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Why U.S. Corporate Boards Don’t Include Workers

197 points by petethomas 8y ago

ifur 8y ago
Because the secret lingo needs protecting. And the bottom line has nothing to do with economic output. Justification being that downturns are the fault of reckless consumers while self-declared experts takes credit or the upswings after. Didn't bother reading, but assume it can be shot down along these lines. Edit: So read it, Germany workers need high academic degrees to climb in that system, so in practice not a huge difference. Also reminds me of this great pun: "Do you know what above board means?" "No." "The union and management is in agreement, the board got nothing. Do you know what it's called when the it's above board and the union isn't involved?" "No." "Corruption!" Read: Factory/workers union, not management run ones. Today maybe if finance is involved, probably like that for divisions in IBM when central board is involved.
rdl 8y ago
I wonder if this would make any sense in a tech company. I would generally think a CEO (who is on the board) is going to be more aligned with an engineer's interests than the CEO and a walmart cashier, but they still have some distinct interests. Maybe a representative of non-founders holding the "standard" employee form of stock?
- frgtpsswrdlame 8y ago
  Along what dimensions do you think a tech CEO is more aligned with their employees' interests than a retail CEO would be?
- nerdponx 8y ago
  Isn't this basically what CTOs and CIOs do? Would the non-tech equivalent would be something fanciful like a Chief Cashier Officer?
  - sjg007 8y ago
    You'd probably have a "cashier" who was elected by their peers. Usually it could be a union leader but in the event of no union I'd imagine the workers would vote. It's probably not done because it is quasi-union already as the voting part has already happened so it's just one more step to vote to unionize.
  - forapurpose 8y ago
    CTOs and CIOs are management and represent management. Their priorities aren't wages and working conditions, but bottom line performance and their own power and careers. They represent employee interests as much as the HR director does.
- Alex3917 8y ago
  > I wonder if this would make any sense in a tech company. Yes. Consider these possible board compositions: - 2/3rds founders, 1/3rd investors - 2/3rds investors, 1/3rd founders - 1/3rd founders, 1/3rd investors, 1/3 employees It doesn't really matter whether the CEO is aligned with employees per se, the real value is in having the employees be the tie-breaking vote between management and investors.
- s73v3r_ 8y ago
  I would not think that a tech CEO is any more aligned with an engineer's interests than any other CEO of any other company.
pasiaj 8y ago
I recently had a discussion with a board professional, a female, who has sat in boards of publicly traded companies in Germany, Finland and Sweden. Finnish law does not dictate board composition of companies in any way. In Sweden, companies of 25+ employees in most cases have 2 or more representatives in company board. Germany has a dual board system. Employee representatives have a right to seats on the supervisory board of larger companies – one-third in companies with 500 to 2,000 employees, half in companies with more than 2,000. If I understood this correctly, employees are represented by a union official. Her view was that the German system is simply a bad model that doesn't work. At the same time she credited the Swedish system for the fairly low number of strikes and union activities in Sweden, saying that board representation creates a more keen understanding of business realities throughout union representatives & employees. She advocated for Finland adopting similar policy to Sweden.
- johannes1234321 8y ago
  In what way doesn't it work? Germany has quite a few quite successful companies, world market leaders in their fields and a quite good social relationship. Certainly there are issues, but far from "doesn't work" in my observation.
  - LanceH 8y ago
    Or, Germany has some successful companies that can afford inefficiencies.
    - johannes1234321 8y ago
      Maybe. A related question also is what a measurement for "good" is. Successful companies with unhappy society isn't nneccisarily a good society. That's why I asked for details instead of an anecdotal unspecific remark by one person.
  - mcherm 8y ago
    In this case, the evidence for "doesn't work" would be a REDUCTION in the number of successful companies, not a complete absence of successful companies. And there are so many confounding variables that it is impossible to tease apart the effect of this policy on board membership from every other thing about German law and culture that might affect company success.
chrisseaton 8y ago
Can workers not get representation on boards already by buying shares and voting on board membership? Or is that not effective for some reason?
- nerdponx 8y ago
