Labour Law, Military Occupation, and Industrial Democracy
Rebecca Zahn, University of Strathclyde
Codetermination – worker participation in management, also referred to as Mitbestimmung – forms part of the industrial relations traditions of a number of European countries. Among these, the German system of parity codetermination (paritätische Mitbestimmung), first introduced in the iron and steel industries in 1947 by the British Military Government, provides the greatest level of involvement for workers, by allowing for equal representation of employees and management on the supervisory boards of companies, in certain industries, above specific size thresholds.
This model of codetermination was extended in April 1951 by an Act of the German Parliament (Gesetz über die paritätische Mitbestimmung in der Montanindustrie) to apply across the coal, and iron and steel industries, and paved the way for the Works Constitution Act 1952 (Betriebsverfassungsgesetz) (amended by the Works Constitution Act 1972; still in force today) which extended worker representation on supervisory boards to other industries. Outside the coal, iron and steel industries, employee representatives make up a mandatory one-third of the members of the supervisory board of companies with more than 500 employees. Codetermination is widely regarded in the German literature as a successful trade-union achievement and the most important ‘socio-political innovation’ of German post-war industrial democracy.
Though much admired, this unique model has not been implemented in other major economies. Similar proposals had been widely discussed in Germany and Britain throughout the 1920s, 1930s and 1940s so why was it implemented in Germany under British occupation, but not elsewhere? In part, this question can be answered by looking at the debates occurring in Germany and the UK immediately before, during and after the Second World War on the nationalisation of certain industries which I have written about in detail elsewhere.
However, I would also suggest that the occupation itself played an important role in facilitating fundamental social, political, economic and legal reform. Similar to conditions pertaining in a state of emergency, the occupation both suspended normal rules of engagement and created a (temporary) change in the power dynamics between government, workers and employers. This enabled the reorganisation of internal company structures despite the opposition and, indeed, without consultation of the owners of the companies affected; something that would not have been possible in a different political context.
On 14 December 1946, William Harris-Burland, controller of the British-administered North German Iron and Steel Control Authority (NGISC), convened a meeting in the British Zone of Occupation to discuss Operation Severance, code-name for the reorganisation and deconcentration of the German iron and steel industries following the Second World War. The Potsdam Agreement of 1945 had provided the basis for the Allies’ stated aim of the elimination of ‘excessive concentrations of economic power’. Under Operation Severance, twenty-four iron and steel companies were detached from the big industrial combines which had previously controlled them, to be held in trust by a German Trustee Administration (Treuhandverwaltung), appointed by the British Military Government. The Treuhandverwaltung was led by Heinrich Dinkelbach, a former chief financial officer in the German iron and steel industry confederation (Vereinigte Stahlwerke) who had remained in post following Germany’s defeat.
At the meeting on 14 December, Dinkelbach outlined a plan, which had already been approved by the relevant British authorities in London and by the British Military Government headquarters in Berlin, to not only reorganize the iron and steel industries but to do so in such a way as to limit the sphere of influence of the current owners, while also guaranteeing worker involvement through their trade unions. He proposed equal representation for workers and management on the supervisory boards of the iron and steel industries. The proposals were welcomed by the German trade unionists present at the meeting.
The detailed framework for this unprecedented form of parity codetermination was subsequently negotiated between German trade union representatives and the Treuhandverwaltung, and finalized in January 1947. The management board of the various individual companies (Vorstand) was to include a ‘labour director’ (Arbeitsdirektor) as one of its three members who could only be appointed with the agreement of the trade unions. Supervisory boards (Aufsichtsrat) were to consist of eleven members, five of whom were to represent the employer and the workers respectively, with a neutral chairman appointed by the Treuhandverwaltung. Industry owners were not involved in the negotiations and were only officially informed of the outcome after they were concluded in January 1947.
