Co-determination — best for our businesses

Image: COTO Report
Image: COTO Report

Look out – another idea coming your way…
So this is how business management works in the UK. In a large corporation, the company is owned by shareholders. The actual management of the company is undertaken by, well, professional managers.

Everyone else working in the business – whether they’re manual factory workers, creative hipster graphic designers or “in the moment” financial types, are known as employees of the business. But these employees have very little say in how the business is run – they’re more like contractors: selling their skills, effort and time in exchange for money.  Everything not strictly to do with their remit – when employees are allowed to take breaks; who to hire and fire; whether to move the business to a different country — is decided by those professional managers, who are there to serve their shareholders, not their employees. Indeed, the name “human resources” is indicative of how we treat employees in the UK – resources to be used rather than people to engage with. Dehumanisation much?

So, what is co-determination?
This contrasts with the so-called German model of co-determination, where all except the very smallest of businesses have to include some employee involvement in their decision-making. This employee involvement is enshrined in German law – it isn’t some voluntary act on the part of a couple of benevolent employers. Co-determination is essentially about balance – balancing the interests of shareholders with the interests of employees.

Co-determination works in two ways. First, there’s the Works Council. This is a body which exists within every large German company, and is made up of representatives elected by the employees of the company, and must have at least some representation from wage-earners (also known as blue-collar workers or manual workers) and salary earners (white-collar workers or office workers). The Works Council is there to hold the professional managers to account on issues related to employees’ work — health and safety; breaks and holidays; hirings and firings, etc. They are also there to negotiate better pay deals for employees.

Using Works Councils as a means for pay negotiation appears particularly successful in the German system — the number of strikes in Germany is traditionally much lower than other developed countries, which may be surprising given the relatively high trade union membership. Indeed, Works Councils appear to be a great half-way house for employers and employees, as well as the customers and clients of their services and products. Because companies’ managers are (or at least should be) in constant dialogue with the Works Council, conflicts can be resolved swiftly and without escalation.

The London railway workers’ strike on 5th August this year might have been prevented if such a system were in place here. A Works Council would have allowed employees to get the best deal possible without needing to strike; the employers could resolve the conflict swiftly and keep the trains running; and the people of London could get to their destinations sooner and with less hassle. By giving employees a greater bargaining position within the company, managers could minimise the possibility for escalation and disruption to services.

Of perhaps more importance than Work Councils, however, is the way that companies are structured in Germany. There are essentially two tiers of management: a management board, which makes the majority of the decisions; and a supervisory board, which is in charge of appointing managers; monitoring and scrutinising the management board’s actions; and approving significant business decisions. This board is made up of elected employees, shareholders and managers — not one group has a majority over any of the others, meaning that the groups have to negotiate in order to ensure the best for the company and all of its stakeholders.

Stakeholders, you say? Uh-huh. A stakeholder is anybody who has an investment in the company – whether that’s a financial investment, social investment or otherwise. Whereas companies in the UK exist solely to look after one group alone – shareholders – co-determination is an acknowledgement that other people have stakes in and are affected by the prospects of a company as much as those with an exclusively financial attachment. As globalisation allows corporations to gain in power relative to governments, it is more important than ever that we introduce a little democracy and representation into their management structures so that all voices are heard.

Involvement in works councils and supervisory committees would also give employees a sense of further self-fulfilment, as they help shape the future of the company they have dedicated so much of their time to. This can only be good for consumers and the wider society, as they all benefit from better treated staff and corporations which benefit all, not just their bottom line.

Thinking global
There is unfortunately an obvious problem with codetermination – how would a national government, like the UK’s, enforce codetermination in corporations which operate across the world, in lots of different countries? At the very least, the experience of German corporations over the last fifteen years shows that even if codetermination is achievable at home, the corporation will not afford the same powers to employees in its international branches.

Well, how about looking to the EU — the European Commission, with the backing of member states (which are currently divided between those with high co-determination levels, like Germany, and those with basically none, like the UK) could force corporations to adopt codetermination across the continent. In addition, rather than solely used to increase the wealth of corporations, trade deals like the Transatlantic Trade and Investment Partnership (TTIP, which is currently being negotiated between the EU and the USA) could be used to further the cause of codetermination globally.

Codetermination would create a new era of stakeholder capitalism in the UK – where everyone’s voice counted towards determining the future of a business. It would also give employees a chance to help shape that future in ways they would never be able to under the current system. As the power of corporations grows, this is an idea which needs to be well represented.

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Jon Holiday

Jon commentates on the ways culture and politics interact.

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