  No individual worker can hold enough shares to matter. Unless you're talking about a labor union buying a non-trivial stake in an employer? I've never heard such an idea before, but I'm sure at someone else has thought of it in the past I would be curious to see how that went. It also doesn't do anything at a private company.
  - kalimoxto 8y ago
    The article notes that this has happened. UAW's retirement plan had bought enough shares collectively to leverage them for a board seat at GM.
  - chrisseaton 8y ago
    Yes I mean the workers collectively buying shares, if they want collective representation on the board. Why do workers need to be a special case? Anyone interested in the direction of a public company can get involved this way already.
    - LyndsySimon 8y ago
      I completely agree - this is the mechanism through which it makes sense, for public companies. Privately-held companies don't typically have such a mechanism.
- thrill 8y ago
  In the US? Sure. If a group thinks specific representation will make "things" better for their group, then this is a method occasionally exercised. In certain circumstances, a judge can also appoint you to a board, or even to a CEO position (been there, done that) - but things are generally fairly broken if that happens.
- 8y ago
simonsarris 8y ago
"A board of three is ideal. Your board should never exceed five people, unless your company is publicly held. (Government regulations effectively mandate that public companies have larger boards—the average is nine members.) By far the worst you can do is to make your board extra large. When unsavvy observers see a nonprofit organization with dozens of people on its board, they think: “Look how many great people are committed to this organization! It must be extremely well run.” Actually, a huge board will exercise no effective oversight at all; it merely provides cover for whatever microdictator actually runs the organization. If you want that kind of free rein from your board, blow it up to giant size. If you want an effective board, keep it small." — Peter Thiel More board members may increase intransigence, decrease oversight (cover over who is really making the decisions and who is not), and turn US corps more bureaucratic. Many totally rational worker ideals (keep comfy job) are often very opposed to a company's ideals (upgrade technology, take new risks, automate) that may disrupt current workers in favor of fewer workers or different workers. Boards beholden to current workers may sacrifice a lot of progress to keep things comfy, at the expense of future workers and jobs. I get why, as this article describes, it happens in Germany and is suggested for the US. But on the face of it that mandating board composition is probably not the best way to help workers in companies. There is probably some better way that throws less sand into gears, that involves fewer attempts to mortgage the future of a company for its present workers, etc. Obviously it "works" in germany, for some amount of "works," but it should need no explanation that US companies as a whole are able to move faster, and in high tech, often with higher wages(!!) than in Germany. Sorry that my perspective is dragging this in a tech centric, but everyone should ask themselves: Why are tech workers wages so low in Germany compared to the USA, if they have workers on the board? It seems unaddressed in this discussion so far, which I think is a great discussion to have. But lots of people so far are acting like its obvious that the German model will lead to higher worker salaries but its... not true already in Germany, for tech at least.
- thrill 8y ago
  IME, Peter is spot on. The most ineffective board I ever sat on was a charter school board. There was so much representation present that nothing could get decided in the time allotted. This was, in retrospect, perfectly optimized by the administration of the time - they did whatever they wanted, and unless it really upset a large number of people, nothing changed.
prolikewh0a 8y ago
Corporate boards in USA don't include workers because workers would pull money away from the shareholders and executives in the form of pay raises and better benefits for lower level employees.
- e40 8y ago
  Unless they had a majority, that is not true. Having 1 or 2 workers on the board would be a good thing, I believe. Too many boards are out of touch with what goes on in the company.
  - ProAm 8y ago
    > Too many boards are out of touch with what goes on in the company. Do you have examples of this?
    - yardie 8y ago
      TSLA
      - ProAm 8y ago
        How are they not in touch with what is going on in the company? The chairman seems extremely aware and involved with it. Im not being sarcastic, I'm really interesting in how/which companies people think the board is out of touch and how they are out of touch.
      - Joky 8y ago
        You had to pick THE company whose CEO is actually spending a large part of his time in the factory?
      - mysterypie 8y ago
        I had to google TSLA to realize it was Tesla. What's up with using stock symbols? You saved one letter by not writing Tesla.
    - 8y ago
_rpd 8y ago
