Co-determination and economic democracy:

Proposal for more democratic influence on big companies and the economy

The core of this proposal:
In big companies the supervisory board (SB) that elects and controls the board of managers (BoM) is elected by 3 groups:
shareholders, employees and the population.
No group dominates the others.
Whether a company is big enough for this co-determination, depends not only on a minimum number of employees, but alternatively also on financial minimum values.
A part of the representatives of the employees can be elected also from employees who do not work in the respective company.

In "5.1 Europe" an introduction phase of this co-determination is shown, during which the shareholders are stronger.

1. basic issues

1.1 democracy, power and property

The most comprehensive freedom of the greatest possible number of people (while considering the rights of minorities!) needs as a base a democratic structure of society. In order that democracy works well, the forming power of the democratic institutions must be much greater than the power of persons or small groups through property. This power through property is used especially by big companies. With economic democracy such power can be reduced.
[About property see also appendix A.]

1.2 from 2 groups to 3 groups

For this proposal I start from the existing method in German companies that have more than 2000 employees: In the SB (that elects and controls the BoM) half of the seats is elected by shareholders, the other half is elected by employees. If a voting is undecided, then the chairperson of the SB has two votes in a repeated voting; this is very important, because the representatives of the shareholders can elect her/him alone and therefore can also make decisions alone (e.g. can elect the BoM alone).
[More about it: see appendix B.]
The proposal presented here has a third group that can elect members into the SB: the population. No group dominates the others.

2. consequences of this proposal

2.1 in a single company

2.2 stronger democratic influence on the economy regionally, nationally and internationally

a) Some items that are both regionally/nationally and internationally important:

b) The population and and their representatives have influence

c) EU Parliament: Political groups that have power through SB-seats of the group population, can find like-minded people in the EU-parliament, who they can jointly practice social influence with. Outside Europe similar is possible.

d) For exchange of views, organization and common positioning on a global scale a parliamentary assembly would be useful. There is indeed a campaign for a United Nations Parliamentary Assembly (unpacampaign.org); this UN Parliament would initially have only an advisory function (for a decision to create this parliament a 2/3-majority in the UN general assembly suffices). From a part of this UN Parliament a parliamentary assembly could be formed, which has only members from countries that participate in this SB co-determination. In addition, to give small states more influence: Some decisions could need the consent of a states-body (with 1 vote for each state).

e) Through the governments the international political groups from 2.2.b can also have influence on international economic organizations like the World Trade Organization (WTO), the World Bank and the International Monetary Fund (IMF). In addition: Also the pressure and influence of big companies on the WTO (and other organizations) and on the WTO member states is influenced by the international political groups from 2.2.b and the international parliamentary bodies from 2.2.c and 2.2.d, respectively.

f) An important structure is created for the international coordination of labor unions among themselves (compare 4.2).

g) An international democratic power structure arises, which is largely independent of national borders.

3. size of a company

Besides the number of the employees there are financial criteria for the introduction of this co-determination:

There should be a graduation for the co-determination. Example:

big companies medium-sized companies
ratio of votes in the SB ⅓ : ⅓ : ⅓ ½ : ¼ : ¼
(½ = shareholders)
employees more than 1000 100 - 1000
financial values over A 1/10 A to A

To classify a company as big or medium-sized either the number of employees or a financial value must be reached.

Also if you advocate a reduced size of the big companies and combines, this co-determination makes sense:

For companies that are small according to finance values and staff, it may in certain cases also be useful to use this co-determination. While doing so, at least in some cases the same members of the group population can be elected for various companies, such as the election would be only for 1 SB. Application areas:

In the first two points the financial values ​​and the employees of these companies can be added together to exceed a financial or staff threshold.

4. Election procedures

4.1 Population: distribution of 1/3 of the SB-seats by them

a) Each state can decide who in the own state has the right to vote (although the votes also count internationally):

Additionally, a fixed proportion of votes could be given to certain stakeholders, e.g. for environmental protection. This proportion could be determined by each state individually, but within internationally agreed limits.
Example: 70% of the votes are from the general population, 30% of the votes are from groups, associations, institutions committed to environmental protection.

b) For the SB of a company there are several lists of candidates.

c) The voters each have a limited number of votes that they can distribute to SBs of several companies. They can give up to 25% of their votes to 1 SB.
Example: A voter has 100 votes. She can distribute these votes e.g. to 4 candidates (with 25 votes for each) in 4 SBs or to 100 candidates (with 1 vote for each) in 100 SBs. Or in the same SB she can give 20 votes to one candidate and 5 votes to an other candidate.

