Rerum novarum does not explicitly mention employee participation. Its emphasis on the dignity of the worker, however, could be said to imply that this is a theme that would be developed later. Some Catholics argued that employee participation was a natural right that should be enshrined in law. Pius XI rejected this view of employee participation as an entitlement in Quadragesimo anno but stressed the desirability of a partnership approach to relations within the firm . This idea was developed in various ways in Mater et magistra which spoke of employee participation in decision-making both within the firm and at the level of the economy in general. Since employees were affected by policies developed at levels higher than the firm, they ought also to be allowed to participate in developing those policies. Mater et magistra also called for employees to be allowed to share in the profits of the businesses that they work for. CST’s stance on employee participation was summed up in this passage of Gaudium et spes:
“In economic enterprises it is persons who are joined together, that is, free and independent human beings created lo the image of God. Therefore, with attention to the functions of each-owners or employers, management or labor-and without doing harm to the necessary unity of management, the active sharing of all in the administration and profits of these enterprises in ways to be properly determined is to be promoted.(7) Since more often, however, decisions concerning economic and social conditions, on which the future lot of the workers and of their children depends, are made not within the business itself but by institutions on a higher level, the workers themselves should have a share also in determining these conditions-in person or through freely elected delegates.”
Laborem exercens is the most recent encyclical to deal at length with the employee rights. It emphasizes that work has both objective and subjective dimensions intrinsically related to each other as different elements to be grasped in an overall understanding of human work. The objective dimension refers to the external effect produced by work; the firm’s products or services can be seen as belonging to this objective dimension. Human activity cannot be thought of as work unless it has this objective aspect, unless some change is made and something is produced. Without this, the activity would have to be classed as play, or a quest for speculative knowledge or an aesthetic experience.
The subjective dimension of work, however, is more important than the objective dimension when one when looks at things from an ethical perspective. The subjective dimension of work refers specifically to its ability to contribute to developing the humanity of the worker. Through work, the employee develops his personality in various ways. The question, then, is whether workplace arrangements are so structured as to respect the priority to be given the subjective dimension of work. Do they allow for the exercise of initiative? Can the employee reasonably believe that he is in some sense working for himself? Is the worker a part-owner of his workplace? Does his work allow him opportunities to make a gift of his very self to his others. This gift would be made, most obviously, to those who depend on his salary, to customers or clients and to fellow employees. In principle, this self-giving knows no limits.
Centesimus annus did not deal directly with employee rights, nor with the question of employee participation. The need to give employees some stake in their work, to make an appeal to a legitimate form of self-interest is, however, reinforced by this extract from Centesimus Annus:
“Man tends towards good, but he is also capable of evil. He can transcend his immediate interest and still remain bound to it. The social order will be all the more stable the more it takes this fact into account and does not place in opposition personal interest and the interests of society as a whole, but rather seeks ways to bring them into fruitful harmony. In fact, where self-interest is violently suppressed, it is replaced by a burdensome system of bureaucratic control which dries up the wellsprings of initiative and creativity.”
The idea of an alignment between self-interest and the well-being of one’s communities is obviously relevant to the theme of employee participation.
CST claims no competence when it comes to devising technical solutions for the implementation of employee participation in its various forms. There is obviously a range of acceptable solutions and each firm and each economy will have to work out approaches that suit it best. Laborem exercens points the way. The goal to be achieved is that:
“on the basis of his work each person is fully entitled to consider himself a part-owner of the great workbench at which he is working with every one else.”
The passage continues:
“A way towards that goal could be found by associating labour with the ownership of capital, as far as possible, and by producing a wide range of intermediate bodies with economic, social and cultural purposes; they would be bodies enjoying real autonomy with regard to the public powers, pursuing their specific aims in honest collaboration with each other and in subordination to the demands of the common good”.
It is for the direct employer (the firm) and the indirect employer (anyone with a say in the terms of employment such as the state) to reach workable and just solutions.
The most formidable barriers to designing workplaces that respect the subjective dimension of work are to be found in the realm of ideas. Laborem exercens suggests that the most significant problem lies in the economistic mindset that sees capital and labour as two opposing, and purely material, forces. There is a need for a philosophical shift that allows work, once again, to be seen in its human context.
