Co-determination in big companies:

Proposal with third group

This graphic is intended to express that a third group can compensate for the excessive power of the shareholders.
            The graphic in detail:
            Headline: "Power in big companies".
            Below is a flattened semicircle, with a straight line at the top. 
            In it are 2 areas, one with the word "shareholders" and one with the word "employees". The area with the word "shareholders" is bigger. 
            Below that is another area that is roughly triangular in shape and partially overlaps with the area with the text "shareholders". This lowest area has the text: "third group for environmental protection, consumers:inside, balance of interests, ..."

The core of this proposal:

1. basic issues

1.1 democracy, power and property/possession

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 or possession. This power through property or possession 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 (according to the co‑determination law from 1976): In the SB, that elects and controls the BoM, shareholders and employees are represented. Superficially, both groups have the same number of SB-seats (the seat of the senior executives is a problem). 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 this person 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 other consequences

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 for shareholders, ½ for employees + third group together
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.

In "5.1 Europe" an introduction phase of this co‑determination is shown, during which the shareholders are stronger.
For companies with up to 500 employees (or equivalent financial value), this co‑determination can be optional (details are in appendix D).
Depending on the extent of co‑determination, the subordination of a company to a corporate group is reduced or eliminated.

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 SB‑members of the third group 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 as third group: distribution of its SB-seats

4.1.1 core

Basic idea: With 1 vote, a person elects SB-members for several companies, using a proportional representation method.

4.1.2 on international use

a) Voters from the state in which a company has its headquarters get an advantage in the distribution of SB-seats,

For this the votes are counted separately for national and international votes. International votes are all votes. National votes are those votes, which are cast from voters from that state, where a company has its headquarters. With these national votes, the same companies lists are elected, which are also elected with international votes; with one specialty: at national level, companies are ignored that have their headquarters in another state.
If the number of seats is odd, by national votes 1 seat less than half of the seats is given.
Example: A SB has 15 members. 5 members are of the third group. 2 of the 5 members are elected by national votes, 3 by international votes.
If the number of seats is even, half of the seats is given by national votes.

For the SB-seats that are elected with national votes the calculation of the seat distribution is completed first, with the proportional representation procedure from 4.1.1. During the seat distribution at the international level, care is taken to ensure that a companies list does not receive too many seats on some SBs as a result of the division into national and international counting. Example:

If, in the distribution of seats at the international level, a companies list is entitled to 1 SB-seat, but has already won 1 seat on the same SB at the national level, then this companies list will also in total receive only 1 seat on this SB.

b) For the SB-seats that are elected with national votes (compare a)), 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.
This is decided by majority vote in a body in which each state has 1 vote (strengthens the interests of small states). In addition, this majority must come from states from which, together, a majority of the international votes from a) comes (strengthens the interests of bigger states).
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) The share of votes per state could be restricted to a maximum of 12.5% (or more, as long as only a few states participate). As compensation, for a big state, the number of companies for which SB-seats are filled by international votes can be reduced.
Example: A state has 25% of the population and 20% of the companies (even if it were only 9% instead of 20%, it would remain at 12.5% of the international votes for this state). For 7.5% (20%-12.5%=7.5%) of these companies the SB-seats are filled only by votes that come out of that state.
The mentioned 7.5% should not be related to the number of companies, but to a value calculated for each company from financial values and the number of employees.

d) An international parliamentary assembly elects a human rights body, that can decrease the participation of the population of individual states because of human rights violations. 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.

4.1.3 in addition, if shareholders have half of the SB-seats and SB-votes

Variants in which the shareholders have half of the seats and votes are mentioned

a) If the shareholders have half of the seats and votes in the SB then it is appropriate to make it unlikely that members of the third group have voting rights in the SB,

Here are 2 approaches to achieve this:

Approach 1: In big companies with many employees can apply that the third group has only 2 SB-seats and votes, if the shareholders have half the seats and votes.
Example: A supervisory board has 20 seats and votes, of which 10 are for the shareholders, 8 for the employees and 2 for the third group.
Compared to the co‑determination law from 1976 (1.2), this is different:

Approach 2: SB-members can decide that certain members of the third group do not have the right to vote on a SB (but these members remain SB-member). At the same time, an equal number of members of the shareholders then lose their voting right (e.g. members who received the fewest votes in an election; or according to drawing of lots or another procedure chosen by the shareholders).
Alternatives to decide this:

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

b) The co‑determination, in which the shareholders have half of the seats and votes and the third group has 2 seats and votes, is referred to below as "modest" 3‑groups-codetermination.
This modest 3‑groups-codetermination is stronger than the co‑determination of the co‑determination law from 1976 (which is described in 1.2), but less far‑reaching than the "Montan"-co‑determination, which applies to companies in the iron and steel producing industry with more than 1000 employees. For many decades, "Montan"-co‑determination has been the model for demands of labor unions for other big companies. With the "Montan"-co‑determination, shareholders and employees have the same number of seats and votes on the supervisory board, and both groups jointly elect an additional neutral person. Compared to the modest 3‑groups-codetermination, the "Montan"-co‑determination is more far‑reaching, because the votes of non‑shareholders in "Montan"-co‑determination belong to only one interest group (the employees), which makes resistance to shareholder plans easier. The modest 3‑groups-codetermination is therefore less far‑reaching than an already existing co‑determination by law for big private companies in Germany. This is significant for how easy it is to implement the modest 3‑groups-codetermination by law.