The occupation created an opportunity for workers and management in the German iron and steel industries to do things and to work together with the ruling authorities in a way that would not have been possible in other circumstances. Codetermination as a form of industrial democracy was not a new German or British idea. Business historians have charted Dinkelbach’s long-standing support, influenced by Catholic social ideas, for worker involvement in large companies. Already in 1941, he had written that ‘everyone somehow associated with the enterprise has an equal and justified interest [in it]: its employees, its creditors, and finally, the entire national economy.’ After the end of the Second World War and the assumption of power by the British Military Government, Dinkelbach found himself elevated to lead the reorganisation of the iron and steel industries due, in part, to the fact that he was one of the few senior industrialists not seriously tainted by a Nazi past. Indeed, he was the only board member of the Vereinigte Stahlwerke not to be arrested in December 1945. He subsequently built close personal and professional relationships with members of the British military government, including Harris-Burland (who had incidentally spent time working as an accountant in Germany before the war). This position of authority, which he might not have achieved in a different context, allowed Dinkelbach to pursue ideas on codetermination which had previously met with fierce resistance from his (management) colleagues who largely dissociated themselves from him.
German trade unions had advocated equality of workers and employers in the management of enterprises under the banner of industrial democracy (Wirtschaftsdemokratie) since the 1920s. Plans for a reorganization of the German economy along these lines had been drawn up by exiled German trade-unionists based in the UK during World War Two. These exiles (men such as Hans Gottfurcht, Werner Hansen, Walter Auerbach, Ludwig Rosenberg and Willi Eichler but also some women, including Minna Specht) had not only developed comprehensive plans for post-war German reconstruction but had also forged personal and/or professional relationships with a number of British trade unionists who were engaged in similar domestic debates, including Walter Citrine (TUC Secretary General) and Ernest Bevin (Minister for Labour (1940-1945) and Foreign Secretary (1945-1951)). Some German exiles were recruited by the UK’s Special Operations Executive, trained in Scotland, and sent to Germany as part of ‘Action Goethe’ before the end of the war in order to act as ‘guides’ for the advancing British army and to make contact with Germans who had opposed the Nazis before the war. These relationships between exiled Germans and British trade unionists, forged during the war, continued into the immediate post-war period. The British government facilitated the return of a number of German exiles to the British zone in 1945-46 where they worked for or with the British administration, and had close links to the Treuhandverwaltung.
The occupation gave these normally distinct groups – Dinkelbach as a reforming industrialist and (returning exiled) trade unionists – the space not only to negotiate a model of codetermination in a way that might have been impossible otherwise; but also, with the tacit support of the British Military Government (and the Labour government in London) the opportunity to implement that model.
For labour lawyers, this historical material offers a number of important insights. It illustrates that the law on parity codetermination came about as a result of a unique set of political, social and cultural dynamics between occupiers and occupied. A better understanding of these dynamics allows conclusions to be drawn on the law’s origins and distinctiveness. Disentangling the role of occupation in enabling the introduction of codetermination also provides important insights into the origins and causes of fundamental changes to social, economic and legal structures.
This material is also relevant for contemporary debates on worker representation and how such a system could be implemented. The absence of worker participation in the UK is increasingly regretted and has become a topical subject in academic, political and policy debates. At a political level, Frances O’Grady (the current General Secretary of the TUC, the British Trades Union Congress) and influential members of both the Labour and Conservative Parties, including the former Prime Minister, Theresa May, have called for the appointment of worker representatives to company boards. Although the nature and form of a British variant of worker participation is disputed, the German model of parity codetermination is often cited as exemplary. A better understanding of its historic origins and the British influences on its creation may help those interested in the design of a possible legal framework for a new contemporary British system of worker representation and industrial democracy.
L. Eiber, Die Sozialdemokraten in der Emigration (1988)
J.R. Fear, ‘Heinrich Dinkelbach. Organization Man‘ in J.R. Fear, Organizing Control (2005)
G. Müller, Mitbestimmung in der Nachkriegszeit (1987)
E. Potthoff, Der Kampf um die Montanmitbestimmung (1957)
W. Röder, Die deutschen sozialistischen Exilgruppen in Großbritannien 1940-45 (1968)
E. Schmidt, Die verhinderte Neuordnung 1945-1952 (1971)
H. Thum¸ Mitbestimmung in der Montanindustrie (1982)
R. Zahn, ‘German codetermination without nationalization, and British nationalization without codetermination: retelling the story’ Historical Studies in Industrial Relations 36 (2015), 1-27
Cover picture: The Stahlhof in Düsseldorf, the former headquarters of the German Steelworks Association and, during the occupation, the office of the British Regional Commissioner for North Rhine-Westphalia © Noebse