The global economic downturn and its affect on employment as well as the current corruption scandals made by the large German firms during the recent years once again provided a ground to evaluate the tangible gains of the codetermination system in Germany. The institutional similarities between Germany and Japan and the voluntary consultative-system of labour management in Japan stimulated to carry out a comparative analysis between the countries. Codetermination is linked with corporate governance in the recent years as the presence of the employee representatives in the supervisory board of Germany influence the controlling and monitoring functions of the firms. The findings show employee participation is essential to remain competitive in the market. However, the misuse of codetermination practice by the employee representatives and the country''s orientation towards shareholder-model are questioning the future of such system. Thus, the fiduciary duties of directors are considered to be ways to protect employee interests while ensuring the success of the firms.