Co-determination in the German Stock Corporation

The essential part of the corporate constitution in Germany is the co-determination of the employees in enterprises. Through co-determination the employees participate in material decisions of the enterprise and thus bear part of the responsibility for the development of the enterprise. The legal basis for co-determination is the German Co-determination Act of 1976 (Mitbestimmungsgesetz). This legally regulates the representation of employee interests in stock corporations with more than 2,000 employees. The German Works Constitution Act of 1972 (Betriebsverfassungsgesetz) contains regulations on cooperation with the Works Council. These provisions also apply to the company.

Beside the shareholder General Meeting and the Board of Management as the managing body of the enterprise, German corporation law provides for a Supervisory Board for stock corporations as a controlling body of corporate management. The Co-determination Act of 1976 specifies that in the case of stock corporations with more than 20,000 employees, the Supervisory Board should consist of a total of 20 members.

Of these, 10 members are representatives of the shareholders and 10 members are representatives of the employees. The 10 members from the employee side are divided into three union representatives, a representative of the executive managers and six further members of the workforce.

The principles of Article 25 Co-determination Act apply with regard to the internal organization as well as the rights and obligations of the Supervisory Board. Among the most important tasks of the Supervisory Board are the supervision of the management, the appointment of the Board of Management and the approval of important corporate planning and decisions. All members of the Supervisory Board - independently of whether they are elected by shareholders or employees - have the same rights and obligations. They are not bound by orders or instructions. The employee representatives are elected directly by the workforce or through election delegates, whereas the shareholder representatives are elected by the General Meeting. The Chairman of the Supervisory Board, elected from the group of shareholder representatives, has a casting vote in the case of split resolutions.

The right to co-determination only applies to companies within German national borders. This also means that only employees in companies in Germany can take part in the election of employee representatives to the Supervisory Board. The nationality of the employees and the individual employee representatives is not a consideration. The unions are free to propose their own representatives for the Supervisory Board. For the company, since the Business Combination of Daimler-Benz AG and Chrysler Corp. IG Metall has proposed, among others, a representative of the American UAW (Union United Automobile, Aerospace and Agricultural Implement Workers of America), as their representative on the Supervisory Board. The three union representatives are also elected by the employees of the company in Germany.

The three union representatives are also elected by the employees of the the company in Germany.

In a co-determined stock corporation, the Board of Management must always include a Labor Relations Director as a member. The Labor Relations Director is appointed by the Supervisory Board. In the case of the company, the Labor Relations Director is the member of the Board of Management responsible for Human Resources. His task is to include the possible effects of enterprise decisions on the employees directly in corporate planning, so that, besides technical and commercial considerations, social aspects of personnel management are taken into account at an early stage of the planning process.

The Works Council has the task of safeguarding the interests of the employees within the enterprise as well as working with the employer. In enterprises with several places of business, Central or Group Works Councils are formed, to which the Works Councils of individual branches send their representatives. Organization, rights and obligations ensue from the Works Council Constitution Act.

Part of the overall task of the Works Council is to monitor compliance with the laws, ordnances, accident prevention regulations, collective wage agreements and internal wage agreements. At the same time, it also serves as the employees' authority for hearing grievances, in addition to the employer. Furthermore, the Works Council Constitution Act contains various regulations which establish certain information, notification, advisory and co-determination rights. In particular, these concern social matters such as working hours, holiday planning, health and safety provisions at the workplace and social facilities, the organization of work processes and working environment, co-determination in dismissals as well as the participatory right in changes to plant operation and social compensation plans.

The Works Council is elected by all the employees of a company for a period of four years. The size of the Works Council is dependent upon the number of employees in the company. A certain number of employees elected to the Works Council, dependent upon the number of employees, are fully released from work duties.

At the Group the "World Employee Committee" has also been founded. This is a world employee representative body, consisting of 13 members, whose objective is to ensure and consolidate the exchange of information and opinions among employee representatives worldwide. At the same time, this committee provides a framework for intensive dialogue between employee representatives and Group management on economic and social aspects in the global enterprise. Within this framework the corporate management has agreed on principles of social responsibility with the World Employee Committee, in which the enterprise declares its social responsibility and its support for the nine principles of the "Global Compact".

The "Global Compact" was born of an initiative by the General Secretary of the United Nations, Kofi Annan, which establishes minimum standards for working conditions and industrial relations. The enterprise is committed to the principles of international recognition of human rights. A further focal point of the agreement is the commitment to minimum standards in health protection, in remuneration, working hours and training. The enterprise expressly recognizes the right to freedom of association and collective wage bargaining.