B. The labor -oriented model Large-scale enterprise clearly presents problems of labor contracting. Simple contracts, and the basic doctrines of contract law, are inadequate in themselves to goven the long-term relationships between workers and the firms that employ them elationships that may be affiicted by, among other things, substantial transaction-specific investments and asymmetries of information Collective bargaining via organized unions has been one approach to those problems-an approach that lies outside corporate law, since it is not dependent on the organizational structure of the firms with which the employees bargain. Another approach has been to involve employees directly in corporate govenance by, for example, providing for employee representation on the firms board of directors. Although serious attention was given to employee participation in corporate governance in Germany as early as the Weimar Republic, unionism was the dominant approach everywhere until the Second World War. Then, after the War, serious experimentation with employee participation in corporate governance began in Europe. The results of this experimentation are most conspicuous in Germany where, under legislation initially adopted for the coal and steel industry in 1951 and extended by stages to the rest of German industry between 1952 and 1976, employees are entitled to elect half of the members of the(upper-tier) board of directors in all large German firms. While this German form of"codetermination has been the most far-reaching experiment, a number of other European countries have also experimented with employee participation in more modest ways, giving employees some form of mandatory minority representation on the boards of large corporations Enthusiasm for employee participation crested in the 1970s with the radical expansion of codetermination in Germany and the drafting of the European Community 's proposed Fifth Directive on Company Law, under which German-style codetermination would be extended throughout Europe. Employee participation also attracted considerable attention in the U.S. during that period as adversarial unionism began lose its appeal as a means of dealing with problems of labor contracting and, in fact, began to disappear from the industrial scene Since then, worker participation in corporate governance has steadily lost powe a normative ideal. Despite repeated watering-down, Europe's Fifth Directive has never become law, and it now seems highly unlikely that German-style codetermination will ever be adopted elsewhere. The growing view today is that meaningful direct worker voting participation in corporate affairs tends to produce inefficient decisions, paralysis, or weak boards, and that these costs are likely to exceed any potential benefits that worker participation might bring. The problem, at root, seems to be one of governance. While 7. Proposal for a Fifth Company Law Directive, 1983 0.J(C240)2 57. Proposal for a Fifth Company Law Directive, 1983 O.J. (C240)2. 5 B. The Labor-Oriented Model Large-scale enterprise clearly presents problems of labor contracting. Simple contracts, and the basic doctrines of contract law, are inadequate in themselves to govern the long-term relationships between workers and the firms that employ them – relationships that may be afflicted by, among other things, substantial transaction-specific investments and asymmetries of information. Collective bargaining via organized unions has been one approach to those problems -- an approach that lies outside corporate law, since it is not dependent on the organizational structure of the firms with which the employees bargain. Another approach has been to involve employees directly in corporate governance by, for example, providing for employee representation on the firm’s board of directors. Although serious attention was given to employee participation in corporate governance in Germany as early as the Weimar Republic, unionism was the dominant approach everywhere until the Second World War. Then, after the War, serious experimentation with employee participation in corporate governance began in Europe. The results of this experimentation are most conspicuous in Germany where, under legislation initially adopted for the coal and steel industry in 1951 and extended by stages to the rest of German industry between 1952 and 1976, employees are entitled to elect half of the members of the (upper-tier) board of directors in all large German firms. While this German form of “codetermination” has been the most far-reaching experiment, a number of other European countries have also experimented with employee participation in more modest ways, giving employees some form of mandatory minority representation on the boards of large corporations. Enthusiasm for employee participation crested in the 1970s with the radical expansion of codetermination in Germany and the drafting of the European Community’s proposed Fifth Directive on Company Law,7 under which German-style codetermination would be extended throughout Europe. Employee participation also attracted considerable attention in the U.S. during that period, as adversarial unionism began to lose its appeal as a means of dealing with problems of labor contracting and, in fact, began to disappear from the industrial scene. Since then, worker participation in corporate governance has steadily lost power as a normative ideal. Despite repeated watering-down, Europe’s Fifth Directive has never become law, and it now seems highly unlikely that German-style codetermination will ever be adopted elsewhere. The growing view today is that meaningful direct worker voting participation in corporate affairs tends to produce inefficient decisions, paralysis, or weak boards, and that these costs are likely to exceed any potential benefits that worker participation might bring. The problem, at root, seems to be one of governance. While