tl;dr: the author's answer to the question in the headline is that US unions have become too weak to negotiate adding union representatives to corporate boards.
- pm90 8y ago
  I wonder how much of the "unions are horrible" view that most of us have today was just a effective marketing campaign, much like the "welfare queen" stereotype. Weakening unions seems to have caused much more damage than whatever evils they were accused of (profligate compensation for unproductive workers)
  - asmithmd1 8y ago
    Most of it is marketing. Notice how hard companies fight whenever there is an attempt at unionizing a workplace. My wife is a member of a nurses union and it is nice to have a contract with your employer (something all top executives have) instead of work conditions being at the whim of a manager. A downside of most contracts is there is little room for performance bonuses - almost all contracts are based on time in the union and not performance. The effect is an A player and a D player all get the same wages and benefits. There is no reason a union contract has to be structured this way, but for some reason they almost always are based on time and not performance.
    - asmithmd1 8y ago
      So what does every nurses get in terms of pay and benefits after they are all averaged together? A pretty good deal! After 20 years almost $100/hour of work, 1.5X that after 40 hours per week. 6 weeks vacation, paid sick time and paid major holidays. The contract is renegotiated every 2-3 years to keep the rates increasing with inflation
      - rileymat2 8y ago
        Are you sure about your numbers outside of a few select localities with high cost of living? https://www.payscale.com/research/US/Job=Registered_Nurse_(RN)/Hourly_Rate/e57a1cea/Late-Career https://www.payscale.com/research/US/Job=Registered_Nurse_(R...
onetimeusename 8y ago
I could be mistaken but I believe there are rules in place for public and private companies, as well as non profits, regarding director independence and employees are not considered "independent directors". This came, I believe, as a result of the Enron scandal. Surely this has some role in why employees are not on boards. Here is a link to a Nasdaq policy on the matter[1]. [1] https://www.sec.gov/rules/sro/34-47516.htm https://www.sec.gov/rules/sro/34-47516.htm
stretchwithme 8y ago
How would a board seat even represent all of the employees? Would the arrangement be any less corrupt than the way unions represent workers? Would organized crime get involved? Employees have power over the company. They can leave it for another company. At any time, actually. Companies have to compete for employees. Of course, employees CAN own stock and accumulate enough to get a seat, assuming they can agree. And that, of course, is the problem. Employees won't agree on everything so the majority of employees will get represented and the rest of the employees will not be represented. Winner-take-all decision making opens the door for corruption. It plagues our democracy. Why shouldn't it also plague corporate decision making? If you had an arrangement where employees voted on board issues and the YES employee votes were proportionally assigned to the YES side of the board vote and the NO employee votes were proportionally assigned to the NO side of the board vote, that would make a little more sense. But that would mean the workers would have to be privy to the board's discussions, which means the world will know what they discuss. So, without that proportionality, the employee representative can actually make backroom deals with the other board members. Deals that might benefit him but cost those he represents a lot.
- AmericanChopper 8y ago
  >Winner-take-all decision opens the door for corruption. In any representative decision making body, any individual decision is going to be a `winner-takes-all` decision for whoever likes the outcome. However representative bodies tend to need to make compromises over time, to make sure all of their constituents receive some of what they want.
  - stretchwithme 8y ago
    Sorry, that should have read "Winner-take-all decision making opens the door for corruption." I'll correct this. It's the representative that is winner-take-all. And that gives him or her all of the power of those he allegedly represents. And that means he can be an influence peddler. This is the primary flaw in the US democracy, at least in its current form. In the original arrangement, the Senate was not affected by this and it was harder to game the entire system.
jnordwick 8y ago
Just ditch the Unions and most of the Wagner Act. VW tried to create a workers board in TN similar to the German model, but the UAW got in the way. https://www.nationalreview.com/2015/12/adversarial-labor-laws-volkswagen-tennesee/ https://www.nationalreview.com/2015/12/adversarial-labor-law... I saw a quote from a German labor leader (I think) saying American unions are overly adversarial against firms and don't care about keeping them running. I think a lot of firms would gladly include worker representation in various form an there isn't a need to create laws to require it.
