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Productivity: legislate for workplace democracy and employee ownership

By Klaas Woldring - posted Friday, 31 August 2012

If Australia is to achieve greater workplace productivity vague talk about "greater cooperation between management and employees" is not enough and will remain just that. Both in the areas of workplace democracy and employee share ownership plans (ESOPs) other countries have specifically legislated to provide institutional frameworks for participation and a range of financial arrangements to facilitate employee share ownership. Being a co-owner of a business motivates employees in several ways. It means that they part-own their jobs. This is particularly true of medium–sized businesses. From Mondragon in Spain to Ricardo Semler's Semco in Brazil this policy has proved convincing as a productivity driver.

In terms of participation in decision-making a large number of European countries have introduced legislation since the mid-1950s and in most cases have widened the application of these acts repeatedly, especially in Germany, the Netherlands, the Scandinavian countries and others. Enterprise Councils, with far-reaching advisory powers, and staff representation on corporate boards have been common in Europe, studied, reported on and advocated regularly by at least a dozen well known Australian scholars.

The range of financial participation schemes legislated for in the US since 1984, has also grown in many European countries, including the UK. Plenty where examples there available as well (advantages: improved business performance; increased economic resilience; greater employee engagement and commitment; driving innovation; enhanced employee well-being; and reduced absenteeism). In the recent Nuttall Report, July 2012 the Right to Request ESOPs is strongly advocated.


For the most part this has remained mostly of academic interest in Australia with a few notable exceptions, as for instance Fletcher Jones and Staff and Lend Lease, and the Nelson Report "Shared endeavours" (2000). In individual cases the enlightened entrepreneurs' personal philosophies drove the development. Most of the examples overseas, with some exceptions, e.g. John Lewis & co, have been introduced following appropriate legislation. If the Australian Government, employers' organisations and unions are serious about progressing productivity in the workplace, as distinct from continuing the customary adversarial tug-o-war, effective legislation is what is required now. It is the combination of share ownership schemes and effective voice that provides the productivity boost in particular. The US Professor Joseph Blasi, addressing a conference organized by the Australian Employee Ownership Association in Sydney (November 2010) made this point emphatically.

New additional tools, to emphasise the reality that management and employees need to cooperateto achieve greater productivity and rewards, surely can be added to the Fair Work Act as options that are meaningfully encouraged by the Government. Do unions need a new "fighting fund" to protect their rights or should they also campaign for more intensive participation in the business by adult employees who are well educated and would want to exercise their democratic and economic rights in the workplace?

Of course, as a number of politicians and commentators have pointed out just recently, productivity is indeed a complex issue comprising multiple factors: superior technology, efficiency, education, management attitudes and competence, wage levels and their relationship to executive salary packages, employee motivation, etc.

Some of these factors are beyond direct workplace legislation but many can be addressed. To simply argue for more flexibility and management prerogative, as free marketeers still tend to do, hasn't worked particularly well at all in the last 20 years of economic rationalist ideological dominance. One would have to ask what kind of motivation is achieved with the average employee when executive salaries go through the roof and are in some instances between 50 and 100 times average employee rewards. The bonuses that are paid to some CEO's, who have not even performed well, can hardly result in productive attitudes by employees. As a matter of fact the Productive Commission's Inquiry into these scandalous reward practices, in 2009, only resulted in some quite disappointing recommendations to strengthen the power of shareholders. The entire notion of Fair Work in such a situation is completely laughable I would say, and thoroughly demotivating as well. Interesting to note that productivity has declined over the same period as executive salaries have risen and risen, virtually unchecked even by the ALP Government.

Corporations that have substantial numbers of employees as shareholders tend not to have excessive salary packages for senior executives. There is more transparency and questioning within such business organisations about executive rewards. These employees expect their leaders to perform and if they don't there will be questions especially if there are Enterprise Councils and/or staff directors in place.

In this context we might also consider decisions by corporations to move part of their operations or their entire business to low labour cost countries in Asia to compete more effectively and/or make higher profits. Do their Australian employees have any say in the export of their jobs in this way? If not, why not? Should they have some say in this transfer as the co-creators of the wealth and goodwill up that point? Should they be compensated in some way or share in the benefits of this globalisation? These are the sort of questions that are asked by employees in other countries.


For the purpose of this article I am looking briefly at the gist of Dutch Works Council Act, latest version 2010. This is not a particularly radical Act in the European context as it essentially provides a wide range of advisory, appeal and approval powers to Enterprise Councils; it does provide something that is lacking in Australia where the notion of management prerogative still seems to dominate the workplace culture: it prescribes compulsory consultation and negotiation, within the workplace, not just for an enterprise agreement, but on a permanent basis. Management is expected to work with the employees in the Netherlands.

The institution of an Enterprise Council for an enterprise with at least 50 employees is mandatory. Such a Council shall be directly elected by the persons working in the enterprise from their own ranks by secret written ballot from one or more lists of candidates. The Council may invite one or more experts to attend a meeting in connection with the discussion of a particular subject. Such invitations may also be extended to one or more directors of the enterprise or to one or more outsiders.

For a specified total number of hours per year, the entrepreneur shall give members of the Council and its committees an opportunity, during working hours and with full pay or remuneration, to meet in mutual consultation and to consult with other persons on matters relating to the performance of their duties and for the purposes of acquainting themselves with the working conditions in the enterprise.

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About the Author

Dr Klaas Woldring is a former Associate Professor of Southern Cross University.

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