DOCSLIB.ORG

Codetermination's Effect on Firm Performance Through the Great

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Codetermination's Effect on Firm Performance Through the Great CODETERMINATION’S EFFECT ON FIRM PERFORMANCE THROUGH THE GREAT RECESSION: A CROSS-COUNTRY ANALYSIS BETWEEN GERMANY AND THE UNITED KINGDOM Charles Dana Talcott A thesis submitted to the faculty at the University of North Carolina at Chapel Hill in partial fulfillment of the requirements for the undergraduate business major at the Kenan-Flagler Business School. Chapel Hill 2018 Approved by: David Ravenscraft Douglas A. Elvers Paul Rowe © 2018 Charles Dana Talcott ALL RIGHTS RESERVED ii ABSTRACT Charles Dana Talcott: Codetermination’s Effect on Firm Performance through the Great Recession: A Cross-Country Analysis between Germany and the United Kingdom (Under the direction of David Ravenscraft) This thesis examines the effects of German codetermination on firm profitability, productivity, employment, and wages. In addition to laying out the theoretical considerations regarding codetermination, this thesis contains a review of the empirical studies of codetermination conducted to date and a unique study comparing German and British firms through the Great Recession (2007–2010) and the recovery thereafter (2011–2014). Using four multiple regression models, I compare a sample of German codetermined firms (n = 71) with a comparable set of British firms (n = 291) that feature no board-level employee representation. The results of the empirical analysis indicate that property rights theorists are incorrect in concluding that codetermination causes firms to underperform. These findings are consistent with the results of previous studies of codetermination. At the end of this thesis, I outline several promising areas for future research on codetermination. iii ACKNOWLEDGEMENTS The successful completion of this thesis would not have been possible without the help of several members of the UNC community. Thank you for your guidance and support. Dr. David Ravenscraft, thank you for continually offering helpful solutions to the numerous challenges I faced over the course of my research and for taking time away from your own work to guide me in mine. Dr. Patricia Harms, thank you for teaching me how to conduct research and explore new topics, and how to properly format and cite my written work. Without your instruction and support this fall semester, I could not have begun to research and write this thesis. David Ernsthausen, thank you for helping me find the proper data and library resources needed to conduct this research and for being so generous with your time and patience. Time after time, I was impressed by how responsive and thorough you were in offering your help. Dr. Christopher Wiesen, thank you for helping me with my statistical analysis and for your encouragement later on in writing my thesis. Surely, every honors thesis candidate would be lucky to work with you. Finally, I thank my entire family and, especially, my parents and brother, Robert, for their continual support and encouragement. They inspired me to keep going through thick and thin. iv TABLE OF CONTENTS LIST OF TABLES ....................................................................................................................... viii LIST OF ABBREVIATIONS ........................................................................................................ ix CHAPTER 1: INTRODUCTION ................................................................................................... 1 German Codetermination as Corporate Governance .................................................................. 1 The Legal Framework and Development of Codetermination ................................................... 3 The State of Codetermination in Germany Today ...................................................................... 5 Corporate Governance and Codetermination in the United Kingdom ........................................ 6 CHAPTER 2: LITERATURE REVIEW ........................................................................................ 8 Theoretical Considerations ......................................................................................................... 8 Participation theory applied to codetermination. .................................................................... 8 Property rights theory applied to codetermination. ................................................................. 9 Empirical Studies to Date ......................................................................................................... 11 Profitability and productivity. ............................................................................................... 14 Shareholder value. ................................................................................................................. 15 Employment and wages. ....................................................................................................... 16 Issues with the existing literature. ......................................................................................... 17 CHAPTER 3: METHODOLOGY ................................................................................................ 19 v Using the Great Recession as a Magnifier of Board-Level Conflicts ....................................... 19 Hypotheses for Empirical Analysis .......................................................................................... 20 Operating profit. .................................................................................................................... 20 Revenue per employee. ......................................................................................................... 21 Employment growth. ............................................................................................................. 21 Wage growth. ........................................................................................................................ 22 Data selection and collection. ............................................................................................... 22 Country selection. ................................................................................................................. 23 Forming the German sample. ................................................................................................ 24 Forming the British sample. .................................................................................................. 