Co-determination and Workers in the Boardroom in Germany

Elections for the Factory Council in Germany

I’ve posted up a few pieces about industrial democracy and worker’s control in Yugoslavia and in the former Soviet Union under Lenin. Capitalist West Germany also has a similar system of co-determination in which members of the workforce are represented in the boardroom in a system of factory councils, thus creating the ‘constitutional factory’.

The system is described in the book, Tatsachen Uber Deutschland: Die Bundesrepublik Deutschland (Facts about Germany – The Federal Republic of Germany’) (Munich: Bertelsmann 1985). This is my translation of some of the relevant passages.

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Human self-determination is indisputably valid as the foundation of our social order. It results from the constitutional guarantee of the right to the free development of the personality. It would contradict this image of self-determined people, to regard the worker merely as a component of a system of production, who is solely determined by the interests of capital. Starting from this basic thought, he far-reaching unity exists today that that the aims of the enterprise must be stamped with the interests of the working people, and that the workers’ democratic say in the matter must be heard, when the entrepreneur’s decisions, touch on their vital interests. It has been attempted to do justice to these demands and concede to the workers, legally secured, a considerable measure of co-determination in the factory.

The factory council law of 1920, that first created this possibility of setting up elected representatives of workers and employee in all factories, stood at the beginning of this development. The young Federal Germany made a great step in the direction of employee co-determination in 1951, when it set in force the so-called ‘Coal, Iron and Steel Co-Determination Law’, which granted employees in the large enterprises of the coal, iron and steel industries considerable rights to co-determination, as well as the co-staffing of the organs of management. The Factory Constitutional Law of 1952 provided the employees of nearly all industries co-determination rights in nearly all factories in social and personal matters, and a hearing with in economic decisions. The second factory constitutional law of 1972 brought substantial improvements, above all for the employees’ representatives. This was considerably reformed in the comprehensive co-determination law of 1976. With all these laws the idea of the ‘constitutional factory’, which still appeared as a utopian dream a few decades ago, becomes a reality in the Federal Republic of Germany. The Basic Law’s principle of the social state is filled with life in an important area.

The Factory Council

the most important arrangement for the representation of the employees’ interests in the factory is the factory council. It is elected by all employees over 18 years old. Foreign employees are also entitled to vote and be elected. Everyone entitled to vote can equally stand as a candidate, whether or not they belong to a union. In practice, however, and above all in the larger factories, the unions have a considerable influence in the composition of the candidate lists. The number of members of the factory council is determined by the size of the enterprise. Its term of office lasts three years. As an employer could be tempted to dismiss an ‘uncomfortable’ member of the factory council, the members of the factory councils enjoy a stronger level of protection from dismissal during their time in office and for a year afterwards. The members of the factory council normally practice their office outside of their professional work. Only in the larger factories must a member or several members of a factory council be exempted from their professional activities.

The officials, employees and workers of the Civil Service equally have a representation of their interests, the personal council, whose tasks and powers resemble those of the factory council.

The Rights of the Factory Council

The factory council has multiple rights, above all in social and personal matters. In some things it must be heard, in others it can co-operate, and in some particular matters it finally has a real right of co-determination. ‘Real’ co-determination means that the employer cannot make decisions without the agreement of the factory council. If they cannot come to terms, an agreement office makes the decision, put together from equal numbers of the representatives of employers and the factory council as well as an impartial president.

Without the agreement of the factory council, the firm’s management are not allowed, for example, to arrange any overtime, short-time work, control clocks or introduce other control equipment, issue contract or premium rules, and give notice to vacate company accommodation. The factory council can even compel vacated or newly created positions to be first advertised within the factory.

The factory council cannot stop the dismissal of a fellow worker. They must be heard before every dismissal, and have a right to reply within certain limits. If they reply and themselves make a complaint, they are to be employed until the tribunal’s decision. If the employer plans the dismissal of a large number of workers, they must inform the factory council in time. This then has the right to demand the drawing up a ‘social plan’, that ameliorates the negative aspects for those affected. For example, a settlement, or the costs of removal, would be paid to them.

Also, where the factory council only has a right to a hearing, it can very frequently achieve improvements for the workers through skilful negotiation. In practice the factory council and the employer only rarely stand opposed as irreconcilable opponents, but work together, as the law expressly demands – and strive for sensible compromise.

