Theresa May Looks to Germany for Board Reform

The proposal sounds a lot like Mitbestimmung, or co-determination, a system of joint decision-making between employer and employee that has become a defining feature of German capitalism. Under German rules enacted 40 years ago last month, labour representatives hold half of the seats on the supervisory boards of any company with 2,000 or more workers. Mitbestimmung was a British invention. It was introduced on a large scale by British occupying authorities in the postwar German coal and steel industry, to “prevent it remilitarising”, says Markus Roth, an authority on comparative corporate governance at the Philipps-Universität Marburg. Experts say it played a critical role in the German Wirtschaftswunder, or economic miracle, creating a model of labour relations based on consensus rather than confrontation. It was also one of the reasons Germany was able to avoid the industrial strife that paralysed Britain’s economy in the 1970s. Mitbestimmung is supposed to make big companies more democratic by allowing information to pass more quickly from the shop floor to the C-suite, and ensuring a wider range of views are heard in the boardroom.

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