Why do German companies have workers on their boards?

How it works

A large German company has two boards. The management board runs the business day to day. The supervisory board above it appoints and oversees the managers. That's where the workers sit.

Company size	Workers elect	Law
Coal, mining and steel, over 1,000 staff	Half, with a neutral extra member	1951
Over 2,000 staff	Half the seats	1976
500 to 1,999 staff	One third	2004 (first set in 1952)

(Wikipedia, 2026a; Wikipedia, 2026b)

Half isn't quite equal. Outside coal and steel, the shareholders pick the chair, and the chair has a casting vote to break a tie (Wikipedia, 2026a). The owners keep the last word. The workers get a full hearing before it's said.

A council in every workplace

The board is the top layer. The layer that touches daily life is the works council, the Betriebsrat. Any workplace with five or more permanent staff can elect one (Works Constitution Act, s 1). The council doesn't just get consulted. On some questions the boss can't act without it, including when the working day starts and ends, and any "temporary reduction or extension" of normal hours (Works Constitution Act, s 87).

That last right matters more than it sounds. It means a cut to everyone's hours is something the staff agree to, not something done to them.

2009: cut the hours, not the people

When the global financial crisis hit, German factories lost orders overnight. Many firms didn't sack anyone. They used Kurzarbeit, short-time work: everyone works fewer hours, the company pays for the hours worked, and the Federal Employment Agency pays 60% of the pay for the hours lost. A 30% cut in hours costs a worker only about 10% of their income (Wikipedia, 2026c).

In 2009 more than 1.4 million German workers were on it, at a cost of 5.1 billion euros. An OECD report found it saved nearly 500,000 jobs during the recession. The IMF calls it "widely considered the gold standard" of such programs (Wikipedia, 2026c).

The idea is old. Germany first used it in 1910, for the potash industry. But it works best where the people on the shop floor and the people at the top already talk. A works council that must agree to shorter hours, and worker directors who sit with the managers, turn "who do we let go?" into "how do we all get through this?".

When orders came back, the trained staff were still there. Firms didn't need to hire and train from scratch. Shorter hours shared by everyone look a lot like the four-day week idea, covered in Do shorter working weeks work?

Does it cost the owners?

The old fear: give workers seats, and they'll vote themselves pay rises and scare off investment. Economists Simon Jäger, Benjamin Schoefer and Jörg Heining tested it. In 1994 Germany dropped the one-third rule for new companies, but kept it for companies formed before August that year. Two groups of near-identical firms, one with worker directors and one without.

They found no effect on wages or the share of income that went to workers. And no flight of capital. Shared governance, they wrote, "if anything, increases capital formation" (Jäger et al., 2021). Firms with workers on the board invested at least as much.

That cuts both ways, and it's worth saying plainly. One-third of the seats didn't make workers richer. What it changes is who's in the room: how decisions get made, not how much is paid.

Why Germany?

The roots go back to November 1918. The war was lost and the country was in revolution. The industrialist Hugo Stinnes and the union leader Carl Legien, from opposite sides of everything, signed a deal. Employers recognised unions and their right to bargain, workers got the eight-hour day, firms of more than 50 staff got workers' councils, and returning soldiers got the right to their old jobs back (Wikipedia, 2026d).

After the Second World War the question came back harder. Heavy industry, coal and steel above all, had an economic interest in the war (Wikipedia, 2026e). Giving the workers half the seats in those firms, by law in 1951, put a check on that power. It passed after the metalworkers' unions threatened mass strikes (Wikipedia, 2026b).

The rebuilt West Germany called itself a "social market economy", a term coined in December 1946. Markets, yes, but with "secure social peace" as a condition of the economic miracle, not a nice extra (Wikipedia, 2026f).

Germans call unions and employers Sozialpartner: social partners. Not everyone likes the word. Critics call it a euphemism and prefer "antagonistic cooperation" or "conflict partnership" (Wikipedia, 2026g). That's the real insight. Nobody pretends bosses and staff want the same things. The system assumes they don't, and builds a table where they have to settle it anyway.

The limits

• The owners still decide. The shareholders' chair breaks every tie.
• Few companies are big enough. In 2005 the half-the-board law covered 729 companies, and the coal and steel law about 30 (Wikipedia, 2026a).
• Works councils are patchy. In 2019, depending on the industry, between 16% and 86% of employees worked somewhere with one (Wikipedia, 2026h).
• It doesn't raise pay on its own. The best study finds no wage effect.
• The evidence isn't settled. Some economists find long-run productivity gains; others argue efficiency losses outweigh them (Wikipedia, 2026a).

And Australia?

Australia has no such law. "Australia has not yet passed a general federal law, like a majority of wealthier OECD countries, to protect the right to vote for directors at work" (Wikipedia, 2026i). There are a few exceptions in public bodies, and nothing across private companies.

The other channels have thinned out too. Union membership was about 15% in 2024, down from close to 60% in 1962. Enterprise agreements covered 15% of workers in 2021 (Wikipedia, 2026i). Most Australian workers have no vote on the board and no council with a say over their hours.

Now picture going further than Germany. Worker directors in every company with more than 50 staff, not just the giants. The owners keep their capital and their casting vote. The people who do the work get seats at the table where the work is decided. On the German evidence, the owners lose nothing measurable. In the next downturn, the first question in the boardroom would be how to keep everyone, and someone in the room would be there to ask it.

What you can check

• Ask whether your workplace has a staff-elected director, or any worker voice on the board. In most Australian companies the answer is no.
• When layoffs are announced, ask whether shorter hours for everyone were on the table first, and who decided.
• Look at who sits on the board of a company you buy from, bank with or work for. Count the people elected by the staff.