Deutschland AG rethinks workers’ role in management

https://www.economist.com/business/2020/01/30/deutschland-ag-rethinks-workers-role-in-management

by c0restraint • 6 years ago

48 53 6 years ago

economist.com

sunkenvicar• 6 years ago

Paywalled beyond the first two paragraphs.

chrisseaton2• 6 years ago

Please don't complain about paywalls.

dang• 6 years ago

If there's a workaround, it's ok. Users usually post workarounds in the thread.

This is in the FAQ at https://news.ycombinator.com/newsfaq.html and there's more explanation here:

https://news.ycombinator.com/item?id=10178989

https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...

wongarsu• 6 years ago

Version without paywall: https://outline.com/SvtKVv

arrrg• 6 years ago

Workers’ Councils often don’t exist because people don’t dare to form one. Despite pretty good rights for employees, it can still feel like painting a target on your back.

I should have more forcefully driven for the creation of one in my small company. But it’s all too late now. The company was sold by the owner to a much larger US company and the day after that was announced, nearly a third of employees were fired.

We are developing B2B SaaS and sold that in combination with professional services, with about a 50:50 split in revenue from those two parts. The company built its product without outside investments and has practically always been profitable in the past, with ok revenue growth, but we were seeing pressure from competitors who did have large investments.

The US company didn’t want professional services (and also not anyone doing sales and marketing), they wanted the developers. A couple of weeks into this that seems absurd, especially since they seem to be expecting to keep most of the existing revenue which seems impossible since, you know, we had a 50:50 split in revenue and the people responsible for 50% of that (who had close working relationships with the clients) are no longer there. They are now flying people here but there is hardly anyone to teach them and … you know … usually it takes at least a couple of months to get people up to speed. Months in which our existing clients want to get work done! It’s so irrational. It’s also deeply immoral and unethical.

Whether it be greed or a fundamental misunderstanding of how the product works or what do I know … that whole thing was surreal and weird and I kept thinking that one of the problems was that the person making the deal was fundamentally not understanding the business. Maybe a workers’ council could have helped or at least found a socially more responsible way.

But when the acquisition was only a rumor I frequently mentioned to my colleagues that forming a council would be a good idea but never actually did it. Because, you know, who would want to paint a target on their back.

But it is important for such institutions to exist. Employees inherently tend to have less power than employers and their work is not really optional. They can’t just decide to not do it and changing jobs or career or places where you live can be difficult to impossible. That’s why that isn’t just some kind of exachange of money for work. It has to be specifically and explicitly and strongly protected and workers should always have a say in the business because it concerns them. And their interests and the employers interests are not always aligned.

contingencies• 6 years ago

Does anyone have first hand experience with this system?

Ididntdothis3• 6 years ago

Many German workers have experience with this system. I have had 3 years. It works pretty well in my view and creates some balance. It's probably not as much fun for management but that's Ok. It bugs me that in the US the only accepted stakeholders are the shareholders and nobody else counts.

chrisseaton2• 6 years ago

Most workers are granted shares in the companies they work in. Doesn’t that make them stakeholders already? They could band together and control the company if they wanted to and were granted or bought enough shares.

anonsivalley6522• 6 years ago

Do you have any familiarity with IG Metall? If so, how helpful do you think are they, or were, for organized labor?

Also, worker-owned co-ops seem the only way out of shareholder rent-seeking and narcissistic management behavior because just giving workers input without a fair share of profits is still similar to keeping slavery but adding a suggestions box.

goatinaboat• 6 years ago

It bugs me that in the US the only accepted stakeholders are the shareholders and nobody else counts

This isn’t quite true... the main stakeholders in a US corporation are the senior management. They will continue to receive lavish rewards even when shareholders, customers and employees alike are all getting shafted. Then when they have drained the last drop for themselves and the company expires, they go straight to the same jobs at another company and repeat.

pbourke• 6 years ago

It bugs me that in the US the only accepted stakeholders are the shareholders and nobody else counts.

Executives, too (or mostly)

blub3• 6 years ago

I've seen both. The remuneration aspects were not so much affected, but there were several quality of working life improvements around hours, vacation, sabbaticals, having a voice and privacy as someone else in the topic argues, etc.