c) In order to break the deadlock between shareholders, on the one hand, and employees and third group, on the other hand, one of the following procedures may be used (or all together in multiple election rounds, in that order):

4.2 employees: distribution of their SB-seats

a) At least half of the SB‑members of the employees up to all except 1 are elected by employees of the company.

b) A minimum of 1 to a maximum of half of the SB‑members of the employees is elected by unions:

  1. Directly elected by unions is by default at least 1 SB‑member.
  2. In special cases it makes sense that half of the SB‑members of the employees are directly elected by unions. Example: finance or high-tech companies with high-income employees. Such companies can have a great influence on society and by this on the great number of employees at other companies, who earn less. The interests of these worse earning employees are supported by the direct influence of the unions.
    So that half of the SB‑members of the employees are directly elected by labor unions (for the benefit of this see also "4.4 chairperson of a SB"), in individual cases this can be set in union meetings with 2/3‑majority:
    • without time limit in a central international assembly
    • or with time limit in a smaller, subordinate assembly; there also faster decisions are to be possible.
    An early reelection is not necessary: From the result of the last election of the SB‑members of the employees results the additional members directly elected by unions, as well as the members of a) losing their SB-seat.
    For these individual cases also applies: In the SB an odd number of members of the employees is reduced to an even number, so there is 1 member of the employees less: If e.g. a SB normally has 5 members of the employees, now only 4 remain, 2 of them are directly elected by labor 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 SB‑member, and this one was directly elected by unions. And the shareholders receive an additional seat.
Example: The ratio shareholders:employees:thirdGroup is now 4:1:3 instead of 3:3:3.

4.3 shareholders: many different voting procedures are possible

The election process for the SB-seats of the shareholders 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 who will sit on the SB for the shareholders.
Example 2: The company is owned by the employees working there. These employees thus elect all SB‑members of the shareholders and the SB‑members of the employees according to 4.2.a into the SB.

4.4 chairperson of a SB

  1. If there is no 2/3 majority in the election of the chairperson of a SB, then she/he will be elected by the SB‑members of the third group (they are the most neutral group).
    If there is no majority for any person in the third group 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 SB‑members of the third group have an additional vote in a repeated voting.)

This regulation can be helpful in breaking a deadlock in SB-votings, e.g.

4.5 additions

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 companies from states without this co‑determination

Companies that do not have their headquarters in a state with this co‑determination may be interested in introducing such co‑determination for itself, e.g. if this co‑determination plays a role in state or private purchases or in taxes.
For such companies special regulations are necessary:


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,
See also a verdict from 1979 about the co‑determination law from 1976; BverfGE 50, 290 [341 ff.].)

From a verdict on the co‑determination law of 1976:

(See 1979 verdict on the co‑determination law of 1976, BverfGE 50, 290 [pages 342-4, 348].)

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

B.1 As addition to the mentioned regulation (from the co‑determination law from 1976): One of the persons elected by the employees to the SB is proposed by the senior executives: via an electoral list of only 2 people. And these senior executives each have 2 votes in the making of this list.

B.2 A special case is the "Montan"-co‑determination. This co‑determination is valid 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. In practice, this does not seem to have much relevance.

C. alternative and more direct election and decision procedures

C.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:

The central task of the company must be communication of information and forming of opinions.

C.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:

C.3 local utility companies for energy and water: For these it can be considered, whether rather C.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 C.1, the consumers would then correspond to the cooperative 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 SB‑members of the third group also those people can be represented, that live near the sources of energy and water.

D. smaller medium sized companies

It makes a big difference if a company with 100 employees

In the first case, the interest in co‑determination is certainly greater in the population (if there are no particularities in the second case).

Accordingly, for companies with 100-500 employees (or equivalent financial value), there may be rules that make it optional to have co‑determination with 3 groups in these companies. For these companies to have such co‑determination, voting is needed: by the population or by the employees.

Voting by the population:
At the request of 1,000 supporters, a random process is used to determine people who decide by simple majority whether this co‑determination is introduced in a company. The ballot paper is accompanied by a text from the supporters and a text from the shareholders as an aid to decision-making.

Voting by the employees:
If 10% of the employees of a company demand it, then a voting takes place in which the employees decide by simple majority.

Either until rejection or in case of success until the introduction of this co‑determination, including the election of the BoM: The initiators are protected from dismissal, and the company must not transfer its headquarters to another state.

E. additional points

Additionally shall apply:

  1. Profit of a company: The SB decides on how the profit of a company is used.
  2. Increase or decrease of capital (e.g. issue of new shares): For this majorities are necessary in the SB and the shareholders' meeting.
  3. Relocation of the headquarters of a company to an other state: For this majorities are necessary in the SB and the shareholders' meeting.
  4. Right for final decision ("Letztentscheidungsrecht"): The "right for final decision" of the general meeting (shareholders' meeting) of a company, which exists according to § 111 IV AktG in Germany, will be abolished. This law makes it possible for the BoM to submit certain decisions, if the SB does not agree, to the general meeting for a decision.

For 1. till 3. in addition the more direct co‑determination according to C.2 can be used.