Introduction: company co-determination with at least 3 groups

Here are a few examples of company co-determination with at least 3 groups, this means a co-determination with at least a third group in addition to shareholders and employees. There is much more information in the German text version.

power in big companies

a) 1970-75 on the implementation of a European Company

(The following sources are translated from German.)

b) 1975-78, Bullock Commission in Great Britain: system „2x+y“

On the proposal of the Bullock Commission ("Report of the committee of inquiry on industrial democracy"), Thomas Piketty wrote in his book "Capital and Ideology" (2020) on pages 506-8:

"One particularly interesting case involves the so-called 2x+y proposal discussed in the United Kingdom in 1977-1978. In 1975 Labour Prime Minister Harold Wilson commissioned a report from a commission chaired by historian Allan Bullock and composed of jurists, trade unionists, and employers. The commission‘s conclusions were submitted in 1977.

In any case, the Bullock Commission proposed in 1977 that the Labour government adopt the so-called 2x+y system. Concretely, in every firm with more than 2,000 employees, shareholders and workers were both to elect a number x of board members, and the government would then top off the board by naming y independent directors, who would cast the decisive votes in case of a stalemate between shareholder and worker representatives. For example, a board of directors might consist of five shareholder representatives, five worker representatives, and two representatives of the government. The numbers x and y could be set by the firm‘s bylaws, but the latter could not affect the overall structure or the fact that the board of directors alone had the right to make the most important decisions (such as naming the firm‘s executives, approving its financial reports, distributing dividends, and so on). Unsurprisingly, shareholders and the City of London‘s financial community outspokenly opposed the proposal, which radically challenged the usual assumptions of private capitalism, potentially going much farther than German or Swedish co-management. By contrast, there was strong support from the unions and the Labour Party, with no compromise in sight. [Footnote: Union and employer representatives had clashed within the Bullock Commission, and it was the jurists and academics who cast the deciding votes in favor of the majority report.] In the fall of 1978, James Callaghan, the new Labour prime minister who replaced Wilson in 1976, seriously contemplated calling a snap election at a time when the polls were predicting a Labour victory. In the end, he decided to wait another year. The country was immobilized by numerous strikes during the „Winter of Discontent“ (1978-79) in a period of high inflation. The Tories, led by Margaret Thatcher, won the election in 1979, and the project was definitively buried.

Broadly speaking, one key issue concerns the extent to which it is possible to overcome the automatic majority that shareholders enjoy unter the German system of co-management. The Bullock Commission‘s 2x+y proposal is one answer to this question, by assigning a major role to the state. This might work with very large firms (where it would be tantamount to making local and national governments minority shareholders), but it might be problematic to apply such a system to hundreds of thousands of small and medium firms. [Footnote: It could be problematic unless the procedures for appointing public board members are spelled out and steps are taken to ensure that the system functions in a satisfactory manner (which is not neccessarily impossible but would require concrete historical experimentation).] One important limitation of the German system is that it applies only to large firms (with more than 500 employees), whereas Nordic co-management applies much more broadly (to firms with more than thirty, thirty-five, or fifty salaries depending on the case). Since the majority of workers work for small firms, it is essential to find solutions applicable to companies of all sizes.
As a complement to ideas like "2x+y", one might also want to encourage employee shareholding, …"

c) 1988, William M. Evan and R. Edward Freeman:

“A Stakeholder Theory of the Modern Corporation: Kantian Capitalism” (in “Ethical theory and business” (Beauchamps / Bowie)), pages 100-105:

Principle of Corporate Rights (PCR): The corporation and its managers may not violate the legitimate rights of others to determine their own future.
Principle of Corporate Effects (PCE): The corporation and its managers are responsible for the effects of their actions on others.