Even if management doesn't like it, it's good even for them because it helps keep them honest.

paulhart• 6 years ago

“Only [...] SAP, a software-maker, is among the world’s 100 biggest companies. Apple’s $1.4trn market value is roughly that of the entire DAX 30.”

Is this actually a problem though? The model seems to have provided some insulation from global turmoil in the past; is having enormous corporations the only important thing for a country’s economy? For as long as it doesn’t fall foul of EU laws, I can see Germans wanting to maintain this strategic advantage that other nations ignore while they’re busy chasing down every last short-term dollar.

Ididntdothis3• 6 years ago

I think these huge companies are not good for the economy, the country or innovation. They are too powerful and they have the ability to suppress competition by just buying it up.

akira2501• 6 years ago

Their GDP per capita is about 17% lower than the United States, but their GDP per hour worked is only 3% lower with their average work-week being 22% shorter than in the United States.

So, from a very narrow and short-sighted point of view.. they're just as productive as we are, but they have 1/3 our population and they work fewer hours which limits their ability to compete in the global marketplace.

For German companies that serve only domestically or within the EU, I doubt the councils are a problem or even an impediment.. but for companies that want to operate globally, I imagine it does reduce their ability to compete.

I guess the question for Germany is, do they want to sacrifice these broader protections and slightly better working conditions in order to improve profits for a handful of companies that can actually take advantage of it? I hope not, but it looks like the groundwork is already being laid for a campaign to change this.

kamarg• 6 years ago

I wonder if the question is really, do the giant corporations that want to compete globally have as much ability to get laws passed in Germany as they do here in the US? If they do, you can bet that those protections and working conditions will start looking a lot more like what we see in the US even if it's only a benefit for a fraction of a percentage of people in Germany and a detriment for all the rest.

fulafel• 6 years ago

It sounds to me like Germans are doing better than US people in competing on the global marketplace? Shorter hours is a valuable advantage.

thomasdullien2• 6 years ago

The "reduces their ability to compete"-argument does not hold water considering the data, though. One useful measure of a countries competitiveness is the size of their exports (because it implies that there is a lot of foreign demand for the products from that country), or in their "exports-to-population" ratio.

If you check https://tradingeconomics.com/germany/exports you can see that Germany exports about EUR 112bn worth of goods per month, on a population of about 83 million, about EUR 1350 per head. For comparison:

Canada exports about 49bn CAD per month, on a population of 38m, for approximately 1297 CAD per head.

The US exports about 208bn USD per month, on a population of 327m, for approximately 638 USD per head.

If anything, the big weakness of the German economy is not that it is not competitive enough, the big weakness of the German economy is a lack of domestic consumption due to not much of the money actually reaching workers pockets; this is a result of a fairly aggressive wage stagnation that set in in the 2000s.

twright• 6 years ago

A more accurate title seems to be “Management rethinks workers’ role in management.” Are there complaints about co-determination from workers themselves (I’d be more interested to hear those)? Or is this management complaining they can’t mistreat workers in the name of corporate profit?

fxtentacle3• 6 years ago

It's the latter and the article even concedes that mistreating workers won't help much, either.

"European countries which do not embrace it hardly do better."

fxtentacle3• 6 years ago

Sounds like propaganda to me.

I'm German and my impression is that almost everyone is happy with the current model where you have a legally guaranteed right of holding CEOs accountable.

Everyone, except the American hedge funds trying to squeeze out more profits by increasing working hours, that is.

So to me, this article reads like "let's make Germany more like America in that the rich rule the poor".

And I find it rather surprising that they went with "Deutschland AG" because treating Germany like a country is usually only done by a rather weird tiny subset of citizens who refuse to adhere to laws and instead revel in conspiracy theories about foreign overloads secretly deciding what everyone has to do.

But most weirdly I find that I haven't heard this set of laws being discussed critically in German at all, but that instead an English article with odd word choice should be the first to criticise it.

hef198985• 6 years ago

Yeah, the Deutschland AG where all companies were in one way or the other intervened with each other with Deutsche Bank in the middle is long gone. At least since the 90s.

C14L• 6 years ago

Early 2000s. One of the Schroeder reforms.

