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Guest Columnists - German industrial relations model is partnership of workers, owners

Generally, we use the term "democracy" in reference to how a society governs itself. Seldom will we use the term with respect to the management and operation of a business.

Our model of a business rests on the fundamental separation of the powers and functions of owners (inclusive of senior management and executives) and workers. It is, therefore, fascinating to consider the German model of business management and control and labour relations.

The German model has three basic components — work councils, co-determination boards, and regional wage-setting institutions. These components are sanctioned by and operate under the protection of German legislation. They operate independently of German trade unions.

Work councils are associated with small businesses. Council members are elected by the workers. The council has the responsibility and authority to be involved in the management of the business. This includes items such as hours of operation, hours of work, layoffs, firings, production and workplace environment. In a broader societal context, these councils provide the opportunity for developing leadership skills and act as ‘feeders’ for leadership roles within the broader German society.

Co-determination boards are associated with larger firms usually having 2,000 workers or more and whose operations are controlled by boards of directors. By law, half of the directors of the board are elected from the business’ workforce (excluding senior management and the executive). Any aspect of the firm’s operation is within the jurisdiction of the board.

The co-determination board cannot stop the sale of the business, outsourcing, setting up offshore, or closing the business. However, the board, and thereby, the workers, are able to negotiate for significant considerations, which may include work protection and, more importantly, investment in the local business.

The third component of the model is not involved in the management of businesses. Where they exist, the regional wage-setting institutions’ role is to define wages within a geographic region or for a multiple of businesses in the same industry. Workers and owners are equally represented in these institutions.

The central theme of these institutions is a partnership of workers and owners. The partnership is legislated by the German government; however, the success of the model requires that partnership, co-operation, and mutual respect are the norm with respect to relations between labour and owners. To repeat — between labour and owners, the fundamental and essential components of any business.

Germany’s model has been successful. Germany is the economic powerhouse in the European Union.

The average yearly gross salary in Germany in 2013 was US$60,000 (depending on the source, the figure is US$74,000 compared to US$46,500 in Canada). Wages increased by 2.5 per cent in 2009, 0.4 per cent in 2010 and three per cent in 2011.

There is no minimum wage. Workers enjoy a six-week annual vacation. Workers do not work more than eight hours per day either on a daily basis or as an average over a period of six months.

CEO salaries are 12 times higher than the median wages of workers compared to 400 to 500 times higher in the United States (Canada is not to far behind the United States).

Germany has maintained its manufacturing sector (it is argued, to a large extent, because of the model) and the higher-wage jobs associated with manufacturing jobs without incurring a major trade deficit. Workers and owners have a vested interest in the success of businesses and a vested interest in ensuring that the engines of the economy are working well.

And the most interesting part of the story regarding Germany’s model? It was imposed on Germany by the Allies — the guys who ‘won’ the Second World War.

The intent of the Allies was to establish an economic model that would support a democratic Germany. The issue for the Allies was to ensure that someone could and would match the power of the owners, who had been the economic source of the power enjoyed by Hitler (he is the guy, who, through the democratic process, created a dictatorship to wreak havoc on his country and on the world).

The European Union is now examining the model for implementation. As well, German multinationals setting up shop in the United States are wanting to implement the model in their U.S. businesses.

Whether the model is acceptable to other countries only time will tell. What is being demonstrated is that there are other models of industrial relations, labour relations, business management and control.

The German model may go the furthest with respect to balancing the power between workers and owners within a business and, more broadly, the national economy. The model may go the furthest with respect to the democratization of the workplace, of industry, of the economy and the subsequent democratization of society.

What Germany may be demonstrating is that democratic principles can and may even need to extend into our workplaces to achieve economic prosperity and well-being. And that our model of a business needs to incorporate workers as having equal standing with owners.

One can only imagine what such a model would mean in the broader society as leadership, partnership, and co-operative skills and attitudes are practised in other dimensions of our lives.

» Chester and Rosemarie Letkeman are both retired from federal public service and are longtime Brandon residents. They are both interested in public policy, but have no political affiliation. Their column runs monthly.

Republished from the Brandon Sun print edition June 20, 2014

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Generally, we use the term "democracy" in reference to how a society governs itself. Seldom will we use the term with respect to the management and operation of a business.

Our model of a business rests on the fundamental separation of the powers and functions of owners (inclusive of senior management and executives) and workers. It is, therefore, fascinating to consider the German model of business management and control and labour relations.

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Generally, we use the term "democracy" in reference to how a society governs itself. Seldom will we use the term with respect to the management and operation of a business.

Our model of a business rests on the fundamental separation of the powers and functions of owners (inclusive of senior management and executives) and workers. It is, therefore, fascinating to consider the German model of business management and control and labour relations.

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