Freeman and Reed (1983) distinguish two senses of stakeholder. The “narrow definition” includes those groups who are vital to the survival and success of the corporation. The “wide definition” includes any group or individual who can affect or is affected by the corporation. While the wide definition is more in keeping with (PCE) and (PCR), it raises too many difficult issues. We shall begin with a more modest aim: to articulate a stakeholder theory using the narrow definition.
...
1. The Stakeholder Board of Directors. We propose that every corporation of a certain size yet to be determined, but surely all those that are publicly traded or are of the size of those publicly traded, form a Board of Directors comprised of representatives of five stakeholder groups, including employees, customers, suppliers, stockholders, and members of the local community, as well as a representative of the corporation, whom we might call a „metaphysical director“ since he or she would be responsible for the metaphysical entity that is „the corporation.“ Whether or not each representative has an equal voting right is a matter that can be decided by experimentation;

Therefore representatives of each stakeholder group would be elected from a „stakeholder assembly“ who would initially meet to adopt working rules, charters, and so on, and whose sole purpose would be to elect and recall representatives to corporate boards.

Each stakeholder group would have the right to elect representatives and to recall representatives to boards. Whether this is done on a corporation-by-corporation, an industry-by-industry, or a country-by-country basis is a matter for further discussion.

Management would have the right to act on its fiduciary duty, as interpreted and constrained by the Board and the courts, …“

d) 2019, Goliathwatch:

I am active at Goliathwatch.
In http://goliathwatch.de/wp-content/uploads/2020/04/20200403-co-determination-gw.pdf is the text "Civil society co‑determination in companies", in which 4 basic points for co-determination with 3rd group are mentioned:

  1. Representatives of the 3rd group should not be elected by the other two groups.
  2. The company size, from which co-determination is applied, should not only be about a minimum number of employees, but alternatively also about minimum financial values …
  3. The shareholders should have a minority of the votes, just like the other groups. For a previous interim solution, however, an approach should be observed in which the shareholders have 50% of the votes.
  4. This co-determination should be transnational.

e) 2019, Economy for the Common Good / Christian Felber:

In the book "Change Everything – Creating an Economy for the Common Good" (2019, Christian Felber) in the section "Democratization of Corporations" starting on page 84:
„… Multinational corporations are quite another matter, however. Today global groups exist that are more powerful than many governments. Their decisions have the potential to affect hundreds of thousands of people and they exert a disproportionate influence on the media, political parties, science and justice. The fact that a few private individuals determine the course taken by such giants while all those affected – inside corporations and beyond them – are given no say is profoundly undemocratic. This situation is irreconcilable with the highest good in Western culture, namely democracy. For this reason, large corporations should be democratized to ever higher degrees in proportion to their growth in size, and the degree of co-determination granted to society should be increased accordingly. Take this possible scenario, for example:

In some countries, such as Germany, employee co-determination already exists in large corporations; the largest challenge is still to achieve co-determination of society, … One could conceivably have a regional economic parliament which would act as a representative of the sovereign people and be on the supervisory board of all large companies in the region. This parliament would be elected by means of a direct democratic procedure.
… If the public and the employees were to take more responsibility the larger a company became, it would only be fair for them to help bear the prunt of any financial losses. Freedom and responsibility should be coupled.“

f) 2020, Michael Kox,

my text on 3-groups-codetermination in www.mitbestimmung.eu/english
Some points from it:


Footnotes:

1 Compare in Lyon-Caen section „§ 1 – Das deutsche Beispiel“ on pages 39-42.

2 "Mitbestimmung, Wirtschaftsordnung, Grundgesetz - Protokoll der Wissenschaftlichen Konferenz des Deutschen Gewerkschaftsbundes vom 1. bis 3. Oktober 1975 in Frankfurt am Main", published by Heinz O. Vetter, 1975, Europäische Verlagsanstalt

3 "Mitbestimmung für die Europäische Aktiengesellschaft: Nützliche Lehren aus mehr als dreißig Jahren Seifenoper" of Arndt Sorge, 2006, WZB discussion paper (SP III 2006-204)