25 Empirical Analysis Design ....................................................................................................... 26 Variables. .............................................................................................................................. 26 Regression Analysis .................................................................................................................. 32 Regression output. ................................................................................................................. 32 CHAPTER 4: DISCUSSION ........................................................................................................ 37 Conclusion ................................................................................................................................ 37 Limitations ................................................................................................................................ 38 Macro-economic differences. ............................................................................................... 38 Access to data. ...................................................................................................................... 39 Statistical analysis. ................................................................................................................ 40 vi Opportunities for Future Research ............................................................................................ 41 Ideal one-third codetermined comparable companies. ......................................................... 41 Cross-country analysis with Belgium. .................................................................................. 42 Case studies and conversations. ............................................................................................ 43 Countries with similar cultures. ............................................................................................ 43 Comparing codetermination and unionization. ..................................................................... 44 REFERENCES ............................................................................................................................. 45 vii LIST OF TABLES Table 1.1 Forms of Codetermination in Germany Today ............................................................... 4 Table 2.1. Empirical Studies of German Codetermination to Date .............................................. 12 Table 3.1. Dependent and Independent Variable .......................................................................... 29 Table 3.2. Multiple Regression Output ......................................................................................... 35 Table 4.1. British and German GDP Growth Rates 2007–2014 ................................................... 39 Table 4.2. Structure of GDP output in Belgium, Germany, and the United Kingdom in 2007 .... 43 viii LIST OF ABBREVIATIONS CJEU Court of Justice of the European Union DID Differences-in-Differences EU European Union GDP Gross Domestic Product M&A Mergers & Acquisitions OLS Ordinary Least Squares
Load more

Recommended publications
  • Codetermination: a Viable Strategy for the United States?
    CODETERMINATION: A VIABLE STRATEGY FOR THE UNITED STATES? JEREMY A. TRIMBLE* I. INTRODUCTION ....................................................................169 II. CORPORATE GOVERNANCE IN GERMANY.............................172 A. Introduction to the German Corporate Governance System .......................................................172 B. The Development of German Codetermination............174 C. European Union Corporate Law ..................................177 III. PERFORMANCE OF THE GERMAN CODETERMINATION SYSTEM ................................................................................180 A. Does the German Codetermination System Meet its Policy Goals? ...................................................181 B. Do Companies Willingly Choose Codetermination? ..........................................................183 IV. DOMESTIC CALLS FOR STAKEHOLDER RIGHTS....................190 V. APPLYING CODETERMINATION IN THE U.S. ........................191 VI. CONCLUSION........................................................................195 I. INTRODUCTION In recent years, there has been considerable concern over the treatment and pay of workers in large corporations within the United States (U.S.). This has generated enough concern that bills have been introduced to the Senate to fundamentally change the way corporations interact with their employees, evidenced most recently by Senator Elizabeth Warren’s Accountable Capitalism Act and Senator Bernie Sanders’ STOP BEZOS Act. These acts sought to force large corporations
    [Show full text]
  • Duties and Responsibilities of Directors in Europe
    CMS Adonnino Ascoli & Cavasola Scamoni CMS Albiñana & Suárez de Lezo CMS Bureau Francis Lefebvre CMS Cameron McKenna LLP CMS DeBacker CMS Derks Star Busmann CMS von Erlach Henrici CMS Hasche Sigle CMS Reich-Rohrwig Hainz Duties and responsibilities of directors in Europe With increased consolidation of business across Europe, executives of multinational groups can find that they are required to become directors of companies in a variety of jurisdictions, often at short notice. The rules relating to directorships vary considerably from jurisdiction to jurisdiction. This guide is intended to provide an overview of the duties and responsibilities of directors across 13 jurisdictions in Europe, answering the most frequently asked questions for directors coming from another jurisdiction. In many jurisdictions, there are various forms of company available, and there are different rules for directors according to the type of company used. This guide focuses for each jurisdiction on the most common form of company, and on the rules which apply to executive/managing directors. CMS is the alliance of major independent European law firms providing clients with a full range of legal and tax services based on a thorough understanding of their business. Operating in 47 business centres around the world, CMS has over 575 partners, more than 2,000 legal and tax advisers and a total complement of over 3,800 staff. This guide is intended only to provide a general overview of the matters covered. It is based upon the law in each of the countries as at 1st September 2005. However, the information contained in this guide is not comprehensive and does not purport to be professional advice.