To summarise, Rerum novarum was inspired by concern over the material poverty of the working classes in the industrialized nations at the end of the nineteenth century. It was also a response to an economic system and a way of looking at things that saw work as a mere commodity so that no respect was accorded to the subjective dimension of work. Over the past fifty years, CST has emphasized the importance of allowing employees to exercise their initiative and to play a part in the governance of the firm and of the economy. It has called for workers to be made part-owners and sharers in profit. It has not committed itself to any specific model of employee participation since a range of ethically acceptable approaches exists.
Saturday, 14 March 2009
Thursday, 12 March 2009
O'Connor - directors as neutral referees
Marleen O’Connor, (“The human capital era: reconceptualising corporate law to facilitate labor-management co-operation”, (1992 – 1993) 78 Cornell Law Review 899) sees a need to move from a command and control economy to one where employees are fully committed to the corporation. She seeks “organizational arrangements that are best suited to motivating a highly committed workforce to utilize fully their information-processing and communication abilities.” There are significant barriers to prevent this shift from occurring. The law needs to intervene to overcome these cultural barriers. Essentially, she suggests two reforms. First, directors should be neutral referees owing a duty to employees as well as to shareholders. Fiduciary duties, she argues, tend to foster stable patterns of co-operation. This reform would send a signal that employees are central to the employer. Directors would be freed from the shackles, real or perceived, of shareholder value. The second reform would be the establishment of Employee Participation Committees to act as the employees’ contact point with directors. This approach would be superior to German style co-determination because it would not divide the board into separate camps.
Wednesday, 11 March 2009
Karl Klare - self-realization demands employee participation
Karl Klare ("Workplace democracy & market reconstruction: an agenda for legal reform”, (1988 – 1989) 38 Catholic University Law Review 1) argues for a sweeping reform of labour law to promote active employee participation in firm governance.
Klare calls for a recasting of corporate governance and labor law to promote workplace democracy. He argues that the main goal of labor law should be to expand and enhance democracy at every level of the experience and organization of work. This is a demand both of a respect for self-realization and of the practical needs of the firm operating in a modern economy. Employees increasingly look to their work as a source of self-realization in a deep sense (as presenting opportunities for learning and expression, challenging work and an improvement in their technical skills and personal capacities). Labor law’s goals should be to promote employee security in turbulent times, enhance human capital and reduce discrimination in the workplace. Klare challenges the assumption that the common law as it stood, or is imagined to have stood, at a give era represents the natural state of things so that the burden of proof rests on those who argue for a deviation from this norm. He argues that even the common law, at any stage in its development, has a built-in regulatory agenda of its own that is open to challenge
Klare calls for a recasting of corporate governance and labor law to promote workplace democracy. He argues that the main goal of labor law should be to expand and enhance democracy at every level of the experience and organization of work. This is a demand both of a respect for self-realization and of the practical needs of the firm operating in a modern economy. Employees increasingly look to their work as a source of self-realization in a deep sense (as presenting opportunities for learning and expression, challenging work and an improvement in their technical skills and personal capacities). Labor law’s goals should be to promote employee security in turbulent times, enhance human capital and reduce discrimination in the workplace. Klare challenges the assumption that the common law as it stood, or is imagined to have stood, at a give era represents the natural state of things so that the burden of proof rests on those who argue for a deviation from this norm. He argues that even the common law, at any stage in its development, has a built-in regulatory agenda of its own that is open to challenge
Tuesday, 10 March 2009
Hansmann and employee participation
Hansmann (Henry Hansmann, "Worker participation and corporate governance", (1993) 43 University of Toronto Law Journal 589) suggests that the corporation’s collective choice mechanisms should have the twin aims of minimizing transaction costs and of yielding substantially good quality decisions. Where decision-making is in the hands of people with heterogeneous interests, decision-making is likely to be inefficient (as it becomes bogged down by in-fighting). Where decision-makers have the same interests, where there is homogeneity, efficient decision-making becomes possible. Shareholder-dominated decision-making is homogenous in the sense that the range of issues that affect shareholders qua shareholders is relatively restricted. The same cannot often be said of employees since within their ranks there will be radical differences of interest (according to age, status, location and so on) and these differences will affect their decision-making qua employees. Any successful approach needs to minimize the risk of “intra-firm politics”. It has been pointed out that Hansmann appears not to be comparing like with like: he is comparing direct employee representation with indirect shareholder representation. If employees participated in governance through representatives (indirect participation) then the risk of intra-firm politics would be substantially diminished.
