Both Germany and the UK are members of the European Union (EU) and participate in harmonised European legislation, including employment law, as well as a common capitalist market economy. However, despite these commonalities, there remain significant differences in the national business systems of the two countries, particularly with reference to the employment relationship and industrial relations (Brewster and Mayrhofer, 2012). This can be appreciated by looking at the two countries, first Germany, and then at the UK, in order to compare and contrast the two systems.
The German model of capitalism is different from that in the UK, it is referred to as a social form of capitalism, or ‘sessile marthektwirtscharft’ (Edye and Lintner, 1996). The history and corporate culture with in Germany, and the development of the industrial structure, has been highly diverging, which has converged to create an industrial framework which is relatively tight, with close ties between the different stakeholders (Silvia, 2013). The relationship between the state, companies, and their various stakeholders, reflects the German approach towards capitalism, in which the systems should be regulated in a manner to produce socially acceptable outcomes (Edye and Lintner, 1996). The result has been a system where there is a high level of value placed on consensus, with the institutions that were created to embody the social values becoming self reinforcing mechanisms that have continued to propagate the same social values (Silvia, 2013; Edye and Lintner, 1996). This system can be seen in the way that the relationship between the firm and its various internal and external stakeholders has been manage. The country has historically had consensus built into the way in which governance takes place, with two tier board systems utilised by large organisation (Dimsdale, 1994). The two tier system consists first of a supervisory board, referred to as an aufsichtsrat and then a management board, referred to as a vorstand (Dimsdale, 1994). Although practices have been in place since 1884, the current co-determination is the system now in place was originally determined at the end of the Second World War, and initially found in the West German coal and steel industries (Silvia, 2013). The Cooperative Management Law which was introduced in 1951, along with the workers committee law of 1952, was amended in 1976 and 1972 respectively, when the framework was extended, and applied to all firms in Germany that had more than 2000 employees (Silvia, 2013). The regulations require that just below half of the supervisory board members for each company worker representatives (Silvia, 2013). The members of the supervisory board are elected by the trade unions and the shareholders, and the chairman always has a casting vote, and is always a representative of the shareholders (Silvia, 2013). The management board is elected by the supervisory board, with the management board given the responsibility for the day-to-day running of the firm (Silvia, 2013). It is a requirement that there is at least one representative of the employees on the management board (Silvia,
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