When Laura Miller arrived for her first meeting as a board member at Volkswagen, she felt out of place. Unlike the other executives in tailored suits who had climbed the corporate ladder, Laura worked on the factory floor installing dashboards. Yet there she sat, about to help make decisions that would affect the future of one of the world’s largest automakers.
Most Americans have never heard of codetermination. The idea that the people who build the products should help guide the company seems foreign to our business culture. We’re used to a system where shareholders reign supreme, and workers are seen primarily as costs to be managed rather than stakeholders to be consulted.
But what if there’s a better way? What if including workers in high-level decision-making creates stronger, more sustainable companies? And what if this approach could help address some of America’s most pressing economic challenges, from wage stagnation to short-term thinking in corporate leadership?
This chapter explores Germany’s worker representation system and considers what Americans might learn from it. The German model isn’t perfect, and it can’t simply be copied wholesale. But it offers valuable lessons about balancing the interests of different stakeholders and building an economy that works better for everyone.
The German Model: How It Works
- Management board (Vorstand): Handles day-to-day operations.
- Supervisory board (Aufsichtsrat): Oversees long-term strategy and appoints management board members.
Under German law:
- Companies with more than 2,000 employees: workers elect half the supervisory board.
- Companies with 500–2,000 employees: workers elect one-third of the board.
This ensures that worker perspectives factor into major company decisions.
This doesn’t mean workers control German companies. The board chair, typically representing shareholders, can cast a tie-breaking vote. Daily operations remain management’s responsibility. But worker representatives have a meaningful voice in major decisions like factory closures, executive appointments, and long-term investments.
The system extends beyond the boardroom. Nearly all German companies have works councils—elected bodies that address workplace-specific issues like scheduling, safety, and training. These councils give workers a voice in daily management decisions without involving unions directly in business operations.
This dual system—codetermination at the board level and works councils at the workplace level—creates multiple channels for worker input, fostering a collaborative approach that has helped define Germany’s economic model.
The Benefits: Why It Works
Codetermination contributes in several ways:
- Promotes long-term thinking: Worker representatives push back against short-termism, encouraging investment in long-term stability. Martin Höpner found companies with strong worker representation invest more in R&D and maintain higher employment during downturns.
- Improves information flow: Workers see operational problems executives might miss, helping prevent costly mistakes. Example: During the 2008 crisis, Volkswagen preserved jobs through reduced work schedules, while GM, without worker input, implemented deep cuts and required government bailout.
- Builds trust and reduces conflict: When workers feel heard, they accept difficult changes more readily. Klaus Müller: “When workers help shape decisions, they have skin in the game.”
- Distributes economic gains more broadly: German CEO pay averages about 20× worker pay (compared to 300×+ in the U.S.), supporting social cohesion and consumer spending.