Pierre-Yves GOMEZ

In this paper, we articulate the meaning of understanding the firm as nexus of promises, showing how the tendency towards null contracts in a world of increasing complexity makes promises central to governing the firm. Based on the specific case of the promise to increase return on equity in the publicly listed firm, we work out the structural determinants of the hierarchy of promises where the interests of employees and shareholders are contradictory, developing propositions about the relationship between the organization and composition of employees, on the one hand, and the organization and composition of shareholders on the other, and the propensity of firms to make promises. In the concluding discussion, we move beyond a structural explanation to explore how executives choose to ally with employees or shareholders, drawing on a discussion of the recent history of the financial services industry.

L’un des traits distinctifs du système de gouvernance à l’allemande est la représentation paritaire des salariés au sein des conseils de surveillance des grandes entreprises. Souvent considérée comme «culturellement» allemande, le présent article montre cependant qu’une supposée «tradition allemande» de cogestion relève du mythe. Le régime de gouvernance allemand est plutôt le fruit du contexte politique et institutionnel dramatique de la fin des années 1940 qui a vu des luttes et la mobilisation des acteurs politiques, économiques et syndicaux. Pour expliquer qu’un consensus institutionnel sur la cogestion ait finalement eu lieu en Allemagne dans une période de chaos institutionnel, nous montrons le rôle méconnu joué par l’Église catholique allemande. À la fois étrangère par nature à la question du gouvernement des entreprises, mais fortement impliquée dans les réflexions sur l’organisation du pouvoir économique avant et après la seconde guerre mondiale, elle a constitué une «institution socle» à partir de laquelle les effets de mobilisation ont pu générer un consensus sur la cogestion, qui s’est s’institutionnalisé dans le modèle dual paritaire, considéré depuis comme «typiquement germanique»., Codetermined supervisory boards with half of the directors representing employees are one of the distinctive features of the German corporate governance system. This is often supposed to be rooted in typically “German culture”. The present contribution reveals however that this supposedly “German tradition” is a myth. The specific regime of codetermined supervisory boards is rather the outcome of the dramatic political and institutional circumstances of the late nineteen-forties, having witnessed a fierce fight and the mobilization of various actors ranging from politicians and industrialists to trade unionists. On the way to an institutional consensus, the German catholic church played a significant, albeit seldom recognized, role. It acted as a “base institution” positively influencing the efforts of mobilization in favor of board codetermination and making an agreement possible.

This study examines the impact of employee stock ownership and board employee representation on firm performance. Research Findings/Results: Results drawn from a longitudinal analysis of a sample of 230 French firms over the period 2000-2005 provide support for an inverted U-shaped relationship between employee ownership and accounting-based performance measures. However, this relationship is not supported when a market-based performance measure is used. We also found that the inflection point of the inverted U-shaped relationship between employee ownership and firm performance does not depend upon the level of employee representation on the board. Theoretical Implications: This study addresses the inconsistency of results found so far in the literature examining the performance implications of employee ownership by proposing a theoretical framework and providing empirical support for the hypothesis suggesting that the relationship between employee ownership and firm performance is not linear, but indeed, has an inverted U-shape. Practical Implications: In a governance context characterized by a spectacular increase in employee ownership fostered by a pervasive support from both managers and government, our results suggest that performance implications of employee ownership are positive up to a certain point, after which the marginal effect of employee ownership on firm performance becomes negative. As a result, our findings suggest that managers and shareholders should be careful when launching and increasing the level of employee ownership to not go beyond specific inflection points.