Mitbestimmung is Controversial

Although Mitbestimmung – codetermination: the legal right of workers to be represented at the highest levels of management – is foundational to the German social market economy, its merits are debated constantly.

Business (companies and their associations) believes that Mitbestimmung has been taken too far. The many different interests represented makes it too difficult to find consensus. It is an inefficient way to run profitable companies.

In October 2004 Germany’s two largest chambers of commerce (BDI and BDA) demanded reform of the Mitbestimmung. Their main argument was the pressures due to increasing internationalization of their companies. They referred to Mitbestimmung as an historical mistake.

There exists in Germany, however, a cultural and political consensus favoring Mitbestimmung. Germans believe that it provides for stability in companies. Employees identify themselves with them. Productivity is kept at high levels.

An historical mistake?

(Un)healthy skepticism

Kenne mer nit, bruche mer nit, fott domet – loosely translated as “Don’t know dat. Don’t need dat. Get it outta here.” A well-known figure of speech in the dialect spoken in the Rhineland. The German fear (Angst) of change. Too much, too fast. A never-ending story.

Especially the older and well-established generations are skeptical of any change. Skepsis is then passed down from one generation to the next, ankering itself deep into the German psyche.

The digitalization of the economy. The move away from fossil fuels to natural energy sources such as wind. A free trade agreement between the European Union and the United States. These and other topics are ever-present in the media, triggering in many Germans feelings of worry. “Why should we change things which have worked for us over the past decades?”

A good example is the reluctance in Germany to make necessary changes in education. “Why should we all of sudden put computers and tablets in the classroom? Do we really need new media in all areas of society? Let’s first take a step back and analyze it carefully. No hasty decisions!”

While the Germans in their ministries and commissions are studying the issue other countries are moving ahead rapidly and preparing themselves for the digital world.

Often, when it comes to reacting to change, Germany, the Land der Dichter und Denker – literally the country of poets and thinkers – falls into a kind of lethargy, of Schockstarre – shock + numbness.

There is nothing wrong with being skeptical about change. It is often difficult, however, for the German people to find the right balance between pessimism and optimism.

The Switch Operator

Dr. Sigrid Evelyn Nikutta is the head of Berlin’s public transportation authority, and is considered one of Germany’s top managers. Named Manager of the Year in 2012, she is known for her democratic and employee-focused leadership style.

Nikutta characterizes herself as consistent, consequent and cooperative: “Employees are my colleagues. I seen them as people. That is no contradiction to an ambitious leadership style which sets clear goals. Involvement of all key people, on all levels, is critical, in order to make clear and fast decisions, whose results are followed closely.”

Nikutta’s management approach is not only effective, but moreso very popular among today’s German workers. Especially the younger generations prefer a boss who is more of a partner and who communicates transparently.

Successful leadership leads to motivation and results. The head of Berlin’s public transportation authority is a model for successful, consensus-oriented management.

MacArthur vs. Nimitz

During World War II, the two American military leaders in charge of operations in the Pacific could not have been more different in their personalities and leadership styles. Both General Douglas MacArthur and Admiral Chester Nimitz were in charge of two different sections of the Pacific, answering to no one but the Joint Chiefs of Staff. They both had incredible success, both in their individual and joint campaigns. Yet, only one of these men became an American celebrity, admired for his amazing leadership skills.

MacArthur was a showman, fond of strong gestures and motivating speeches. Occasionally accused of being a megalomaniac, Macarthur believed very strongly that the Pacific fleet should be united under his authority. He expected his officers to inform him about everything, and he expected his orders to be carried out precisely as he specified them. His opinions on his officers’ advice and reporting abilities are shown very clearly in two of his quotes:

“I realize that advice is worth what it costs – that is, nothing. Expect only five percent of an intelligence report to be accurate. The trick of a good commander is to isolate the five percent.”

On the other hand, Nimitz was said to be a team player, who relied on his staff’s expertise to successfully manage themselves and to provide useful advice when needed. Naval historian Robert Love wrote that Nimitz “had the ability to pick able subordinates and the courage to let them do their jobs without interference. He molded disparate personalities into an effective team.”

Nimitz was a German-Texan, born and raised in Fredericksburg, Texas.

The Allies and Mitbestimmung

“Herewith the establishment of works councils is permitted within all of Germany.”

German Mitbestimmung – co-determination, employee participation in high-level company decision making – is a tradition, law and an institution which most certainly is a source of headaches for American business partners and investors. At the same time the works councils are a source of great pride and self-understanding for all German labor unions as well as for many German citizens.

