Tribune. Who should govern companies, in other words guide and control the actions of their leaders? Shareholder representatives? Independent directors, selected for their skills? Employee representatives? On this subject, the opposition is clear between the countries of continental Europe, which have long practiced “co-determination” with, on average, 30% of employee representatives on boards of directors, and the countries inspired by the model. Anglo-Saxon where the shareholders keep the monopoly of power.
French companies, traditionally not very open to employee participation in governance, in a context of conflicting relations between employers and unions, have however evolved in recent years. Since the Sapin (2013), Rebsamen (2015) and Pacte (2019) laws, a minimum presence of employees has been imposed on boards where they now hold between 10 and 15% of the seats, their number slowly continuing to grow.
What to expect What should we fear, on the contrary? Research carried out in Germany, where 30 to 50% of directors have been employees for a long time, helps frame the debate. First observation: shareholders are not too keen on sharing their power. Studies have shown that, when employees have more than 30% of seats, investors perceive this presence unfavorably, which very concretely leads to a decrease in the value and stock market profitability of firms. (“Does Good Corporate Governance Include Employee Representation? Evidence from German Corporate Boards”, Larry Fauver and Michaël Fuerst, Journal of Financial Economics, 2006).
Employee skills
However – and this is the second observation – no study has succeeded in showing that governance including a significant number of employees had any negative effect on the functioning of companies. The risks of blocking within the councils, pointed out by opponents of co-determination, are fairly easily countered. On average, no increase in the wage bill is noted. Stock market performance is falling, but the real performance of firms is not falling.
Several converging studies even show that, contrary to the fears of investors, the significant presence of employees on boards of directors has on average positive effects, in particular on labor productivity and the number of patents filed (“Codetermination, Efficiency and Productivity ”, Felix Fitzroy and Kornelius Kraft, British Journal of Industrial Organization, 2005; “Codetermination and innovation”, Kornelius Kraft, Jörg Stank and Ralf Dewenter, Cambridge Journal of Economics, 2011).
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