The individual employee, apart from their electoral rights to the factory council, has rights, which could be called the ‘Innerfactory Basic Rights’. They have the right above all to be informed of the type of job and the arrangements for the termination of work; to demand information on the remuneration of work and the calculation of wages; to inspect their personal acts; and to complain if they feel discriminated against or unjustly treated. In most cases the employee is allowed to draw on a member of the factory council.

Co-determination in Large Factories

The factory council has no influence on the economic management of the enterprise. It is above them only in having a certain compass to inform, and only that in factories with over 100 employees.

There is, however, economic co-determination in various forms in almost all big factories. In the German Federal Republic more than half of large enterprises are joint-stock companies. German joint-stock companies have two management premiums: the supervisory board as supervisory organ and the board of directors, which conducts current business. From 1951 onwards a third of the members of the supervisory board in every joint-stock company must be elected representatives of workers and employees. This rule is valid for small and medium joint-stock companies (up to 2,000 employees), and also today in certain other legal forms for enterprises with 500-2000 employees.

There are, however, two special co-determination regulations for big businesses. In the large enterprises of mining, iron and steel production, with over 1,000 employees the so-called Iron, Steel and Coal Co-determination Law has been applied since 1951. According to this law, one half of the supervisory board is occupied by representatives of the investors and the other by those of the employees respectively. Both sides must then agree on a further, neutral member. A work director must be a member of the board of directors as a fully-qualified member, who cannot be elected against the voices of the employees representatives in the supervisory board.

For the big businesses of the remaining industries, which have more than 2,000 employees, the general co-determination law of 1976 is valid. In this law, which encompasses around 500 enterprises in all branches of the economy with the exception of the coal, iron and steel industries, and the press, the regulations are more complicated. According to this, there is complete parity per capita between the sides of the shareholders and the employees. But in cases of a tied vote, the voice of the chairman decides, who cannot be elected against the wishes of the investors. Furthermore, at least one representative of the ‘managing employees’, meaning an employee with management functions, must belong to the supervisory board on the side of the workers. The unions would have preferred it, if the co-determination law for the coal, iron and steel industries, which has stood the test of time over three decades, would have been extended to the remaining large factories. But the same have succeeded with legislation, which sees it as a too sweeping limitation of the basic constitutional right to property. The employers’ federations are of the opinion, that in this form the law places too strongly places narrow limits on property rights, and raised a constitutional complaint. The Federal Constitutional Court referred the complaint back and declared that the Co-determination Law is consistent with the Basic Law. The co-determination of workers has proved to be a stabilising element for the economic and social order of Germany. This order depends not least on the readiness of all parties to working together more fairly. The possibility of active co-creation increases the workers’ and employees’ motivation to work and thereby strengthens the efficiency of German industry.

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Composition of the Supervisory Board according to the Factory Constitutional Law

10:4 Investors to workers.

In the coal, iron and steel industry the proportion is 7:7 investors to workers with a neutral member.

According to the Co-determination Law of 1976

Investors to workers – 7:7 + 1 president with a deciding vote and 1 managing employee.

Forms of Co-determination and its Area of Validity

Co-determination after the law of 1976 – 4.5 million employees, large, joint-stock companies.

Coal, Iron and Steel Co-determination law – 0.6 million employees.

3rd Partnerships – 0.6 million, small joint-stock companies.

Interfactory Co-determination (Factory Constitution Law) 9.3 million, the remaining economy.

Interfactory Co-determination (Personal Representation Law) – 3.6 million, the Civil Service.

No co-determination – 3.4 million – small factories with less than 5 employees.

Rights of the Factory Council

Co-operation

Personal planning, dismissals, termination of employment, work arrangements, factory organisation, factory alterations, work protection.

Co-determination

Working time, principles of pay, holidays, social facilities, professional education, factory regulations, recruitment and promotion.

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This isn’t workers’ control, but it is a type of industrial democracy, giving the workers a voice in some of the decisions made by management concerning their pay and conditions. I don’t know if this legislation survived the administrations of Franz-Josef Strauss, Helmut Kohl or Gerhard Schroder, Germany’s answer to Tony Blair. Some of the functions of the factory council could be performed through a good trade union, if such things were still permitted in post-Thatcherite Britain. Nevertheless, it seems that German workers, at least the period from 1975 to the book’s publication a decade later, enjoyed a degree of legal protection and a presence in the boardroom that their British counterparts lacked. This is one lesson from our friends on the Continent, which we should learn, no matter what the narrow chauvinists in UKIP may shout to the contrary.