Works councils exist in a variety of forms, but all serve the central function of establishing a group of worker representatives (however selected) who facilitate honest communication between workers and management, and provide workers an avenue for consultation on certain decisions. While this rarely extends to co-determination (the German model being the outstanding exception), the requirement for consultation in itself may be a source of bargaining power. Works councils may operate as supplements or complements to trade unions. Some firms have supported them as alternatives to unionization. In the United States, in the early part of this century, works councils covered 10 percent of the workforce in several major industries. They quickly lost popularity among managers, or workers, or both, and in the 1920s most vanished from the U.S.; however they continue to play a significant role in Europe. This article draws on a combination of interviews and abstract modeling techniques to address several questions: Do councils require external institutional mandating, as in most of Western Europe, or can they be expected to arise from voluntary managerial decision making? When will councils communicate productivity-improving information between workers and firms? What are the benefits and costs of giving councils co-determination rights over some decisions? What can go wrong in a council setting and what arrangements might minimize the risk of poorly functioning councils?
