Representing workers, the German way | Business| Economy and finance news from a German perspective | DW | 12.12.2017
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Representing workers, the German way

Most German workers are familiar with the concepts of 'works councils' and 'co-determination,' but what are they? This week in Bonn, a conference of these uniquely German worker representative systems takes place.

German Works Councils Day — it's probably not going to set the pulses racing in the way that say, Valentine's Day, Halloween or a chocolate-egg heavy Easter Sunday might.

But as a means for understanding the distinct way in which the interests of German workers are represented, it provides a decent insight.

This week at the old German parliament building in Bonn, works councils ("Betriebsräte" in German) representing workers from across Germany are meeting for the three-day conference. There they will discuss various issues relating to working life in Germany and provide information for workers across different areas and disciplines.

A phrase that will crop up frequently is "co-determination," or "Mitbestimmung" in German. Essentially, it refers to the unique way in which workers in Germany have the right to elect their own representatives to their companies' supervisory boards.

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Still awake? If so, bear with us — it might not seem like the most spellbinding topic in the world but it is certainly not an insignificant one. Germany is long established as the economic powerhouse of Europe and several economists have cited the country's distinct worker representation model as the basis for much of the country's success. 

But what is a German works council anyway? How does it differ from a union? And what on earth is co-determination?

From master craftsmen to shop stewards

Germany has a lot of experience of heavy regulation within its professional spheres. From the famous guild system of Medieval times to initiatives to develop dedicated worker councils at the time of the 1848 Frankfurt Parliament and then again in the Weimar era (1919-1933), the idea that German workers should have proper representation and status has a long history.

Such noble ideals were not compatible with the totalitarian horror of the Nazi era, but in the democratic Germany that emerged after the second world war, the ideal of meaningful worker representation was imbued with even greater meaning. Work councils were restored and Konrad Adenauer's government introduced several laws aimed at improving worker rights and strengthening their levels of representation.

In 1951, coal and steel workers were given the right to elect representatives to supervisory boards, with various other forms of this so-called co-determination model rolled out across various sectors in the years that followed.

A strike by Lufthansa workers (Reuters)

Lufthansa workers on strike in Frankfurt in 2013

The Co-determination Act, enacted in 1976, still allows for workers in large public and private companies — those with more than 2,000 employees — to elect up to half of the members of that company's supervisory board of directors, giving workers a powerful say in how those companies are run, from overall strategy to everyday minutiae.

Then there are the works councils — the groups that will come together this week in Bonn and whose legal basis is established by the German Works Council Constitution Act.

Works councils are neither unions nor executive boards; they are representative groups drawn from a company's employee base and designed to further co-determination rights, particularly concerning matters of employee welfare.

The right to co-determination

While law does not dictate that a works council must be established by a company, workers in any private company with more than five employees are entitled to have one. The size of the council depends on the size of the company (e.g. 51-100 employees, a seven-person council).

Read more: Germany faces huge shortage of skilled workers

Works councils have extensive and substantial rights, from overseeing the implementation of employment laws and rights, to issues around appointments, contract terminations and even the layout of a given workplace.

They differ from German unions in that unions are generally not made up of a company's employees and are a group that represents an industry's workers. In Germany, employers have unions too and together with workers' unions, they negotiate wages and pay scales.

While works councils are an important part of the overall co-determination model, perhaps the most influential dimension of co-determination is the right it gives workers in big companies to elect up to half the members of a company's supervisory board, and one third in a company with 500-2,000 employees.

Companies' supervisory boards make the big decisions in corporate life and German workers, via the co-determination model, have a big say in those decisions.

In Germany, large public and private companies have a supervisory board (elected by the shareholders and the workers), which in turn appoints and oversees a company's board of management, which takes care of the day-to-day running of the company.

A need for change?

German workers may take such extensive levels of representation for granted but the models used in the country are not typical of other rich economies — plenty of British and American observers have cast envious glances towards the German system over the years.

To what extent the high level of worker influence accounts for Germany's economic success is debatable, though. Academic studies on the subject differ, but the majority of research suggests co-determination and works councils are positive, particularly when it comes to raising productivity.

The model has its critics though. Some, such as Reiner Hoffmann, chairman of the German Trade Union Federation (DGB), say it is becoming outdated, particularly given that increasingly fewer companies are fully covered by co-determination provisions.

Others see the system as entrenching the privileges of long-term workers at the cost of less secure employees, again, something that is possibly out of step with the realities of a modern labor market.

The system may need some kind of an upgrade, but its essence — that German workers should have a meaningful stake in their companies' decision making processes — is surely here to stay.

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