- ppseafield 8y ago
  Isn't the history of labor abuse, company towns/script, corporate thugs at the ballot boxes, etc., a counterexample? Does Germany have a similar history? IIRC most German engineering firms are privately owned, many of them family businesses. Negotiations would definitely be easier than with typical large, publicly traded US companies. Edit: I should add that I'm not necessarily defending hostile unions, or unions that do more harm than good. On just pointing out that the labor/corporation relationship in the US has been less than friendly.
  - zaarn 8y ago
    Germany does have a history of abusing labor, notably from the 1800s, back then if you worked in a factory you likely didn't make enough to live, so your wife worked there too as well as your kids once they're old enough to cry. A lot of social reforms followed eventually, in part due to pressure from worker parties, and we got most of the labor law up to 1919 when the weekly hours worked was limited at 48 hours. Up until 1945 the laws around labor were updated continuously and around 45 they were cleaned up and unified. This included a lot of other stuff like overtime payments, break times, required time between work shifts, etc. Unions also started appearing in that timeframe, first ones in ~1850, and that interacted with the labor law. Around 1870, Labor Unions were integrated into the corporations, which at that point basically consisted of the rich factory owner and the starving workers (cliched, but that was the situation here). The unions immediately went about fixing that and were subsequently banned out of fear (by pressure through the rich factory owners) and then later unbanned again. (Then in the two following wars abused and centralized) The modern history is less interesting, there is some abuse through the unions but in general they had collective bargains which enabled workers to get a labor contract between their union and the corporation which basically sets the hours worked, compensation levels, days off per year and various other parameters. Having such a contract basically rids you of most of the protections afforded by the state since you're now in the union and the union is strong enough to negotiate fair labor conditions for you (if it isn't this doesn't apply). If you're not part of the union then this also doesn't apply, this is only if you're part of the union (though usually the collective labor contract is favorable and people use those even if not in the union). Generally unions don't have a purely negative image (unless they manage to piss off a lot of people like when you effectively halt public transport). Most of them work along with the corporation to protect workers, ie if the corporation is short on profit they'll suggest that instead of firing a lot of people they could reduce hours worked instead.
jstewartmobile 8y ago
Having rank-and-file employees on the board seems a little iffy. Maybe it would work if the ownership had some interest in employee perspectives and well-being--like in the Filene case. Filene strikes me as an outlier though. Without that interest, you're just putting high schoolers up against an NFL team--no match for the wealth, power, and credentials of shareholders and their representatives.
s73v3r_ 8y ago
I would hesitate to say that the US system arose out of completely "voluntary" agreements. In the US, most employees, even if they were to band together, have nowhere near the bargaining power to be able to negotiate a seat at the table. As the article itself showed, when companies started falling on hard times, or even when one manager became aghast that the workers were sharing in the profits, the employee councils were out.
Kinnard 8y ago
No mention of startup employee compensation and board structures? Seems like a conspicuous elision.
JumpCrisscross 8y ago
Tech companies' employees usually receive equity. Perhaps we could provide an incentive for giving stockholding employees, collectively, with a Board seat. This Board member would represent stockholding employees' interest, not all employees, and so find natural alignment with the broader shareholder base. It's probably not the final solution, but it's a moderate and prima facie sensible step. Carrots which to mind include: * Lower reporting requirements from the SEC; * Tax benefits from state tax authorities or the IRS; * Limited liability shielding in employee lawsuits; et cetera.
- dannyw 8y ago
  Employees receive stock options, which are not yet equity. Employees generally also have to sign away their rights to vote.
  - JumpCrisscross 8y ago
    > Employees receive stock options, which are not yet equity These vest and are exercised. Biasing representation, at least initially, to those who have been at the company longer and bought their stock seems prudent. > Employees generally also have to sign away their rights to vote Above is a proposal to amend that.
mbostleman 8y ago