    [Show full text]
  • The German Supervisory Board
    The German Supervisory Board: A Practical Introduction for US Public Company Directors The German Supervisory Board: | A Practical Introduction for US Public Company Directors The German Supervisory Board: | A Practical Introduction for US Public Company Directors Contents Foreword Foreword 03 As the world’s economy globalizes, there is often an expectation that business practices will Executive Summary 04 harmonize along with it. This is an expectation The German Supervisory Board: Characteristics and Context 05 that we will see a kind of convergence of corporate The German Supervisory Board in Action: Regular Order, M&A, Crisis 14 governance forms and practices, where boards the world over resemble each other, perhaps Conclusion 15 with a large majority of independent directors, an Endnotes 17 audit committee, a separate chair and CEO, and so on. A lot of this reflects a certain familiarity Claus Buhleier with the Anglo-Saxon board model among Partner, Center for Corporate institutional investors in London and New York. Governance Deloitte Germany [email protected] The reality, however, is quite different. Despite real advances in globalization in other areas, differences in what boards look like and how they work in practice persist across countries. This publication brings to light the differences between the predominant Anglo Saxon, one-tier corporate governance model on the one hand, and the still influential Germanic two-tier-model on the other. The authors, Yvonne Schlaeppi and Michael Marquardt, both experienced corporate directors Kai Bruehl who have served on European company boards, Director, Risk Advisory Deloitte highlight the main characteristics of the German Germany [email protected] supervisory board model and how it demands accountability from its members, despite looking rather different than the combined board model.
    [Show full text]
  • Deutsche Annington Immobilien SE (Incorporated in Germany As a European Company (Societas Europaea)) As Guarantor EUR 8,000,000,000 Debt Issuance Programme
    Base Prospectus 12 March 2015 This document constitutes the base prospectus of Deutsche Annington Finance B.V. in respect of non-equity securities within the meaning of Art. 22 para 6 no. 4 of the Commission Regulation (EC) No. 809/2004 of 29 April 2004, as amended, ("Non- Equity Securities") for the purpose of Article 5.4 of the Directive 2003/71/EC (the "Prospectus Directive"), as amended (the "Base Prospectus" or the "Prospectus"). Deutsche Annington Finance B.V. (incorporated in The Netherlands as a private company with limited liability) as Issuer and Deutsche Annington Immobilien SE (incorporated in Germany as a European Company (Societas Europaea)) as Guarantor EUR 8,000,000,000 Debt Issuance Programme The Base Prospectus has been approved by the Commission de Surveillance du Secteur Financier (the "CSSF") which is the Luxembourg competent authority for the purposes of the approval of the Base Prospectus under the Luxembourg law on prospectuses for securities (loi relative aux prospectus pour valeurs mobilières) dated 10 July 2005 (the "Luxembourg Prospectus Law") implementing Prospectus Directive into Luxembourg law. The Issuer has requested the CSSF to provide the competent authorities in the Federal Republic of Germany ("Germany"), the Republic of Austria ("Austria") and The Netherlands with a certificate of approval attesting that this Base Prospectus has been drawn up in accordance with the Luxembourg Prospectus Law. The Issuer may request the CSSF to provide competent authorities in additional host member states within the European Economic Area with such notification. By approving a prospectus, the CSSF shall give no undertaking as to the economic and financial soundness of the operation or the quality or the solvency of the Issuer or Guarantor pursuant to Article 7(7) of the Luxembourg Law.