Doctor_Fegg• 6 years ago

“UK plc” is common parlance here. I’m guessing the (British) Economist is awkwardly trying to use the same idiom.

germanier• 6 years ago

"Deutschland AG" was commonly used in political discussion up until the early 2000s, it even made it into Wikipedia https://de.wikipedia.org/wiki/Deutschland_AG and other encyclopedias. It has nothing to do with the Reichsbürger movement

fxtentacle3• 6 years ago

Wow, I didn't know :)

That said, I haven't encountered the terminology elsewhere, so I was surprised to read it in this article.

neonate• 6 years ago

Is it basically the equivalent of the phrase "Corporate America"?

gyulai8• 6 years ago

...the problem is that "worker codetermination" is not really about owners and workers pulling on the same string, but rather worker representatives often have a ridiculously narrow-minded focus on workers' interests while completely disregarding what is and isn't economical for a company to do.

To give you one example: I used to work for one of Germany's biggest telcos. Believe it or not: That company is unable to do geographically-targeted advertising for reasons of worker codetermination. Worker reps in the company's supervisory board argue that, since some employees get part of their compensation through sales commissions, targeting advertising to region X gives employees in region X an unfair advantage to earn more money than employees in other regions.

Working for the same company, I was involved in a project to do natural language processing in a ticket system the company was using to track repair and maintenance work of radio units, with the goal of building a model to recognize tickets that were in increased need of attention by higher-level management. Even though it wasn't initially the project's goal to do so, the thing that the model ultimately picked up on was basically indications of employees being lazy as they handle those tickets. -- But the data I was given was anonymized. It was argued that if it weren't anonymized, my project would have never been approved by worker representatives in the supervisory board for reasons of violating workers' right to "data protection".

necrobrit• 6 years ago

Interesting. This is a pretty common criticism of unions in the anglosphere as well -- often alongside a note that the problem has been "solved" in Germany via worker codetermination.

Have you found this situation to be universal in Germany or only at some employers? This is one of those things I'd actually expect "the market" to be good at regulating. Bad union or management kills a company, company with better management or union fills the market void etc...

gyulai8• 6 years ago

This was the only company with worker codetermination that I've ever worked at, so I don't have anything to compare it to. Part of the reason is that, as the article says, companies will try at all costs to avoid it when there is legally a way it can be avoided, and I'm guessing that this in and of itself speaks to the fact that there's a problem there. Otherwise you might expect companies to volunteer into it for reasons of improving their employer brand and so forth. But the opposite is the case, with many large companies going as far as incorporating in other European jurisdictions and using European freedom-of-movement rules for legal entities to operate out of Germany. N.b.: This confers no tax advantages. It is done solely for the purposes of escaping Germany's companies' law. (Examples: The German department store "Müller" with over 700 retail locations in Germany and "Air Berlin", a major airline out of Germany, were incorporated in Britain).

blub3• 6 years ago

It seems to me that many programmers suffer from some privacy blind spot where their brain literally freezes when they have to think about the negative consequences of their latest software gizmo.

It was decided in a court of law that employers can't spy on their employees. It's good that companies are being cautious. Not everything in this world revolves around efficiency and tracking everything.

gyulai8• 6 years ago

I certainly do not suffer from "privacy blind spots". As a matter of fact, I've worked for one company in the telco space doing industry-leading work on setting standards about how to properly anonymize call detail records. And then, in this German telco that I mentioned, we were doing groundbreaking work setting up our data engineering in such a way as to comply with Germany's stringent privacy protections where consumers are concerned. I now work in another privacy-focused company.

But this one story I was telling:

Management: Please make a mathematical model that will predict if a radio unit has repeated and prolonged outages, using well over a hundred independent variables, ranging from technical information, to network topology, to information from the ticket system.

Me: Done. Mathematical model says: Radio units have problems if the people servicing them are lazy bums. Here is a system, based on natural language processing, that will predict people being lazy bums with huge accuracy.

Management: So who are the lazy bums?

Me: Can't tell you that. Because privacy.

I mean. Come on...

kaffeeringe• 6 years ago

It's legally their job to represent only the workers. And they legally have no way of knowing, what's really going on economically. They may be informed about the financial status, if the company is big enough for a economic sub-committee. But they can't make any decisions on that. They aare there solely to represent the interests of the workers. See paragraph 80 Betriebsverfassungsgesetz.

Your example only shows, that your workers council is unhappy with the provision based system, because it's unfair. Regional targetting would make it even unfairer. The solution is easy: abandaon the provisions and let the people do their jobs.

gyulai8• 6 years ago

If they have seats on the supervisory board, then they have wide-ranging legal powers to know about everything that's going on in the company.

