Co-Determination and American Worker Rights

08/18/2005

Paul Munnis

Corporations are made up of three key parties who have skin in the business success of a corporation. Investors, workers, and managers all have a stake in the future of a company. In Europe, the Legislative bodies and the Courts have recognized this as fact and have determined that it is necessary that all three groups be fairly represented on the corporate board of directors as the legal consequence of forming a corporation.

The CEO and CFO represent the investors and can be removed by stockholders at stockholders meetings for poor performance or for illegal behavior. Labor makes up one third of the Board of Directors with the labor representatives elected by work unit members. These work units can fire a worker representative for poor representation or for illegal behavior. Management also participates in the election to assure their representation to the Board.

Management consists of both technical and administrative management. Thus a Senior Design Engineer is a member of management as is a Department Manager in a factory unit. Management representatives join labor representatives to make up that one third of the Board.

The rest of the Board members are made up of Corporate Officers and outsiders who are invited to serve by the Board in consideration of various contributions that they can make to the furtherance of the interests of the corporation. Conflict of interest is not permitted.

Thus a corporate Board might consist of a CEO, a CFO, a Human Resources Officer, three worker/manager representatives and three outside members elected by the Board. This then would be a nine-member Board.

The legislation that makes this a reality is called: “The Co-Determination Workers Act,” and it establishes basic rights of all who have a stake in the corporation. It is no less than a major change in the way that the corporate structure is required to be by law. It assures that all Parties are fairly represented at the business table. It prevents a lot of strikes and abuse that we see in American corporations often at the expense of workers. It has evolved over time with various pieces of legislation that have expanded the right of workers to have a major say in the running of a company.

America is still clinging to an early industrial model of Labor representation that Europe has moved past and the Co-determination Act has demonstrated success as the new model. The result is that every worker in Europe is represented in business while only a select few in a few U.S. industries have a voice at the business management table. Most American workers have to take what they are given and like it. Here in America middle management is not represented at all on the Corporate Board and the CEO and CFO often snag millions at the expense of the investors, workers and managers.

American Labor is also recognizing that as industrialization declines and knowledge based industries rise then Labor Unions are finding it very difficult to organize and have recently had a falling out over the issue. Yet this problem of organization failure is not theirs alone. Labor Laws have not evolved over time to handle non-Unionized corporations.

In our opinion it is time for a rethink concerning the rights of Labor in the American workplace. In Germany for example a business as small as five employees has a work group (by law) and a right to co-determination of the management of the business. Workers jobs, livelihood, and the welfare of the family unit are all at stake with a job commitment and are all protected by legislation that levels the playing field for Labor.

If we did this in America would it be the end of Labor Unions? No, the Unions have a lot of experience at contract bargaining, at organizing work place groups, and in assisting worker groups in setting objectives and goals for the good of the work unit members and the company that they work for. They would be free to sell their services to the work groups for purposes of developing contract proposals, communicating them to members, getting votes taken, and in presenting the results to the Board of Directors for action.

Conceivably a work group could elect a person from a Union Organization to be a Board Representative.

In one case study that I participated in at Germany during the mid-1980’s it was determined that a particular labor productivity improvement would yield a large amount of new profit for the corporation. The Board decided to split the profit three ways. One third went to the investors, one third went to the workers and managers as a bonus at the end of the year, and one third was directed for new product development introduction and thus assure retention of the workers who were displaced by the productivity gain. 

Using this approach U.S. Labor Unions would have a big problem solved for them, the organization of workers and managers. The organization format would be accomplished by law and without a recruiting effort. Unions would be faced with a challenge to offer quality representation and services to those work groups that were formed. They would still have to sell themselves and their services. There could be new Unions or even Lawyers that spring up to offer competing services and some work groups could decide to go it alone without professional representation.

It is time for America to rethink the rights of workers and to modernize our Labor Laws as we go forth in the new millennium. The present system is unfair and unworthy of America. Co-determination could play a role in forming a proven model for future success in America. To learn more about it you can search the Internet for “Codetermination Act.”

This subject should be a key discussion item during the 2006 election for representation to Congress. American workers should be entitled to job security that is at least as good as EU workers have. Having co-determination could prevent corporations from setting European workers against American workers, and allow both groups to compete with off-shoring and allow NAFTA and CAFTA to be dealt with.

Co-determination would also put an end to the demands of corporations to be given tax waivers in local communities or else they move their plant elsewhere since workers would have to shoulder the burden of lost revenue to the community and do it without added compensation they would likely oppose that at Board meetings. In Europe non-profits and charitable organizations are exempt. Government workers are fully covered by the law. Labor Courts exist to hear Labor complaints and to establish case law for guidance.