Friday, February 12, 2010

AMERICA NEEDS CO-DETERMINATION ON ITS BOARD OF DIRECTORS

AMERICA NEEDS CO-DETERMINATION ON ITS BOARD OF DIRECTORS

By Kevin Stoda, Germany


You may ask what “co-determination” is. In Germany, it is cooperation between workers and companies at the Board of Director level. This is something that does exist in the USA but has existed for nearly 6 decades in one of the world’s perennial best economies. According to EUROFOUND, “The concept of co-determination refers to two distinct levels and forms of employee participation: co-determination at establishment level by the works council (see next entry on co-determination rights of the works council ) and co-determination above establishment level, on the supervisory board of companies, which is the main subject of this entry.” At the supervisory level of all large companies in Germany, the employees have a 50% representation on the supervisory board of the firm.

http://www.eurofound.europa.eu/emire/GERMANY/CODETERMINATION-DE.htm

In contrast to Germany, Sweden it is 1/3 representation for employees. Similarly, medium-sized firms in Germany of between 500 and 2000 employees have only 1/3 representation on their co-determining boards—by law. “The employee representatives are elected either by direct election by the workforce if they so wish, or otherwise indirectly by a secondary body of delegates elected by the workforce. The shareholders' representatives are elected by the appropriate shareholders' meeting or company general meeting.” This practice actually was first instituted in the Weimar Republic, but has its roots in many alternative philosophies. “In terms of the history of ideas it [the concept and practice of co-determination] covers a broad spectrum, ranging from catholic social theory via radical democratic to socialist perspectives.”

After WWII, the practice of co-determination was instituted in the German iron and steel industry. Interestingly, these industries were the source of the first great political unification steps between Belgium, France, Germany, Italy, Luxembourg and the Netherlands in the 1950s occurred in these two industries. In short, this is one reason that one of the three pillars in the European Common Market--and later the European Union--has always been a social and worker or family oriented pillar.

http://europa.eu/abc/history/index_en.htm

“The 1976 Co-Determination Act was passed in the face of strong resistance from the employers' associations . A constitutional appeal against the Act was rejected by the Federal Constitutional Court in 1979.
As regards the form of co-determination to be applied in the European Company (Societas Europea, or SE), there are three variants available. The first is modelled closely on practice in the Federal Republic and the Netherlands, and the second corresponds to the French system. The third variant provides minimum conditions for co-determination; here, the form of co-determination can be agreed between management and employees as they choose, but employee representatives must be informed and consulted on the company's business situation at least every calendar quarter. As a general principle the nature of co-determination is, however, governed by the provisions on the matter in the Member State in which the SE is located.”

AMERICA NEEDS TO LOOK AT THE EUROPEAN MODEL

http://www.commondreams.org/video/2010/02/12

Author of “Europe’s Promise: Why the European Way Is the Best Hope for an Insecure Age”, Steven Hill was on Democracy Now today. He noted that the concept of Co-Determination in medium and large companies is one of the many elements of economic and social development which America must consider incorporating if the USA is to learn to handle economic crises with much more maturity than it has over the past 4 decades (or more).

“Co-determination” and social commitments to its citizens for industry and businesses in Europe makes the continent’s major exporters, Germany and the Netherlands, particularly strong even during the great global downturn we have seen over the past few years in America (and in the near future). Siemens, BMW, Mercedes, etc. all have “co-determination of workers”.

http://www.youtube.com/watch?v=2wwq3Q9ODVI&NR=1

In short, the Europe Union—which is facing the possible bankruptcy of several states—including Portugal, Ireland, Greece—is still the largest economy in the world. Moreover, it is set to whether these economic and bankruptcy crises much better than the USA. This is because the USA does not have the social and economic safety nets nor cross-national social commitments that Europe is already displaying to be quite mature.

http://www.democracynow.org/2010/2/12/europes_promise

In this age of uncertainty, Steven Hill argues that European is way ahead of the USA in health care, early childhood development support, education, wonderful transportation options, a greener economy, and great welfare care. The USA is falling short in most of these areas. “Europe has more Fortune 500 companies than the USA and China combined. It has had a bigger GNP than nearly the USA and China combined.”

Currently, even France has a lower unemployment rate than the USA. Europe is a place where American investors go to make big returns, i.e. it is not China.

Hill says, “Unquestionably, capitalism has proven itself to be the greatest wealth generator ever, raising the living standards for hundreds of millions of people. What is at issue is our ability to harness that wealth-generating capacity for the good of the many — instead of the enrichment of the few. That harnessing requires a balancing act, an optimal mix of free enterprise combined with the right amount of government regulation that does not unduly burden entrepreneurship and commerce. Codetermination — specifically supervisory boards and works councils — is one of the keys to that harnessing, and to Europe’s distinct brand of ‘social capitalism.’”


NOTES


Co-Determination, http://en.wikipedia.org/wiki/Co-determination

Co-Determination is not an Alien Concept in Europe, http://www.etuc.org/a/382

Co-Determination, Efficiency, & Productivity http://ideas.repec.org/p/iza/izadps/dp1442.html

Economic Effects of Co-Determination, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=926100

German Co-Determination, http://www.bod.de/index.php?id=296&objk_id=227261

Hill, Stephen “Economic Democracy an Co-Determination: http://www.theglobalist.com/storyid.aspx?StoryId=8239

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2 Comments:

Blogger Kevin Anthony Stoda said...

http://www.democracynow.org/2010/2/12/europes_promise

STEVEN HILL: Certainly. Europe was a military—a place of military warring nations for centuries. And after the utter destruction of World Wars I and II, the politicians of Europe—interestingly, the conservative politicians of Europe, people like Konrad Adenauer from Germany and Winston Churchill from the UK—they decided that it was time to quit pouring their nations’ wealth into the military machines they had been and to start pouring it into their people. So a movement emerged for what was called then the “social market economy”—in my book, I call it “social capitalism”—to start taking the resources of their free markets and plowing it back into developing their people, giving things like, for example, free or nearly free university education, which Europe still has today, whereas, you know, in the United States students are paying increasingly amount for tuition. Having childcare, in the United States, childcare for two children is about $12,000 per year for a family in the United States. In Europe, you’re paying a thousand to maybe $2,000 per year for that same childcare. And so, Europe plowed it back into these things in order to develop these things for their people.

And they also did other things that I think is of great interest that many people in the United States have not heard about. In order to, in a sense, put some regulations around corporate power, Germany was the first to develop a practice known as co-determination, where the—you know, every corporation has a board of directors, but in Germany 50 percent of those board members are elected by the workers. In Sweden a third of the board members are elected by the workers. It would be as if Wal-Mart were required by law to allow its workers to elect 50 percent of its board of directors. It’s almost unimaginable from the American point of view. And yet, here you have major economies in Europe that actually do this on a fairly regular basis, and yet most Americans have never even heard about this.

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