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What is the Concept of Codetermination in Germany and should UK Start-ups use it?

Start-ups are meant to be innovative. That is why new concepts should be of interest to them, at least to discuss between management, on the interest of using them inside their company. Codetermination implies a larger collaboration between management and workers.

In Germany, it is called “Mitbestimmung.” Is there an interest for start-ups to open an office in Germany, to try the concept, and then to import it to their UK office? Here is a closer look at Codetermination that will help figure it out.

We are at an Important Moment in History regarding Social Changes

It is easy to see that the world is at a crossroads when it comes to social changes. On social media, stronger ideological currents are facing each other, with adversity that hasn’t been seen throughout the last generations. It creates a society that is entirely divided. Anyone who knows how to lead will come to the conclusion that this is unsustainable in the long term. And the wisest of them will see this moment as an opportunity, for those who will be able to unite will come out stronger from this decisive phase of history.

This is why it could definitely be interesting for a start-up company to think about opening a division in Germany, in which the idea of codetermination would be tested. Thinking of moving the company from UK to Germany, in part, would definitely be an interesting move, in 2022.

Furthermore, that would position the start-up in the center of Europe, a most important move in view of Brexit, that is still on everyone’s mind. But most of all, managers could learn how codetermination works, how it can benefit the company in the UK, and if employees and managers should be sent to Germany, to learn how to proceed. Let’s get into more details regarding codetermination, so that you can make an informed decision.

What is the concept of Codetermination?

To bring it to its simplest form, codetermination is a cooperation between managers and employees, in regard to decision-making inside the company. The main goal is to rebalance capitalism so that it isn’t just beneficial to one part of the equation, but to both.

In Germany, the concept of codetermination is rooted in corporate governance, since 1976, when the Codetermination Act came to life. It is meant to enable equal participation of the employees in the process of decision-making, inside a company. It installs a democratic process that should also lead to equality of capital and work. It is a reward for employees, as they are provided with the right to participate in the choices that will make the company grow.

How does it work?

There are two groups of employees that participate in the process. The first one is the work council and the second is the supervisory board. The individuals in the council are elected. They often are the same persons that handle trade unions. They are provided with sensitive information that can help them make suggestions in terms of work conditions, salaries, and the work week schedule. Employers need to go through the council, if they intend to change employees working conditions, in any way.

As for the supervisory board, Germany is the first country to introduce a two-tier system. It means that the executive board needs to be composed of executives and chaired by the CEO, like a regular one, but it needs to include a supervisory board as well, made of non-executives, shareholders, and employee representatives.

What is the Role of the Supervisory Board?

Whenever an appointment is to be made, for a management board member, the supervisory board will have the opportunity to accept or deny the person suggested. It also has the right to oversee the activities of the management board and business operations.

The compensation of the board members is also a subject that they are entitled to their say. When it comes to negotiations of salaries and conditions, they are usually held by the union council members. However, it is clearly possible that they hold meetings to discuss with the supervisory board, in order to have their views on what should be discussed at the negotiation table. You can check the example of the Supervisory Board of European Union for instance.

Is it Really Beneficial?

Those who have worked in German firms, and have experienced codetermination, will tell you that it certainly has many advantages. As we mentioned at the beginning of this article, in such a divided society as the one we have today, anything that has the power to unite is a good thing, inside a company.

A start-up in the UK, that can experiment with codetermination in Germany and bring parts of it back to the head office, will certainly hold advantages over its competitors. It is good to keep in mind that the current issues with this concept are that it tends to slow down the decision-making progress and that it reduces the efficiency of a company, in certain cases.

But knowing that will help the managers of the start-up to adapt better the idea, inside their UK office, for sure. In the future, they may even teach a thing or two about codetermination to their managers in the German division.

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