Comment: On Mark Roe, German Codetermination and German Securities Markets

5 Colum. J. Eur. L. 213 (1999)

Friedrich Kübler. Professor of Law Emeritus, Johann Wolfgang Goethe-Universitit Frankfurt am Main, Professor of Law, University of Pennsylvania, Philadelphia.

It is certainly a pleasure to be invited to give a comment to Professor Roe’s fascinating paper on codetermination and securities markets in Germany. At the same time this task proves to be a somewhat painful experience. In spite of many defects in the regulatory details of the system, I have always been very much in favor of the basic idea of codetermination for both historical and personal reasons. Historically, when viewed against the background of industrial feudalism (the alliance between the Imperial regime, the land-owning aristocracy and the then new business conglomerates like Krupp) codetermination seems a healthy device to balance the political powers of German-style capitalism. Codetermination was first introduced after World War I; eliminated by the Nazi system; and reintroduced and expanded after World War II. From the 1950’s to at least the 1980’s the system worked reasonably well. In addition, I also favor codetermination on a more personal level. Twenty years ago, I was part of a team of Frankfurt professors who successfully defended the 1976 Codetermination Statute before the Federal Constitutional Court.

In spite of this rather strong set of beliefs and convictions, I have to admit that Professor Roe has identified one of the most important weaknesses of the German corporate system. His starting points cannot be contested: the German securities market lacks volume, depth and life, and our system of corporate governance suffers from serious defects. He is equally right in pointing out the interrelation and the functional links between these problems and laborrepresentation on corporate boards and in politely blaming us for the lack of meaningful discussion. From a German perspective, his paper has the merit to encourage a debate which we have neglected much too long. In order to contribute to this discourse I shall no longer address those parts of his analysis which I find fully persuasive, but concentrate on the few points necessitating further inquiry. There are three issues which I would like to address. These are the lack of initial public offerings (IPOs), the concentration of ownership in big corporations and what I call the “chicken and egg” problem of codetermination.