How do works councils and employee board-level representation affect company performance? Research on employee participation provides mixed and sometimes contradictory findings. This article argues that the performance effects of employee participation depend on the business cycle. Specifically, the conservative impact of employee participation on strategy may be associated with lower company value in good times, but may also provide a buffer against a loss of value in bad times. This argument is supported by data from 726 European firms in the period surrounding the financial crash of 2006–2008.