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The Elgar Companion to Law and Economics, Second Edition

Edited by Jürgen G. Backhaus

This thoroughly updated and revised edition of a popular and authoritative reference work introduces the reader to the major concepts and leading contributors in the field of law and economics. The Companion features accessible, informative and provocative entries on all the significant issues, and breaks new ground by bringing together widely dispersed yet theoretically congruent ideas.
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Chapter 19: Company Board Representation

Jürgen G. Backhaus


Jürgen G. Backhaus Introduction Corporations can have widely differing forms. Against the backdrop of the peculiar German system of codetermination, we can illustrate the law and economics rationale behind different types of board composition. Boards are split into two, the managing and the supervisory boards. Works councils elect the powerful chairmen, who can end up on supervisory boards and, more importantly, the steering committees. In addition, investment bankers may join forces with employee representatives in controlling management appointments. How did this system come about, which events shaped it, and why is it being continued by globally operating companies? Codetermination as an interlocking system Codetermination is an interrelated set of institutions which consists of five major elements (Table 19.1). At the plant level, it involves the representation of workers in works councils. Works councils need to be heard in many matters referring to the daily practice of work and they need to be involved in Table 19.1 Codetermination as an interlocking system Competition between locations 4 8 12 16 Works Collective Two-tier Bonding of council bargaining board investment Works council Collective bargaining Two-tier board Bonding of investment Competition between locations/ Gewerbesteuer x 5 9 13 1 x 10 14 2 6 x 15 3 7 11 x 17 18 297 19 20 x 298 The Elgar companion to law and economics discussions with respect to such issues as hours, time and form of payment, and the hiring and firing of individual workers. They need to agree on economic matters that...

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