-Codetermination has proved to be efficient, and several northern Euro-
paean countries adopted similar systems, while others, such as the UK,
did not. The combined influences made dialogue between management
and the workers a natural component of decision making.
Germany's codetermination law (initbestimmung), which refers to the participation of labor in the management of a firm, mandates representation for unions and salaried employees on the supervisory boards of all large companies, and “works councils” of employees at every work site. Unions are well integrated
into managerial decision making and can make a positive contribution to corporate competitiveness and restructuring; this seems different from the traditional adversarial relationship of unions and management in the United States?6 I-low- ever, the fact is that firms, in the form of affiliated organizations of companies, have to contend with negotiating with powerful industry wide unions. Employment conditions that would be negotiated privately in the United State, for example, are subject to federal mandates in Germany - a model unique in Europe.
Union membership in Germany is voluntary usually with one union for each major industry, and union power is quite strong. Negotiated contracts with firms by the employers' federation stand to be accepted by IPirms who are members of the federation, or used as a guide for other firms; these contracts therefore result in setting the pay scale for about 90 percent of the country's workers)'7
The union works councils play an active role in hiring, firing, training, and reassignment during times of reorganization and change?8 Because of the depth of works council penetration into personnel and work organization matters, as required by law, their role has been termed by some as “co manager of the internal labor market.” This situation has considerable implications for how managers of MNCs plan to operate in Germany. IG Metall, for example, which is Germany's largest metalworking union, with 2.6 million workers, negotiates guidelines regarding pay, hours, and working conditions on a regional basis. Then works councils use those guidelines to make local agreements IG Metall's proactive role on change illustrates the evolving role of unions by leading management thinking instead of reacting to it. In addition, management and workers tend to work together because of the structure of the unions. Indeed, Adams suggests that such institutional accord is a powerful factor in changing deeply ingrained cultural traits.
Codetermination has clearly helped to modify German managerial style from authoritarian to something more akin to humanitarian, without, it should be noted, altering its capacity for efficiency and effectiveness5 This system compares to the lack of integration and active roles for unions in the U.S. auto industry, for example, conditions that limit opportunities for change.
DaimlerChrysler, the German-American company headquartered in Germany, includes a works council in its decision making, as mandated by German
Law. This mean that the company's labor representatives pay close attention to U.S. attitudes which may lead to changes in the tone of the collective bargaining processes. The two-tiered system of a supervisory and a management board will remain. It is likely that the company will exert pressure to bring down the high labor costs and taxes in Germany, under the threat of moving its plants elsewhere in order to remain globally competitive. With the DaimlerChrysler company accounting for about 13 percent of the DAX index of 30 German blue-chip stocks, U.S. shareholders and managers in the company will no doubt hold some power to bring about change and reduce operating costs in the company - and perhaps eventually in the country. Pay for German production workers is among the highest in the world, about 150 percent of that in the United States, and about ten times that in Mexico. German workers also have the highest number of paid vacation days in the world, and they prefer short work days. The stores are open very little in the evenings or weekends. Termination costs are also very high (including severance pay, retraining costs, time to find another job, etc.) and that is assuming that you are successful in terminating the employee in the first place, which is very difficult in Europe. This was brought home to Colgate-Palmolive when it tried to close its factory in Hamburg in 1996. The company offered the 500 employees an average of $40,000 each, but the union would not accept and eventually Colgate had to pay a much higher (undisclosed) amount. -
The German model, according to Rudiger Soitwedel of the Institute for the World Economy at Kid, holds that competition should be based on factors other than cost.81 Thus the higher wage level in Germany should be offset by higher- value goods like luxury cars and machine tools which have been the hallmark of Germany's products. To the extent that theWest German unions have established the high-wage, high-skill, and high-value-added production pattern, then, they have also become dependent on the continued presence of that pattern. 82 In recognition of that dependency, German auto firms are in the process of remaking themselves after the Japanese model - reducing supplies and cutting costs in order to compete on a global scale. However, this social contract which has underpinned Germany's manufacturing success is fraying at the edges as Germany's economy weakens under the $100 billion cost of absorbing East Germany, and under competitive EC pressures.
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