Labour Minister Mallikarjun Kharge is doing his bit to take forward his party’s (Congress) aam aadmi agenda. That explains the revival of efforts to push through a two-decade-old legislation, Participation of Workers in Management Bill, 1990, which was put in cold storage after its introduction in the Rajya Sabha.
No one can fault the minister for lack of sincerity. As reported in Business Standard yesterday, he held wide-ranging discussions with representatives of various interest groups to find consensus on a move that has faced stiff opposition from industry in the past.
The Bill seeks to ensure “specific and meaningful” participation of workers in management in company boards. The government wants public sector units (PSUs) to take the lead, and the minister hopes “thereafter, it may also be possible to evolve consensus among other stakeholders”.
That may, however, just remain wishful thinking. A day after the minister’s meeting, the HR head of a PSU said the move will be a disaster. “We will have no option if the owners (the government) force us, but the managements will treat worker-directors as nothing but showpieces for the ultimate industrial democracy,” he said.
The HR director said his company did have workers’ participation at the plant-level in the form of work councils, etc. But the decisions were generally restricted to “tea, towels and toilets”, as the workers’ representatives were just not interested in scaling up their involvement. Managing is your responsibility, we want the benefits, he said, is the theme.
Trade union leaders have returned the compliment by saying that managements are just not interested in sharing meaningful information with workers’ representatives in these meetings due to what they call a class bias.
These views can be termed extreme, but they also show lack of trust between the two sides. And trust is the minimum that is required for any such experiment to succeed. It is doubtful whether law can change people’s minds.
Some Indian public sector banks do have employee-directors. But most bank managements say the experience hasn’t been too good either. In many cases, these directors haven’t attended board meetings citing political work pressures, or have been harping on just one theme — higher benefits for employees. “Directors need a holistic perspective. You can’t carry your trade union baggage to the board room,” a bank director said.
Supporters of workers’ participation in company boards say the workers’ representatives on the board can play a useful role in safeguarding the interests of workers; he or she can serve as a guide and control element; can prevail upon top management not to take measures that would be unpopular with the employees; can guide other board members on matters of investment in employee benefit schemes like housing, and so forth.
But those against the proposal say the focus of workers’ representatives is different from that of the remaining members of the board. Also, communication and subsequently relations between the workers’ representative and the workers suffers after the former assumes directorship as he or she tends to become alienated from the workers. As a result, the workers’ representative may be less effective with the other members of the board in dealing with employee matters.
HR experts say the proponents of workers’ participants in management often cite the experiment in Germany, which was the first country to adopt such a practice. Known as Mitbestimmung, meaning co-determination, the practice started during Germany’s economic re-emergence after the second world war, with a series of laws culminating in a 1976 decree that requires that just under half of companies’ supervisory board members are representatives of workers. Shareholders and trade unions elect members of a supervisory board which is meant to set the company’s general agenda. The supervisory board then elects a management board, which is actually charged with the day-to-day running of the company. The management board is required to have one worker representative.
For many years, the German model was considered to be the ultimate example of how industrial democracy can and should work. But the enthusiasm of its supporters seems to have taken a few hard knocks in recent times. Many experts say the system of co-determination made managers less willing to take tough, unpopular decisions and more likely to make trade-offs. Supervisory board support for the performance-related pay of executives would often be traded with cash bonuses for the workforce, or the appointment of a new top executive would be linked to job security pledges for employees.
This has also led to corruption charges. For example, a couple of years ago, German car maker Volkswagen was in the news for all the wrong reasons. It was reported that managers in the company paid for exotic holidays to works councillors, etc.
India is certainly better off in this respect, but forcing workers’ participation in boardrooms without ensuring that it first succeeds at the lower level, is nothing but putting the cart before the horse.