And thanks for pointing me to paragraph 80 of the Betriebsverfassungsgesetz. I read it just now, and "representing the interests of workers" is totally not what it's saying. It's saying: They should ensure that legal & contractual provisions that exist in order to further workers' interests are observed. That's totally not the same thing. -- Because a law doesn't become law unless the needs of both workers and employers have been considered. And a contract doesn't become a contract unless both workers and employers have agreed. And their role is simply to ensure compliance with those provisions. Where there is no provision, they have no mandate. For example, coming back to my example: There is no legal provision that protects workers from repercussions if there is documented evidence that they have been lazy, so the workers council has no mandate to try to protect lazy workers, yet for some reason they do.

The legal duty of the supervisory board is to watch out for the company's best interests, period. Even those board members who are sent there by the workers council are, in theory, bound by that duty.

I'm not against trade unionism. Trade unions exist so that workers don't suffer from reduced bargaining power when making contracts with employers. But still: Employers and employees are separate economic entities with separate interests who engage with each other over a market interface, with each looking out for their own bests interests (and no one else's).

Workers' codetermination is taking it one step further: You have a company that has certain interests. And you insert people into the decision-making process of that company who observe the best interests of an entity that is completely separate and has completely separate interests.

Imagine the relationship between General Motors and Microsoft as an analogy for the relationship between General Motors and General Motors Employees. With GM having lock-in for Windows software, MSFT has a lot of bargaining power. But each of GM and MSFT look out for their own best interests when they negotiate licensing. -- That's trade unionism.

Now imagine what it would be like if providing software licenses legally entitled MSFT to put people onto GM's board. This would mean GM would actually be hampered in its ability to make decisions that are in its own best interests (both as it negotiates with MSFT, but also as it does pretty much anything else). -- That's worker codetermination.

TeMPOraL• 6 years ago

On the extremes, I see two ways of doing negotiation - or in general, reconciling conflicting interests: a competitive one, and a cooperative one.

What you're describing is the competitive one: you have sides focusing solely on their local, direct, short-term interests, in hopes that as they all fight each other, the aggregate state of the system will be a decent compromise. The cooperative way would be if all parties got together, did a global optimization across all their goals, and went along with the result until something changes and it needs to be readjusted.

For some reason, the competitive way is the most common one. It's in what you say about worker representatives vs. company. It's how the whole market works. The good side is, such system is very dynamic and quick to respond to shifting preferences (and shifting landscapes). The bad side: it's ridiculously wasteful, and it turns people against each other.

I suppose the reason the competitive model is more common is because you can't just get random people to do global optimization together - it's hard to ensure honesty and mutual understanding of all participants.

RE wastefulness, I like to compare it to the issue of active vs. passive stationkeeping in physics[0]. Imagine that your village wants a new fire tower. You want to have a few cameras 50 meters above ground for spotting fires. There are two ways to approach it. You could build an actual 50m tower and place cameras there. Or you could go to the store, buy a large quadcopter (and a lot of spare parts), tether it to mains power and keep it continuously flying at 50m. Building an actual tower has a much bigger up-front expense, but then it's essentially free. Getting a camera-equipped drone flying is cheap, but keeping it flying for days, weeks, years would waste absurd amounts of energy, very quickly exceeding all the energy put into building the tower.

Obviously, cooperative approach is like building the tower - the desired goal is made explicit and free to maintain. Competitive is like flying that drone - the desired goal emerges from opposite forces fighting, and requires the battle to go on forever.

[0] - it's not the real name of the consideration, it's just how I call it. I wonder if it has a proper name.

fxj• 6 years ago

This is the situation in europe at the moment:

As far as the rules on employee participation are concerned, three groups of countries can be distinguished in the 28 EU countries and Norway. In the first group, consisting of ten countries, there is no employee participation. In the five countries in the second group, employee participation is limited to state-owned or recently privatised companies. But the largest group is made up of 14 countries that provide for employee representation on the boards of private sector companies above a certain size. There are large differences in the minimum numbers of employees and other aspects of the procedures for employee involvement at national level.

http://de.worker-participation.eu/Nationale-Arbeitsbeziehung...

Deutschland AG rethinks workers’ role in management

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