Workers' participation in decision-making processes and firm stability

This paper argues that firm efficiency and stability, as well as workers' satisfaction, can be achieved through participatory decision-making rules. It offers theoretical rationales and empirical illustrations based on the framing and operation of European works councils. Employees should take part in establishing the rules; otherwise managers will make rules that allow them to retain control of the key points in the decision-making process. In constructing such rules the involvement of unions is required; however, once rules are set union activity becomes marginal. Government intervention remains marginal throughout.