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.
For this co-determination the size of a company does not only refer to the number of employees, but also to financial values.
A part of the representatives of the employees can be elected also from employees who do not work in the respective enterprise.

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 votings 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 the 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

"Party" is meaning "party or political group" in the following text.

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 lists of candidates from several parties.
It is also possible that multiple parties together make a joint list of candidates.

c) Voters can weight their votes. And 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 for each individual SB, e.g. according to the method Sainte-Laguë / Webster), a correction is necessary so that a smaller party that has less SB-seats than corresponding to its share of votes (of the votes for all SBs), receives more SB-seats.
Example, before the correction: In all SBs together a small party has 2% of the SB-seats, but its total share of the vote is at 10%.
One possibility for the correction is given in Appendix C.1.

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 those countries, 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 party has already lost a SB-seat by national votes, then it becomes less likely, that it also gets in this SB a seat by international votes (details see in appendix C.1.d).

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).
  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 applied in big mining companies and in big companies that produce iron and steel, if these fields make up at least 20% of a company. 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 alone.

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

"Party" is meaning "party or political group" in the following text.

C.1 To compensate for a disadvantage of smaller parties the following correction is used (introductory see also 4.1.d).

a) Without correction is possible:

  For all SBs together: Difference
Votes SB-seats (target → actual)
Party A   7.000 7 → 0 -7
Party B 13.000 13 → 3 -10
Party C 23.000 23 → 28 +5
Party D 27.000 27 → 31 +4
Party E 30.000 30 → 38 +8

The parties A and B have too few SB-seats, the parties C, D and E have too many SB-seats.

b) The parties A and B get more SB-seats, the parties C, D and E get less seats.
A party with too few SB-Seats (party A or B) gets these additional SB-seats for those SBs, where the difference of votes is proportionally the smallest between a candidate list of this party and the votes per SB-seat of a candidate list of the party C, D or E.
Example of the parties B and E:

  Supervisory boards
1 23456
Votes of party B 300 300 400 500 600 300
Votes of Party E 1200 1300 900 600 1000 500
Preliminary seats of party E 1 2 1 1 1 1
Votes per seat of party E 1200 650 900 600 1000 500
(E-B)*100/E    difference of votes 75% 54% 56% 17% 40% 40%

At SB 4 the vote difference is the smallest (with 17%). Compared to party E party B has the biggest right to this SB-seat; if there is no exception under C.1.c.
In principle, this can be used in this way: An overall ranking list of these votes-differences is created that applies to all SBs and parties together. Then down from place 1 on this list, SB-seats are redistributed, taking into account the exceptions in C.1.c.
But it takes no overall ranking list, it is sufficient and more understandable regarding redistribution, if there are multiple ranking lists, each for only about 10 to 20 SBs. To allocate a SB / a company to a certain ranking list, there are various possibilities:

c) To C.1.b there are the following exceptions:
A party with too few SB-seats (party A or B) does not get the SB-seat,

d) Also the division into national and international votes, which is mentioned in 4.1.e, must be considered. For the national votes the procedure from C.1.b is done first. When after this the procedure is also done for international votes, additionally applies:

e) Additional points:

C.2 joint lists of candidates of several parties:

  1. To achieve that the number of votes of a party for all SBs together can be determined: Each candidate is identified as a representative of a party or several parties. If a candidate is marked as a representative of several parties, then her/his votes are attributed to these parties equally.
  2. If a SB-seat that was won by a joint list of candidates is lost by C.1.b, then this is only possible, if all parties of this candidate list together in all SBs of a ranking list have more SB-seats than they are entitled to according to their percentage (so not solely the party matters the candidate is assigned to).

C.3 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.4 In connection with 4.2 ("finance-companies with high-income employees") and 4.4 are the following regulations. They prevent that parties that are especially near to shareholders can prevail against a big majority of other parties.
At the election for a SB a list of candidates gets all seats, if it fulfills one of the following preconditions:

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.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 from those parties are sent, that have the most votes for all SBs together from those voters, who cast their votes in the state where the company has its headquarters. It is not necessary, that these representatives have been candidates of the SB-election.

"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.3, C.4 and C.6.b an international parliamentary assembly is mentioned, in C.3 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 D.2 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. This way the consumers could e.g. elect the board of management directly. 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 D.2, 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 an enterprise: The SB decides on how the profit of an enterprise 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 an enterprise to an other state: For this majorities are necessary in the SB and the shareholders' meeting.