On October 29th 2014, the German Marshall Fund of the United States (GMF) hosted a roundtable discussion on labor relations in Germany and the United States. US Secretary of Labor Thomas Perez, German Federal Minister of Labor and Social Affairs Andrea Nahles, and a group of eleven works council chairs came together for an engaging discussion on how to balance the demands of all stakeholders in a company. In her welcoming statement, GMF director Heike MacKerron reflected on the strong American interest in German corporate governance and training that existed in the 1970s and 1980, but has waned since then. After expressing GMF’s willingness to engage in the event and help sustain political interest in this area on both sides of the Atlantic, MacKerron concluded by introducing the director of the Hans-Böckler Foundation, Michael Guggemos, who moderated the discussion.
After an introduction by Minister Nahles, Secretary Perez entered into discussion with the works council chairs, who represented some of Germany’s largest corporations such as Siemens, Volkswagen, and BMW (for a list of all participants, please see end of article). The idea was to have a two-way discussion, in which the US Secretary of Labor could explore what the United States can learn from German corporate governance. The representatives of German industry, most of which have US branches, also expressed their interest and concern with US labor laws. Given the relative strength of both the German and American economies, Secretary Perez applauded the German professional training system and stressed the importance of working together to ensure growth and shared prosperity
The success of the German model is often attributed to quality vocational training, a dual education system that combines apprenticeships in a company with vocational school, and co-determination. Minister Nahles also pointed to the continuously high voter turn-out at works council elections, which speaks to the legitimacy of the council members and the effectiveness of the system. Accordingly, Secretary Perez shed light on his goal of working towards a similar system in the US. He specifically wishes to develop a system in which both shareholders and stakeholders have a voice in corporate decision processes.
A key component of the German model is the active participation of workers in the managerial and supervisory bodies of companies. This contributes to a sense of mutual ownership and allows industries to weather the effects of crises more easily. In addition, the dual vocational training system produces a highly qualified and skilled workforce. In the United States, on the other hand, apprenticeships enjoy less of a success story. According to Perez, they have come to be devalued and their utility is underestimated. President Obama has called to double the number of apprentices in the United States in the next five years.
The works council members also stressed the importance of compromise. During the financial crisis, many prevented layoffs in a spirit of mutual sacrifice and common interest. Employees could keep their jobs, albeit with a temporary reduction in working hours and therefore wages, while management continued to invest in its existing workforce. Short term losses were accepted for the sake of future gains, which required a long-term perspective. Perez agreed that managers need to move beyond a quarter-to-quarter growth mentality and focus more on sustainability. The works council chairs also advised against ‘hire and fire’ practices during economic downturns and recoveries for the sake of consistency and stability within companies. As a country often considered ‘commodity-poor,’ Germany’s strength lies within its human capital investments.
Secretary Perez agreed that the United States must also create structures in which workers are on equal footing with management. He acknowledged that the German model cannot simply be transposed to the United States, but that it will be a long process and an intricate balancing act.. A fundamental challenge is that in the United States, significant legal barriers stand in the way of progress. Ultimately, Secretary Perez highlighted the importance of greater opportunities for workers to have a voice in those decisions within the United States.
Perez left hopeful and wrapped up the discussion on a high note. He reminded the group that Ford Motor Company survived the crisis exactly because it chose to make shared sacrifices. The United Auto Workers Union (UAW) came together with Ford and was able to come to come to an agreement. Everyone had a voice and seat at the table. In the future, he hopes there will be more success stories like this one.
Deutsche Telekom AG
Nokia Siemens Networks
Volkswagen AG, Braunscheig
Frank Michael Hell
BASF SE, Ludwigshafen
Herbert Kannegiesser GmbH
BMW AG, Berlin
Winergy AG, Voerde