There are something like 25,000 companies in the US with revenues over $100 million. How is it that 25,000 actors - who at that level of revenue are likely pretty sharp business people that are highly motivated by the bottom line - are not coming up with this idea on their own?
- perfmode 8y ago
  are you invoking the efficient market hypothesis?
  - mbostleman 8y ago
    Actually I think it's more akin to Natural Selection.
    - perfmode 8y ago
      has the notion of natural section which you’re invoking been articulated in a way that can be shown to be applicable and falsifiable with respect to your claim?
useful 8y ago
I'm pretty sure I can get a job if my company dies. Workers don't have a good incentive to offset the human need to want more more in worker wages which may be counterproductive to the long term viability of a company to compete.
hirundo 8y ago
Why doesn't the mechanic who fixes my Volvo have a vote in my choice on whether to replace the clutch or where to drive it this weekend? Because it's my Volvo, and my money I'm spending on it not his. He can choose to work for me or not, but can't reach in my wallet or choose a destination. Certainly he is a stakeholder in such decisions. But that doesn't make it his choice. If a law is passed that gives my mechanic a vote on such things it would partially transfer the car's ownership from me to him, a redistribution of wealth. Whether you consider that to be justice or theft or both or neither, it isn't a great incentive for me to own a car or hire someone to fix it.
- citation_please 8y ago
  HN loves it's metaphors and analogies. This one falls apart quite quickly because the transaction between you and your car mechanic is orders of magnitude more elastic/liquid than that of a employee and an employer. This is why the laws that govern those transactions are wildly different. Once your car mechanic's single source of income is your transaction, which feeds their children and puts a roof over their family's head (as is the case for many employees), then maybe we can revisit this analogy. Finally, because your analogy was so weak, I would also recommend to reexamine your opinion on employee rights at large, because they may be formed around similarly broken logic. Remember, the more your neighbors are protected from poverty and destitution, the less likely they are to be caught in a lifestyle of drugs and violence, which also benefits you and your family.
deleted 8y ago
[deleted]
sunstone 8y ago
Because according to American accounting standards workers are an expense and not an asset.
- hirundo 8y ago
  definition of asset: 1. A useful or valuable quality, person, or thing; an advantage or resource: proved herself an asset to the company. 2. A valuable item that is owned. The accounting term is closer to the second definition. I assume that you don't think a company should consider a worker to be "a valuable item that is owned."
  - adiusmus 8y ago
    Given how I’ve been treated by various corporations, I’d say that plenty of companies consider workers as “a valuable item that is owned”. I had a clause in one contract they tried to insert that stated I was not allowed to work in any company that was a client of theirs or start a business of my own that might compete against them. My lawyer laughed out loud at that clause.
iamleppert 8y ago
A good movie about why this is a bad idea is “Other People’s Money” (Danny Devito). Employees will always optimize for themselves, eventually leading to the destruction of the company. In power law systems, the enemy of efficiency is local optimization. The very thing that allows the behemoth corporations of today to exist and scale to work is the fact that there are compounding factors working - which is the work of the board. These factors would be less likely in a more locally optimized system, which would naturally result in the case of employee run corporations where the employees are treated fairly. I think it says a lot that many of the most large corporations are the result of this kind of organization structure. It’s clear that this isn’t the best structure for human beings but is probably very much needed by very high level business like the tech industry. Do you really think employee run business would have led to enough free capital and accumulation of wealth to invest billions of dollars in a pair of AR goggles?
- rileymat2 8y ago
  Minor Quibble: Many times the CEO is both an employee and has a voting seat on the board.
nameisu 8y ago
america was built by businesses for businesses
all_blue_chucks 8y ago
Why would this even be a question? Boards are nothing more than a way to represent owners. You can't have shareholders vote on every single decision.
throw2016 8y ago
The simple answer is to privilege capital over all else. And in the US it denotes the triumph of capital and dilution of the value of labour. It's as if labour is an afterthought and not an integral part of value creation. This bitter struggle has been ongoing for the last 300 years and has seen the rise of communism, socialism and other struggles. And its going to continue. The solutions are simple but entrenched interests with capital will obviously protect their interests.

