Are ‘democratic workplaces’ in the US really that practical?
IT IS the dream of practically every American to be their own boss. Sen Elizabeth Warren, DMassachusetts, is offering a plan to make that a reality - sort of - for many workers by requiring fi rms with more than US$ 1 billion in revenue to acquire a federal charter and fi ll at least 40 per cent of their board seats with employee representatives.
The idea, known as codetermination, is already reality in Germany and Scandinavia. And as socialists talking of “democratic workplaces” surge in popularity, apparently it’s gaining traction here.
The fact that Germany and others manage to make it work should quiet fears on the right that co- determination must necessarily cause some sort of corporate holocaust. And yet, the fact that co- determination seems to truly succeed only in one fairly small area of Europe should give the left some pause, too. Scandinavian culture, vastly more collabourative and trusting than American culture, has no disasters comparable to those we’ve seen in the American automotive industry, where General Motors’s union simply refused to believe the dire fi nancial picture painted by the company until a few weeks before the fi rm ran out of cash.
Which is not to say that American management and American workers are incapable of working together. The United States already has a form of co- determination - through employee ownership of substantial shares of stock. Many of those fi rms not only do quite well but also are renowned for their innovative and collabourative corporate culture.
On the other hand, the United States also has had some highprofi le employee- ownership debacles, most notably the failed employee ownership scheme at United Airlines, which ended with the fi rm catapulting into bankruptcy.
United’s story illuminates the potential pitfalls that employee ownership faces in the United States. The biggest problem was that American labour bargaining isn’t organised the way it is in Germany, with trade unions ceding much authority over day-to- day facility operation to local works councils.
As a consequence, United was dealing with multiple extremely strong unions, and each of those unions continued doing, in collective bargaining, what it had done before the ownership plan: trying to claim as much value as possible for its own members during negotiations. The refusal to leave a dime of surplus on the table that might be snatched up by another union left United, like other airlines, in constant danger of falling into the red.
That attitude was a symptom of a broader fact about American labour relations: They are extraordinarily adversarial. This is a deep feature of American labour markets that has roots in our culture, in the contentious and often violent process of unionising major industrial concerns, and in our labour law itself, which, in an effort to keep companies from forming “company unions,” drove a sharp wedge between the unions and management.
Our unions tend to glower at management across a chasm of mutual distrust; they also tend to be inflexible, somewhat shortsighted and not particularly attentive to the overall health of the fi rm. American management, in turn, has its own issues with shortsightedness, tends to be fairly indifferent to the needs of its workers - especially the non-professional ones - and to view the social costs of business decisions as fairly irrelevant to its decision-making.
One can imagine a world in which worker representation changes these features of American capitalism. But one can also easily imagine a scenario where employee representatives on the board use their power to claim value for workers even when a fi rm is in trouble.
Or where particular groups of workers manage to take control of the board- election process and divert fi rm resources to their members not from shareholders, but from other workers who are less numerous or well organised. If you have been paying attention to the union deals cut by cash- strapped governments and struggling industrial concerns, you have some inkling of what that process might look like: Cuts in wages and benefits get pushed onto new workers, while the old workers retain their above-market compensation.
Perhaps the easiest thing to imagine, however, is simply that this scheme will gravely disappoint those proposing it.
Workers would not have a majority on the board, and a reasonably united front between shareholders and management would be enough to block any substantial influence over corporate decisions. — WPBloomberg