    [Show full text]
  • Deutsche Annington Finance BV
    Base Prospectus 30 June 2014 This document constitutes the base prospectus of Deutsche Annington Finance B.V. in respect of non-equity securities within the meaning of Art. 22 para 6 no. 4 of the Commission Regulation (EC) No. 809/2004 of 29 April 2004, as amended, (Non-Equity Securities) for the purpose of article 5.4 of the Directive 2003/71/EC (the Prospectus Directive), as amended by Directive 2010/73/EU of the European Parliament and of the Council of 24 November 2010 (the Base Prospectus or the Prospectus). Deutsche Annington Finance B.V. (incorporated in The Netherlands as a private company with limited liability) as Issuer and Deutsche Annington Immobilien SE (incorporated in Germany as a European Company (Societas Europaea)) as Guarantor EUR 5,000,000,000 Debt Issuance Programme The Base Prospectus has been approved by the Commission de Surveillance du Secteur Financier (the CSSF) which is the Luxembourg competent authority for the purposes of the approval of the Base Prospectus under the Luxembourg law on prospectuses for securities (loi relative aux prospectus pour valeurs mobilières) dated 10 July 2005 (the Luxembourg Prospectus Law) transposing under Luxembourg law the Prospectus Directive. By approving this Base Prospectus, the CSSF does not give any undertaking as to the economical and financial soundness of the operation or the quality or solvency of the Issuer or the Guarantor. The Issuer has requested the CSSF to provide the competent authorities in the Federal Republic of Germany (Germany), the Republic of Austria (Austria) and The Netherlands with a certificate of approval attesting that this Base Prospectus has been drawn up in accordance with the Luxembourg Prospectus Law.
    [Show full text]
  • Co-Determination and Innovation
    IZA DP No. 4487 Co-determination and Innovation Kornelius Kraft Jörg Stank Ralf Dewenter October 2009 DISCUSSION PAPER SERIES Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor Co-determination and Innovation Kornelius Kraft University of Dortmund, ZEW and IZA Jörg Stank HOCHTIEF AG Ralf Dewenter University of Ilmenau Discussion Paper No. 4487 October 2009 IZA P.O. Box 7240 53072 Bonn Germany Phone: +49-228-3894-0 Fax: +49-228-3894-180 E-mail: [email protected] Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. IZA Discussion Paper No. 4487 October 2009 ABSTRACT Co-determination and Innovation This paper examines the effect of the German co-determination law of 1976 (MitbestG) on the innovative activity of German firms.
    [Show full text]
  • Corporate Governance Statement 2020
    CORPORATE GOVERNANCE STATEMENT 2020 ABN 625 684 068 IR.MARLEYSPOON.COM Marley Spoon AG (Company or Marley Spoon and together with its subsidiaries Group) is committed to ensuring that its Corporate Governance framework meets and exceeds the requirements set out in the ASX Corporate Governance Council’s Principles and Recommendations 4th Edition (Governance Principles). Marley Spoon is a German stock corporation (Aktiengesellschaft, AG) with its headquarters in Berlin, Germany, registered with the Commercial Register of the local court (Amtsgericht) Charlottenburg under HRB 195994 B. The Company was originally formed as a German limited liability company (Gesellschaft mit beschränkter Haftung, GmbH) and was transformed into a German stock corporation effective as of 2 May 2018. On 19 April 2018, Marley Spoon was registered in Australia as a foreign company under the Corporations Act 2001 (Cth). The main constituent document of Marley Spoon is its constitution (Satzung) whereas the corporate governance policies and practices described below are those that have been in place since the Company’s listing on ASX on 2 July 2018 or as at the date(s) in this report, as applicable. Consistent with the Company’s commitment to transparency in its dealings with stakeholders, this Corporate Governance Statement (Statement) has been prepared by reference to each recommendation contained in the Governance Principles. In this Statement, all references to: (a) the Board are references to the Supervisory Board (Aufsichtsrat) of the Company; (b) Directors are references to the members of the Supervisory Board (Aufsichtsrat) of the Company; (c) the Management are references to the Management Board (Vorstand) of the Company ; (d) Security Holders are references to both shareholders (Aktionäre) and CDI holders of the Company; and (e) the Company’s website are to: https://ir.marleyspoon.com.