Monday, 9 March 2009
Singer - Jobs and justice
I have just read a very thoughtful article about employee participation (Joseph Singer, "Jobs and justice: rethinking the stakeholder debate". (1993) 43 University of Toronto Law Journal 475).
Singer argues that governmental intervention, in corporate governance and more generally, to promote fundamental employee rights (including rights to participate in the formulation of corporate policy) is both necessary and morally justifiable. He rejects the argument that this is an intervention in private contracting that would necessarily harm everyone by imposing higher terms than employers would be prepared to offer or employees would be prepared to accept (the unintended consequences type of argument). He points out that this logic does not apply when there is a radical inequality of bargaining power. More fundamentally, there are some things that are due as a matter of common decency. Consistently with a natural law approach, Singer’s starting point is to say that employment (by which he means, I think, stable and “well-paid” employment) is a prerequisite for participation in the economic system and is necessary for human flourishing. Thus, a just economic system will have to provide: access to well-paid employment (the earlier part of his article suggests that he means a wage that will support a family at least above subsistence level); some reasonable guarantees of job security; retraining and job placement when employees are “in transition”; and a right to participate in formulating corporate policy in a democratic manner.
Singer argues that stakeholder statutes are unlikely to deliver these employee rights. They enhance managerial discretion unacceptably but without being likely to deliver any corresponding benefit to employees. A stakeholder statute would be unlikely to give directors sufficient push to focus on employee interests. Singer doubts very much that courts in the US would be prepared to allow employees to invoke stakeholder statutes directly. More likely, they would give directors a discretion to take employee interests into account.
Singer does not believe that stakeholder laws are radical enough to make a difference. The answer, he suggests, will be some form of codetermination or giving employees ownership of voting shares or a combination of the two. Worker participation is justified, he believes, by analogy with democracy in the political system. There will be a need for governmental intervention across a range of policy headings including labour law (and perhaps education policy).
Singer argues that governmental intervention, in corporate governance and more generally, to promote fundamental employee rights (including rights to participate in the formulation of corporate policy) is both necessary and morally justifiable. He rejects the argument that this is an intervention in private contracting that would necessarily harm everyone by imposing higher terms than employers would be prepared to offer or employees would be prepared to accept (the unintended consequences type of argument). He points out that this logic does not apply when there is a radical inequality of bargaining power. More fundamentally, there are some things that are due as a matter of common decency. Consistently with a natural law approach, Singer’s starting point is to say that employment (by which he means, I think, stable and “well-paid” employment) is a prerequisite for participation in the economic system and is necessary for human flourishing. Thus, a just economic system will have to provide: access to well-paid employment (the earlier part of his article suggests that he means a wage that will support a family at least above subsistence level); some reasonable guarantees of job security; retraining and job placement when employees are “in transition”; and a right to participate in formulating corporate policy in a democratic manner.
Singer argues that stakeholder statutes are unlikely to deliver these employee rights. They enhance managerial discretion unacceptably but without being likely to deliver any corresponding benefit to employees. A stakeholder statute would be unlikely to give directors sufficient push to focus on employee interests. Singer doubts very much that courts in the US would be prepared to allow employees to invoke stakeholder statutes directly. More likely, they would give directors a discretion to take employee interests into account.
Singer does not believe that stakeholder laws are radical enough to make a difference. The answer, he suggests, will be some form of codetermination or giving employees ownership of voting shares or a combination of the two. Worker participation is justified, he believes, by analogy with democracy in the political system. There will be a need for governmental intervention across a range of policy headings including labour law (and perhaps education policy).
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