Theresa May. Photo: Home Office (under creative commons)
Why Theresa May is right (and the FT is wrong) about co-determination
It was the UK’s first woman Prime Minister, Margaret Thatcher, who said “It’s a funny old world” as she was about to take her leave of Downing Street. Now the second woman to enter the UK’s most famous address, Theresa May, is setting out her policy stall and has advocated both an active industrial strategy and a role for workers on company boards, two key asks of the TUC. My colleague, Janet Williamson, yesterday outlined the value of such a role for workers, but an opinion piece by a Berlin-based journalist, Ursula Weidenfeld, in today’s Financial Times has criticised this move.
In Germany, half of the seats on boards of companies with 2,000 or more employees must be occupied by labour representatives. This is known as ‘co-determination’, or “mitbestimmung”. Weidenfeld admits the successes of this policy: she notes that “workers have helped to reduce production costs” and that they have supported flexible working and short-time work where necessary. Her criticisms are that co-determination has hindered innovation and reduced profits. Young people, who don’t want to work for any company for more than a few years, “would much rather resign than stay and fight for their rights”. Co-determination protects the privileges of male, full-time workers over part-time and self-employed workers, while not reflecting the increasingly multinational character of German companies’ workforces, she argues.
My experience of co-determination has been very different. In 2012, the TUC published a report called ‘German Lessons’, based on visits I made to German companies including Volkswagen, Siemens, BASF and ThyssenKrupp. I met people like Harald Kern of the Siemens Works Council – which hinders innovation, according to the logic of Weidenfeld. Harald described Siemens’ work in electromobility, or the question of the smart grid, which was seen as the future of IT and which means that every individual will be able to communicate all over the planet – and which all sounds pretty innovative to me. Indeed it is those German companies covered by the law of mitbestimmung that are leading the development of Industrie 4.0, the next stage of the industrial revolution. At ThyssenKrupp, the German steel company, the Works Council recognised that the company could only remain competitive in the world, in its niche area, if it got bigger – and who would argue with that after the steel crisis that is currently affecting so many other parts of Europe, including the UK? This meant that ThyssenKrupp backed an investment in Brazil, even if that meant less investment in Germany in the short to medium term, with the support of its labour representatives.
Regarding young people, it may be true that the brightest and the best can move around, but many do not have that luxury. Moreover, thinking of the role of works councils as “fighting for rights” is a bit of a misunderstanding. Co-determination means that a workforce perspective is brought into the boardroom, so that company executives can see a problem from a workers point of view. Labour representatives do not become “co-managers”, as Weidenfeld puts it. On the day I visited the Volkswagen factory in Wolfsburg, there was what might best be described as a “frank exchange of views” going on for some reason or another, but management and workforce could have such surface conflict in the knowledge that a deep-seated trust, developed over years, continued to exist. There is no reason why co-determination should favour male, full-time workers over others and in the TUC’s experience, less aggressive industrial relations helps to attract more young workers and women workers to become trade union reps. Finally, German companies may have multinational workforces, but this is what European Works Councils are for.
Ursula Weidenfeld argues that, with regard to co-determination, “its best years are behind it”. I doubt that. I first became interested in German industrial relations 25 years ago when I worked for what was then the Amalgamated Engineering Union and my boss, Bill (now Lord) Jordan looked enviously at Germany’s dual-system of vocational training. In the quarter century since, I’ve read so many articles describing how Germany’s economic might was about to come to an end. And there it still is, the strongest economy in Europe. But then you know what they say: it’s a funny old world.