Success Story of Germany as a Result of Co-determination

Modern Germany is the biggest industrial nation in Europe and the second only to the USA on earth. As regards GDP the position of unified Germany moves between the second and the third in the world. It enjoys the sixth position among the industrialized countries regarding per capita income.

Moreover, this country has been enjoying a very strong balance of payment position during the last three decades. The unemployment problem is also the lowest, while the German companies have excess capital awaiting investment to the extent of over 700 billion Marks. The price level has also been the most satisfactory during the last few decades.

German success in post-war reconstruction and development can be compared to that of Japan only. There is widespread interest among western scholars to find out the secret behind the grand success of Germany in this regard.

Many of them attribute it to the unique system of German management, called “co-determination”. The name itself indicates that it is participative in nature. In fact, it ensures the extreme form of worker’s participation in management. Important decisions are being taken jointly.

The technical efficiency and experience of German workers have made co-determination successful. Workers need little or no supervision and the managers act as initiators, not as their bosses. Labor management relation in Germany is thus of a relation of mutual co-existence and co-determination. This relation is the specialty of German management. Managers give due weight to the opinion, efforts, and judgment of their subordinates.

Different research studies indicate that in the past, and to a lesser extent today, the German cultural environment favored reliance on authority in directing the workforce, although it was often benevolent authoritarianism. Even today, while managers are required to show concern for subordinates, they also expect obedience.

It is almost a paradox that on the one hand, the managerial style of Germany is characterized by the considerable use of authority, while on the other hand, labor, by law, is represented by and actively involved in managing large corporations. In 1951 a law was passed that provided for co-determination, which requires labor membership in the supervisory board and the executive committee of certain large corporations.

Furthermore, a labor director is elected as a member of the executive committee. This position is a difficult one. The labor director supposedly must represent the interests of the employees and at the same time, must make managerial decisions that are in the best interest of the enterprise.

Gradual evaluation of Co-determination

Co-determination is the most important of all the factors that played important roles in the post-war reconstruction and rehabilitation of German industries. It is believed that Germany has been successful to regain its lost supremacy in industrialization only through Co-determination.

Germany was defeated in both the first and the Second World War. Destruction of German industries was unparalleled and no industrial enterprise worth the name could survive bomb attacks by the Allied Forces. Completely destroyed indusial enterprises.

Numbered around seven hundred. The most affected were the steel and chemical industries. Other industries were also heavily affected and remained closed for a long time even after the war was over. The unemployment problem engulfed the whole economy. Almost one crore people became homeless. Food and water became so scarce that life became endangered in the whole of Germany.

But what a wonder! The German people, thanks to their technical expertise, hard labor, and unique system of management, became successful, within a short period, to rebuild the economy. The defeated and humiliated soldiers on the battlefield became undaunted captains of the industry.

They did the wonder without any foreign aid. They re-organized their industries and management in a way that amazed the US or the British people who won the war. The Germans soon became successful to emerge as the economic superpower and to retaliate.

The conflict between the USA and the Soviet Union also helped Germany to Flourish. The more fortunate was West Germany which was fortified by the western big powers in order to encounter possible Soviet aggression.

American and British capital found increasing inroads into West German industries. Research and development activities also helped the invention of the much-improved machine and technology, thereby enhancing productivity to such an extent threat it was unparalleled in the world.

Undoubtedly, political stability is one of the pre-requisites for industrial development. After the establishment of the Federal Republic in 1949 political stability in West Germany became so pervasive that it helped establish Co-determination on a solid foundation.

However, the initial inroad to Co-determination started during World War-I when a boost in industrial production became a hard reality. Gradually the workers and their unions were brought closer to management. The formation of the “Works Council” in industrial enterprises with representatives of workers laid the foundation of co-determination in Germany.

Finally, the passage of a special piece of law called “Workers co-determination” in the German legislative assembly, gave co-determination the legal foundation. According to that law, the formation of 11 members “supervisory board”, having an equal number of members (5+5) from among workers and shareholders and one neutral member was made compulsory.

The passage of another law in 1952 called “Constitution of the Enterprise” also helped Co-determination by requiring the formation of the “Works Council” with 50% of workers’ membership mandatory. In the opinion of some scholars, the “Works Council is the heart of co-determination.”

After 1952 the power and functions of the ‘Works Council’ were extended and they were compulsorily introduced in all industries except iron, steel, and coal. Ultimately the co-determination act of 1976 (implemented in 1978) was passed which still remains in full force throughout German industries.

In modern Germany jobs in industrial management are considered much more prestigious than those in civil or military bureaucracy. Co-determination offers the opportunity for young graduates to brighten their careers and at the same time to serve the nation by ensuring quality and higher productivity in the industry. The industrialists, managers, and workers, are all working together in the same directing, thereby ensuring the best possible industrial relations in the world.

Structure of co-determination

Co-determination is composed primarily of “supervisory Board” and “Works Council” as mentioned before. Besides, there is the existence of a management board in almost all industrial enterprises, being appointed by the supervisory Board and entrusted with the executive functions on its behalf.

The position of the Management Board is in between the Supervisory Board and Works Council. Thus Co-determination is composed of-Supervisory Board, Management Board, and works Council.

Supervisory board: Like the board of directors of Bangladeshi companies, this board is entrusted with the top-level managerial functions of the industrial enterprises in Japan. It is entrusted with the responsibility to formulate policies, plans, and objectives for the enterprise and also remains responsible for its successes and failures.

It is usually of 11- members 5(five) each form among workers and shareholders and one neutral member to be elected by majority votes of these ten members. This neutral is usually very respectable and acts as a chairman of the board.

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