Edition: Edition: September / November 2015
Editorials

DIRECTORSHIPS

Germany beckons

In follow-up to ANC Gauteng conference, a SA delegation will take
a close look at worker representatives on company boards.

The model of “co-determination”– management-worker consensus – has long been tried and tested in Germany, sometimes brilliantly and sometimes less brilliantly but always with experience enhanced. It’s experience of this mitbestimmung that deserves careful exploration for the model’s possible adaptation to SA (TT Dec’14-Feb ’15).

In July, at the ANC Gauteng public engagement on shareholder activism of retirement funds, the opportunity was provided. A message was read from Arne von Spreckelsen, head of the labour and social affairs unit at the German Embassy in Pretoria, announcing the intention to invite a delegation led by ANC Gauteng chairman Paul Mashatile to a high-level visit for personal interaction with the federal republic’s government and union leaders.

Thumbs up for mitbestimmung

Mountains have been written about mitbesttimmung whose origins extend for over a century. But there’s no substitute for South Africans, serious in the search to overcome conflicts that have become systemic, talking to people who know what they’re talking about. Otherwise, with consequences beneficial to nobody, fresh ideas for development of a social compact remain elusive..

There are reasons that the German economy has become the most prosperous and stable in Europe. Yet, on short-term cycles, the application of mitbestimmung has had mixed fortunes.

During the 1990s, co-determination was a factor blamed for weakness of the German economy by inflating labour costs and preventing business restructures. But in the 2008-09 downturn it enabled a series of liberalising reforms. “As a result, when

Germany pulled out of recession in 2010, its companies had a skilled workforce in place to meet resurging demand,” remarked The Economist. “The pact, along with continuing wage restraint, has boosted productivity while keeping unemployment low.” Hans Böckler Stiftung, the foundation for German trade unions, considers co-determination in a modern economy to be the perquisite for “a climate in which conflicts are settled through dialogue and not by force”. It summarises the objectives:

QUICK OVERVIEW

Joint-stock companies not in the coal, iron and steel industries (which have their own co-etermination rules), and employ more than 2 000 people directly or in controlled subsidiaries, are subject to the 1976 Co-determination Act. It provides that a company’s supervisory board must comprise employee and shareholder representatives in equal measure.

Yet the company’s owners do have slightly more say since the chairman – in practice, invariably a shareholder representative – has a casting vote when decisions are tied at the second attempt to achieve a majority.  Also, one employee seat is always occupied by a management representative.

Employee representatives on the supervisory board do not have a right of veto when the labour-relations director (who sits on the executive board) is appointed.

All employee representatives on the supervisory board are elected either in a direct ballot or via delegates to an electoral college, regardless of whether they come from inside the company or are external trade-union representatives. The supervisory board appoints, and is entitled to dismiss, members of the executive board. Shareholder representatives on the supervisory board are elected at the shareholders’ general meeting.

Where a joint-stock company has 501 to 2 000 employees, employee representatives must make up one-third of the supervisory board.

  • Equality of capital and work. Under the Works Constitution Act, the legal claim to codetermination at establishment level is inalienable. It requires companies to consider the interests not only of the shareholders but also of the employees;

STUCK IN A RUT

Typical controversy and contradiction to the concept of co-determination is illustrated in SA by the National Union of Metalworkers (Numsa), formerly a backbone of Cosatu, to whom the concept implies collusion with capitalistic enemies of the people; no matter that several unions have investment companies and hold direct stakes in JSE-listed entities through pension funds.

A fresh twist is that Numsa wants representation on the board of Eskom, just as unionists had previously sat on the Eskom board. It was a practice that the unions, having rejected “co-determination” where employees have a say in company management, had decided to end.

But recently Numsa general secretary Irvin Jim, of all people, said that he wants Eskom directors to include union-nominated representatives. He believes that they should not continue “sitting on the outside” if “looting” is to be prevented. According to Jim, he envisages “a form of extended collective bargaining” which is different from the loathed “co-determination”.

He’s splitting hairs. It’s impossible to sit on a board and not accept responsibility for the direction of its affairs. Matters of parlance aren’t always matters of substance. Jim’s way is co-determination, whatever he wants to call it.

  • Democracy in the economy. It’s not just about transferring parliamentary forms of democracy but about the principle of democracy and resolution of conflicts through dialogue and co-decision;
  • Social development. Through a better consideration of employees’ interests when making establishment and company decisions, codetermination contributes to the improvement of working peoples’ lives and working conditions;
  • Control of economic power. Where economic power masses together, control is an important instrument in avoiding its misuse. Whether participating in company decisions or contributing on company matters, the principle is the same: codetermination means
    co-responsibility. In works councils and supervisory boards the employees, just like the employer, need to watch for the longterm development of the company. Creating a productive balance of interests, co-determination is an important factor in the stabilisation of economic and social order.

Having examined mitbestimmung in practice, the report-back of the ANC Gauteng delegation should be illuminating and perhaps also influential as the provincial body moves into the party’s national policy-making conferences.