d) Because for the population there are only relatively few seats in a SB (e.g. only 5 in a SB with 15 members): After an initial calculation of the seat distribution (with proportional representation, e.g. according to the method Sainte-Laguë / Webster), a rule from appendix C.1 is used, that shall ensure that

e) The votes are counted separately for national and international votes. International votes include national votes. National votes are those votes, which are cast from voters in that country, where a company has its headquarters. By national votes 1 SB-seat less than half of the seats is given.
Example: A SB has 15 members, so 5 of the group population. 2 of the 5 members are distributed by national votes, 3 by international votes.
In addition a procedure is used that brings about: If a list of candidates has already gotten a SB-seat by national votes, then it becomes less likely, that it also gets a seat by international votes (see at the end of appendix C.1).

f) The share of votes per state could be restricted to a maximum of 12.5% ​​(= one 8th). In very large countries (e.g. India), as a compensation, the number of companies of that state can then be reduced, for which SB-seats are filled by international votes.
Example: A state has 25% of the population and 20% of the companies. For the 7.5% (20% -12.5% = 7.5%) of these companies that are internationally sought after least, the SB-seats are filled only by votes that come out of that state. (Had it taken only 8% instead of 20%, a share of 12.5% of the international votes had remained.)

g) The election of SB-members of the group population takes place at the end of every year (for about 4 years): for SBs where the members of the group shareholders are elected in the months before or after.

Additional regulations to 4.1 are in appendix C.

4.2 employees: distribution of 1/3 of the SB-seats by them (+ special cases)

a) At least half of the employee representatives up to all except 1 are elected by employees of the company.

b) A minimum of 1 to a maximum of half of the employee representatives is elected by unions:

c) In deviation from a) and b) there could be an additional regulation for companies with big financial value that have only very few employees: The employees have only 1 employee representative in the SB, and this one was directly elected by unions. And the shareholders receive an additional seat.
Example: The ratio shareholders:employees:population is now 4:1:3 instead of 3:3:3.
See also 4.4.

4.3 shareholders: many different voting procedures are possible

The election process can be different in different states. In the same state it can be different for different company forms. As an example, here are 2 extremes:
Example 1: A single person has the majority of the shares of a company and alone decides which shareholder representatives become member of the SB.
Example 2: The company is owned by the employees working there. These employees thus elect all shareholder representatives and the employee representatives according to 4.2.a into the SB.

4.4 chairperson of a SB

Equality of votes is possible in a SB (regarding 4.2.b and 4.2.c) between

This deadlock is solved by:

  1. If there is no 2/3 majority for the chairperson of a SB, then she/he will be elected by the representatives of the group "population" (they are the most neutral group).
    If there is no majority for a candidate in the group population after 2 ballots, this right to vote will be transferred to one of the other two groups.
  2. If a voting has resulted in a tie, then the chairperson has an additional vote in a repeated voting.

(Alternative solution: If a voting has resulted in a tie, all representatives of the group population have an additional vote in a repeated voting.)

4.5 alternative and more direct procedures

5. carrying it through

5.1 Europe

First of all, the core of this proposal (see introduction) needs to be widely discussed. Then it can be aimed to ensure that a law will be adopted in the EU, that has elements of this proposal. This law could be adopted as part of the "enhanced cooperation" that is applied for a minimum of 9 EU states. In the beginning in many EU countries could apply:

The above-mentioned EU law should later be merged into a legal foundation that exists independent of the EU internationally and also applies to countries outside the EU.

5.2 purchases by state and private clients

The state with public contracts and private customers with private shopping can have influence by

Ranking lists or valuations in the internet or in magazines about products, producers, traders and service companies could be a help for the selection. For this the mass media and organizations can get information about suppliers, human rights, ecology etc. also from SB-members that are from the group "population":

5.3 companies from states without this co-determination

If many states and private customers prefer companies with this co-determination when purchasing, then this can be an argument for companies from states without this co-determination, to introduce such a co-determination.
For such companies special regulations are necessary:

Appendix:

A. property and constitution

Regarding property in connection with big companies, 2 areas can be distinguished:

In a verdict about co-determination the German Constitutional Court wrote, in context with §14 ("property,...") of the constitution:

However regarding the property guarantee essentially only the membership powers of the shareholders are concerned, while the financial element of the property-share is not affected. In addition the only weak personal relation of the share-rights in their membership-legal meaning carries weight

(From the reasons of a verdict from 1999 about the "Montan"-co-determination; see BverfG, 1 BvL 2/91 of 2 March 1999, paragraph no. 77, http://www.bverfg.de.
See also a verdict from 1979 about the co-determination law from 1976; BverfGE 50, 290 [341 ff.].)

B. to 1.2 ("...existing method in German companies,...")

B.1 As addition to the mentioned regulation (from the co-determination law from 1976): Also a representative of the group of the leading/managing employees belongs to the representatives of the employees.

B.2 A special case is the "Montan"-co-determination. This co-determination is valid for mining companies and for companies that produce iron and steel, that have more than 1000 employees. It has the following regulation:

In the supervisory board shareholders and employees have the same amount of votes, additionally both groups together elect a "neutral" person.