    [Show full text]
  • INNOCOLL AG A. Purpose the Purpose of the Compensation
    INNOCOLL AG COMPENSATION COMMITTEE CHARTER A. Purpose The purpose of the Compensation Committee (Vergütungsausschuss) of the Supervisory Board (Aufsichtsrat) (the “Board”) of INNOCOLL AG (the “Company”) is to oversee the discharge of the responsibilities of the Board relating to compensation of the Company’s members of the Management Board (Vorstand) and other executive officers. As a German stock corporation listed on NASDAQ, the Company is required to follow the relevant NASDAQ rules as well as the relevant provisions of the German corporate governance code (as such code is in effect from time to time) (“German Corporate Governance Code”). Irrespective of differences between the NASDAQ rules, the German Corporate Governance Code and the relevant internal corporate documents, the Board as well as the different Board committees will follow primarily the mandatory provisions of German stock corporation law. The Compensation Committee is contained in Section 10 of the Rules of Procedure of the Supervisory Board of the Company. B. Structure and Membership 1. Number. The Compensation Committee shall consist of four members of the Board. 2. Independence. Except as otherwise permitted by the applicable NASDAQ rules, each member of the Compensation Committee shall be an “independent director” as defined by NASDAQ Rule 5605(a)(2) and otherwise meet the applicable criteria for independence set forth in Rule 5605(d)(2) of the NASDAQ rules. 3. Chair. Unless the Board elects a Chair of the Compensation Committee, the Compensation Committee shall elect a Chair by majority vote. 4. Compensation. The compensation of Compensation Committee members shall be as determined by the shareholder’s meeting of the Company or in the articles of association.
    [Show full text]
  • Rules of Procedure of the Management Board of Morphosys AG
    Rules of Procedure of the Management Board of MorphoSys AG The supervisory board (the “Supervisory Board”) of MorphoSys AG (the “Company”) hereby adopts the following rules of procedure (the “Rules of Procedure”) of the management board (the “Vorstand”) of the Company, which shall replace all previous versions of the rules of procedure of the Vorstand: § 1 General Provisions 1) The Vorstand shall manage the business of the Company in its own responsibility. It develops and regularly coordinates with the Supervisory Board on the strategic alignment of the Company and its affiliates, and ensures its implementation. 2) The Vorstand conducts the Company’s business with the due care and diligence of a prudent and conscientious manager in accordance with the applicable law, the articles of association of the Company (the “Articles of Association”), these Rules of Procedure, the relevant service agreements, and all other applicable policies or standard operating procedures of the Company. The recommendations of the German Corporate Governance Code pertaining to the Vorstand shall be observed, unless otherwise stated in the current declaration of conformity of the Supervisory Board and Vorstand of the Company. 3) The Vorstand shall ensures an appropriate risk management and risk controlling. In addition, the Vorstand shall ensure that appropriate measures aligned to the Company's risk profile (compliance management system) will be implemented and shall disclose such principles. § 2 Allocation of Responsibilities 1) The responsibilities of the individual members of the Vorstand are determined by the schedule of responsibilities (the “Schedule of Responsibilities” (Geschäftsverteilungsplan)), which forms part of these Rules of Procedure. Each member of the Vorstand is independently responsible for managing the business areas allocated to him/her.
