Rise of the workers Corbyn’s plans borrow heavily from a German system, but it has not necessarily led to a pay boom
Labour’s plans to shake up boardrooms borrow heavily from Germany’s system of codetermination or mitbestimmung.
Its two-tier board system attempts to directly hand power to workers and facilitate communication between the boardroom and the factory floor. Employee representatives in Germany make up half of a large company’s supervisory board, which oversees and appoints the executive board. Most EU countries require some employee representation on boards but Labour’s plans are more radical, proposing that a third of the top management team must be workforce representatives.
Evidence suggests workers “want to contribute more” when they are included in decision-making in their workplace, says Dr Ewan Mcgaughey, a law lecturer at King’s College London. He says the system developed in Germany was designed to ensure “less industrial conflict”. However, codetermination has not necessarily led to a pay boom in Germany, argues Claus Vistesen, eurozone economist at Pantheon Macro. The country’s
wage growth is “not nearly as strong as you would expect” and pay is “still challenged by the same structural problems” such as automation.
Roger Barker, at the Institute of Directors, says the UK’S corporate governance system emphasises the independence of boardrooms to ensure they are acting in the “best interests of the company”.
The “tough decisions to lay off workers” for the best interests of the company would be problematic when worker directors “clearly do have a conflict of interest”, he says. He questions whether they would have the skills and experience for a “very distinct professional role”.
The UK is planning to dip its toe into codetermination from January next year. Revamped corporate governance rules aim to give employees a voice by requiring companies to adopt one of three options, including appointing a director from the workforce. With Democrats outlining similar plans in the US, boardrooms around the world should brace for change as momentum to elevate workers gathers pace.