Rise of the work­ers Cor­byn’s plans bor­row heav­ily from a Ger­man sys­tem, but it has not nec­es­sar­ily led to a pay boom

The Sunday Telegraph - Money & Business - - Labour Party - Tom Rees

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.

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