One could expand this regulation to all fields of company activity.
Also this regulation has disadvantages to my proposal:

Completion: According to the German law shareholders and employees have not entirely equal rights, when they elect the "neutral" person; through a regulation that twice involves a law court the shareholders can decide without the employees.

C. completing regulations to 4.1 (on the electoral process of the population)

C.1 The following rule shall ensure that

(See also 4.1.d.)

Each vote can be cast for 3 different candidates in 3 different candidate lists of a SB.
During voting e.g. in a single line can be filled in:

For the counting of the votes of a SB there are several rounds:

The division into national and international votes, referred to in 4.1.e, must also be taken into account. For the national SB-seats, the above procedure is completed first. Subsequently, if this procedure is also applied to the international votes, the seats of a list obtained at national level are taken into account as follows:

C.2 For the SB-seats that are elected with national votes (compare 4.1.e) the following special regulation is applied: With a 2/3-majority in an international parliamentary assembly (see C.6.a) and more than ½ of the votes of a states-body it can be decided, that for single companies the distribution of SB-seats by national votes does not apply. The so far national seats then are distributed internationally.
Example for usage: A big international company has its headquarters in a small state that is financially very dependent on this company. Thus this company has a big influence on the government, the population and the legislative processes, by which it obtains unfair advantages over companies that have their headquarters in other states.

C.3 In connection with 4.2 ("finance-companies with high-income employees") and 4.4 is the following regulations. It prevents that lists of candidates that are especially near to shareholders can prevail against a big majority of other lists.
SB-members of the group "population" can decide by a ¾-majority that the list of candidates of an other SB-member of the group "population" can no longer have a SB-seat. The vacant SB-seat will be filled by the candidate from another list, who according to the last election has the highest claim to it.
Example of application: A multimillionaire spends a lot of money on advertising. As a result, the list promoted by him reaches a SB-seat.

As a comparison: it is not uncommon, when in the general meeting of a company all SB-members of the shareholders can be elected by a simple majority of the voting capital.

C.4 In addition to the positive votes for SB-candidates, there could also be negative votes against SB-candidates in the election. For 2 votes for candidates, voters could have 1 vote against a candidate.
Example 1: A voter can distribute 100 positive votes and 50 negative votes. If she uses only 80 of the 100 positive votes, she can only distribute 40 negative votes.
Example 2: A candidate gets 500 positive votes and 200 negative votes. So in total, the candidate has 300 votes. If a candidate has 500 positive votes and 600 negative votes, all 600 votes (and not just 500) are subtracted from the candidate's list of candidates.

Advantages of this regulation:

C.5 If extraordinary few votes were given to a SB, then probably too random and onesided results should be prevented. Therefore:
Into such a SB representatives are sent by parties. It depends on the ratio of votes of a national or regional election, how many SB-seats a party can fill and which party has first access to a SB-seat.

"Extraordinary few votes" could e.g. mean that the SB of a company gets less than about 10-20% of those votes, that are given on average to a company of the same size and the same region.

C.6 Additional points:

a) In C.2 and C.6.b an international parliamentary assembly is mentioned, in C.2 also a states-body. This may be the institutions mentioned in 2.2.d. However, in an earlier stage according to "5.1 Europe" European institutions are used instead.

b) An international parliamentary assembly (see C.6.a) elects a human rights body, that can decrease the participation of the population of individual states because of human rights violations (regarding 4.1 for international election; regarding the parliamentary assembly from C.6.a). A sentenced state looses e.g. up to 5% yearly of the normal portion of votes of its population. An even greater part can be subtracted, if after this body also the parliamentary assembly supports it with a 2/3-majority. Members of the parliamentary assembly who have the nationality of the concerned state cannot vote.

D. alternative and more direct election and decision procedures

D.1 Press / Media / News: To show different opinions and views in a better way, it could be useful, that this 3‑groups-co-determination is not used for all big media-companies. If there is to be such an exception (as a voluntary alternative), then it must have roughly the following limitations to prevent a concentration of power to a few people:

D.2 direct + indirect votings with the 3‑groups-co-determination: In some companies there can be the wish, not to decide in the representative SB for some votings, but instead choose a direct-democratic way. Possibilities for this:

D.3 local utility companies for energy and water: For these it can be considered, whether rather D.1 or a 3‑groups-co-determination is appropriate (both alternatives are possible also for communal or municipal companies). One could think of a solution similar to D.1, the consumers would then correspond to the members. But energy and water are often not obtained at the location where the customers of a utility company live. This rather speaks in favor of the use of a 3‑groups-co-determination, because through the population-representatives also those people can be represented, that live near the sources of energy and water.

E. additional points

For E.1 till E.3 in addition the more direct co-determination according to D.2 can be used.

E.1 Profit of a company: The SB decides on how the profit of a company is used.

E.2 Increase or decrease of capital (e.g. Issue of new shares): For this majorities are necessary in the SB and the shareholders' meeting.

E.3: Relocation of the headquarters of a company to an other state: For this majorities are necessary in the SB and the shareholders' meeting.