    [Show full text]
  • Doing Business in Germany
    Doing Business in Germany The different legal entities and tax law issues Contents 1. Limited Liability Company – GmbH 2 2. Stock Corporation – AG 5 3. Partnership Limited by Shares – KGaA 8 4. GmbH & Co. KG 9 5. Branch offices 11 6. Developments in European Law 12 7. Relevant German tax law 14 FURTHER INFORMATION Should you require further information on any aspect of Doing Business in Germany, please contact one of the persons mentioned below or the person with whom you usually deal. Contact Düsseldorf Dr. Christoph Louven [email protected] Frankfurt Dr. Tim Oliver Brandi [email protected] Hamburg Dr. Andreas H. Meyer [email protected] Munich Dr. Michael Rose [email protected] Tax Dr. Ingmar Dörr [email protected] This note is written as a general guide only. It should not be relied upon as a substitute for specific legal ad- vice. Doing Business in Germany 1 Doing Business in Germany The different legal entities and tax law issues German law offers a number of legal vehicles for the The establishment of branch offices of foreign compa- carrying on of entrepreneurial business activities. The nies is then dealt with briefly followed by an overview of available corporate legal forms are defined in German European corporate law developments. The brochure statutory regulations which can to a greater or lesser concludes with an examination of the various German extent be tailored using contractual provisions. tax law issues applicable to businesses. This brochure gives an overview of the various legal Please regard this client note as a brief summary pro- frameworks within which businesses can operate in vided merely to give an initial overview of the various Germany and outlines the main characteristics of the possible entrepreneurial models in Germany.
    [Show full text]
  • CEO and Corporate Governance: a Comparative Study in France, Germany and USA
    Journal of Research in Business, Economics and Management (JRBEM) ISSN: 2395-2210 SCITECH Volume 8, Issue 3 RESEARCH ORGANISATION March 25, 2017 Journal of Research in Business, Economics and Management www.scitecresearch.com CEO and Corporate Governance: A Comparative Study in France, Germany and USA Emira Spahaj PhD Candidate, Faculty of Economy, University of Tirana, Albania. Abstract Corporate governance broadly refers to the mechanisms, processes and relations by which corporations are controlled and directed. Governance structures and principles identify the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and include the rules and procedures for making decisions in corporate affairs. In France, the governance of an SA (Societe Anonyme) can be organized as a unitary or a dual structure. Unitary structure is the most widely-used structure that consists of a board of directors (conseil d'administration), headed by a chairman and a chief executive officer (CEO) (directeur général) who runs the company. Both positions can be held by the same individual. Dual Structure consists of a management board (directoire) composed of up to five members running the company, and a supervisory board (conseil de surveillance) that oversees the management board. The management board's members and its chairman are appointed and dismissed by the supervisory board, whose members are appointed by the shareholders. In German corporate governance, a Vorstand is the executive board of a corporation (public limited company). It is hierarchically subordinate to the supervisory board (Aufsichtsrat), as German company law imposes a two-tier board of directors.
    [Show full text]
  • Co-Determination: a Driving Force for Corporate Social Responsibility in German Companies?
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Scholz, Robert; Vitols, Sigurt Working Paper Co-determination: A driving force for corporate social responsibility in German companies? WZB Discussion Paper, No. SP III 2018-304 Provided in Cooperation with: WZB Berlin Social Science Center Suggested Citation: Scholz, Robert; Vitols, Sigurt (2018) : Co-determination: A driving force for corporate social responsibility in German companies?, WZB Discussion Paper, No. SP III 2018-304, Wissenschaftszentrum Berlin für Sozialforschung (WZB), Berlin This Version is available at: http://hdl.handle.net/10419/190804 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen
    [Show full text]