Germany’s Corporate Establishment

This system is distinctive in that it recognizes the interests of more than just the shareholders. Other stakeholders, such as workers, local governments and often creditors are represented on supervisory boards. In accordance with German law, half of Volkswagen’s board consists of employee representatives elected by the workforce. Besides, two of the board’s 20 members are delegated by the state of Lower Saxony. Votes by the workers and the local bureaucrats secured Winterkorn’s boardroom triumph in April. Workers’ representatives, including labor union leaders, take up half the seats on the boards of Siemens and Deutsche Bank, too.

This is called “co-determination.” The term has more to it, though, than joint decision-making. As a result, employees’ and other stakeholders’ interests become closely aligned with those of management. There’s a strong esprit de corps, which isn’t necessarily conducive to a clean, value-based culture.

Source: Is Germany’s Corporate Establishment Rotten

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