Corporate Restructuring in Hard Times: Institutions and Interests in the Implementation of Employee Downsizing Measures in Germany (2008-2013)

In this paper, we highlight how the interplay between institutions and the diversity of preferences of different categories of firm stakeholders provides important insights to capture the process under which employee downsizing measures are introduced in large German companies. Germany, the archetypical coordinated market economy, is highly interesting given important new developments. First, the liberalization of atypical employment since the mid-2000s has created a dual labour market: open ended jobs characterized by a high degree of employment protection are cohabitating with more flexible atypical forms of employment (fixed-term contracts and part-time jobs). Second, the corporate structure of several large German companies has experienced an important transformation, namely the decline of concentrated ownership and the rise in prominence of shareholder value oriented institutional investors based in the United Kingdom and the United States. Third, the formation of corporate elites at several blue-chip German companies has also been at the centre of important developments, namely the rise in importance of business/law/management degrees as the core of the educational background of CEOs and other powerful corporate executives; and the increasing use of outside appointments for top positions as opposed to internal recruiting. What is the impact of these changes on the introduction of employee downsizing measures in Germany?

Our empirical evidence strongly suggest the centrality of complexity in the form of the interaction between institutions and preferences to understand the undertaking of employee downsizing measures. Our conceptualization shed doubts on attempts in previous studies (qualitative and quantitative alike) that seek to identify the direct effects of hypothesized independent variables as stand-alone explanations. We illustrate how the impact of the above developments is contingent upon the presence of several supporting factors, most notaby. but not exclusively, ownership diffusion and short-term oriented institutional investors.