And although German Mitbestimmung had had a long tradition in Germany, it was the Western Allies, primarily the Americans and the British, who insisted immediately after World War II that the newly established West German state reinstitute it.

After their takeover of power in January 1933 the National Socialists had outlawed the Mitbestimmung, and forced all labor unions to be unified within the so-called Deutsche Arbeitsfront – literally German Workers Front. The goal was to prevent any potential resistance to the regime from among the working class.

With strikes in 1905 in the coal mining Ruhr region the unions had won the right to establish works councils. In the years thereafter the councils gain increasing influence. During the Weimar Republic these gains were written into law.

The works councils represented the economic and social interests of the workers over and against management. It was no surprise, therefore, that the Nazis saw in them potential opposition to their  demand for absolute power. In 1934 the Nazis banned all independent unions and works councils.

It was no surprise, therefore, that what had been a thorn in the side of the Nazis was reinstated by the Allies. Kontrollratsgesetz Nr. 22 – Allied Law No. 22 – in the Spring of 1946 put works councils back in business.

Since then there has been no better instrument to prevent total control by management. Those who pick a fight with a works council go against the self-understanding and pride of the German movement for worker rights.

Political Consensus

Gerhard Schröder was chancellor of the red-green – Social Democrats plus Green Party – government from 1998 til 2002, and then after reelection from 2002 til 2005. In his first term the Social Democrats and the Greens had a majority in the Bundesrat, the Upper House, where the sixteen German states are represented to co-decide with the federal government on national policy. The Schröder government had little difficulty passing the legislation they had proposed during the election campaign.

In 2002 the situation began to change, however. Federal elections led to another majority for the Social Democrats and the Greens. But at the state level they lost their majority within a few years. The opposition – Christian Democrats and Free Democrats – had gained the majority in the Bundesrat and were able to block legislation proposed by the Schröder government.

Nonetheless, Schröder‘s coalition was able time and again to craft legislation in a way which served the interests of those state governments led by opposition parties. His government was able to compromise and collaborate with those critical German states led by the Christian Democrats and Free Democrats.

Mitbestimmung

Mitbestimmung: to determine with, to co-determine, co-decide; to be involved in a decision making process; representatives of blue and white collar workers having a seat at top management levels.

German law guarantees that employees have a say in all issues affecting the workplace, including internal rules and regulations, work conditions, personnel policy and those decisions determining the future of the company.

Mitbestimmung has its roots in the 19th century, when workers associations were established to improve work conditions and to check the unlimited power of management. The associations evolved into labor unions, which by the end of the 19th century had the legal right to represent workers over and against management.

The creation of labor unions was supported politically not only for ethical reasons, to protect the interests of the worker. Both sides – labor and capital – wanted to establish mechanisms to balance out the interests of both in ways which would avoid stikes, protests and social unrest. This is the spirit behind Mitbestimmung.

Betriebsrat. Works council. Any company with five or more employees must by law allow the formation of a works council. These are elected democratically and represent the interests of all employees – both white collar (non-labor) and blue collar (labor). If management and the works council cannot agree on certain issue, the law requires that a neutral third party mediator be involved.

The interaction between management and works council can be either positive or negative. Well run companies have a very cooperative relationship, which contributes to company success. In other companies the relationship is contentious, especially in those struggling in the market. The works council can often block management attempts to downsize the workforce, close down plants or otherwise restructure in ways negative for the (white collar workforce) employees.

Gewerkschaften. Labor unions in Germany unite employees of one industrial sector. They mostly represent their members in wage negotiations which are obligatory for the whole sector (labor agreement). They have the right to strike, an instrument they use only when negotiations have broken down and after serious deliberation.

Bürgermeister and more

Governors in the German states are called Ministerpräsident or Minister President or Premier. They are president of those ministers, who run the various departments of a state. The state parliaments have the same structure as the Bundestag, Germany‘s national parliament.

The minister president is a colleague among the members of the state parliament‘s largest elected faction and is elected by his or her colleagues to form a government, typically a coalition of two parties.

The minister presidents, like the chancellor, manage and coordinate the work of the ministers, who, however, lead their departments independently. The minister president is a primus inter pares, a first among equals.

Like the ministers at the federal level, the ministers at the state level are powerful political figures from the regions of the state. Each is capable, and in most cases willing, to become minister president. The acting minister president, therefore, has to balance out carefully the interests of these power brokers.

Germans mayors are called Bürgermeister. Again, like the chancellor and the minister presidents, the Bürgermeisters are selected by their colleagues in the largest elected party in their city councils. They form a city government, typically a coalition of two parties.

And like the chancellor and the minister presidents, the mayor is a primus inter pares, managing powerful local politians who head up the city‘s most important departments.

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