197 points by petethomas 8y ago

ifur 8y ago

Because the secret lingo needs protecting. And the bottom line has nothing to do with economic output. Justification being that downturns are the fault of reckless consumers while self-declared experts takes credit or the upswings after. Didn't bother reading, but assume it can be shot down along these lines. Edit: So read it, Germany workers need high academic degrees to climb in that system, so in practice not a huge difference. Also reminds me of this great pun: "Do you know what above board means?" "No." "The union and management is in agreement, the board got nothing. Do you know what it's called when the it's above board and the union isn't involved?" "No." "Corruption!" Read: Factory/workers union, not management run ones. Today maybe if finance is involved, probably like that for divisions in IBM when central board is involved.

rdl 8y ago

I wonder if this would make any sense in a tech company. I would generally think a CEO (who is on the board) is going to be more aligned with an engineer's interests than the CEO and a walmart cashier, but they still have some distinct interests. Maybe a representative of non-founders holding the "standard" employee form of stock?

frgtpsswrdlame 8y ago
Along what dimensions do you think a tech CEO is more aligned with their employees' interests than a retail CEO would be?
nerdponx 8y ago
Isn't this basically what CTOs and CIOs do? Would the non-tech equivalent would be something fanciful like a Chief Cashier Officer?
- sjg007 8y ago
  You'd probably have a "cashier" who was elected by their peers. Usually it could be a union leader but in the event of no union I'd imagine the workers would vote. It's probably not done because it is quasi-union already as the voting part has already happened so it's just one more step to vote to unionize.
- forapurpose 8y ago
  CTOs and CIOs are management and represent management. Their priorities aren't wages and working conditions, but bottom line performance and their own power and careers. They represent employee interests as much as the HR director does.
Alex3917 8y ago
> I wonder if this would make any sense in a tech company. Yes. Consider these possible board compositions: - 2/3rds founders, 1/3rd investors - 2/3rds investors, 1/3rd founders - 1/3rd founders, 1/3rd investors, 1/3 employees It doesn't really matter whether the CEO is aligned with employees per se, the real value is in having the employees be the tie-breaking vote between management and investors.
s73v3r_ 8y ago
I would not think that a tech CEO is any more aligned with an engineer's interests than any other CEO of any other company.

pasiaj 8y ago

I recently had a discussion with a board professional, a female, who has sat in boards of publicly traded companies in Germany, Finland and Sweden. Finnish law does not dictate board composition of companies in any way. In Sweden, companies of 25+ employees in most cases have 2 or more representatives in company board. Germany has a dual board system. Employee representatives have a right to seats on the supervisory board of larger companies – one-third in companies with 500 to 2,000 employees, half in companies with more than 2,000. If I understood this correctly, employees are represented by a union official. Her view was that the German system is simply a bad model that doesn't work. At the same time she credited the Swedish system for the fairly low number of strikes and union activities in Sweden, saying that board representation creates a more keen understanding of business realities throughout union representatives & employees. She advocated for Finland adopting similar policy to Sweden.

johannes1234321 8y ago
In what way doesn't it work? Germany has quite a few quite successful companies, world market leaders in their fields and a quite good social relationship. Certainly there are issues, but far from "doesn't work" in my observation.
- LanceH 8y ago
  Or, Germany has some successful companies that can afford inefficiencies.
  - johannes1234321 8y ago
    Maybe. A related question also is what a measurement for "good" is. Successful companies with unhappy society isn't nneccisarily a good society. That's why I asked for details instead of an anecdotal unspecific remark by one person.
- mcherm 8y ago
  In this case, the evidence for "doesn't work" would be a REDUCTION in the number of successful companies, not a complete absence of successful companies. And there are so many confounding variables that it is impossible to tease apart the effect of this policy on board membership from every other thing about German law and culture that might affect company success.

chrisseaton 8y ago

Can workers not get representation on boards already by buying shares and voting on board membership? Or is that not effective for some reason?

nerdponx 8y ago
No individual worker can hold enough shares to matter. Unless you're talking about a labor union buying a non-trivial stake in an employer? I've never heard such an idea before, but I'm sure at someone else has thought of it in the past I would be curious to see how that went. It also doesn't do anything at a private company.
- kalimoxto 8y ago
  The article notes that this has happened. UAW's retirement plan had bought enough shares collectively to leverage them for a board seat at GM.
- chrisseaton 8y ago
  Yes I mean the workers collectively buying shares, if they want collective representation on the board. Why do workers need to be a special case? Anyone interested in the direction of a public company can get involved this way already.
  - LyndsySimon 8y ago
    I completely agree - this is the mechanism through which it makes sense, for public companies. Privately-held companies don't typically have such a mechanism.
thrill 8y ago
In the US? Sure. If a group thinks specific representation will make "things" better for their group, then this is a method occasionally exercised. In certain circumstances, a judge can also appoint you to a board, or even to a CEO position (been there, done that) - but things are generally fairly broken if that happens.
8y ago

simonsarris 8y ago

"A board of three is ideal. Your board should never exceed five people, unless your company is publicly held. (Government regulations effectively mandate that public companies have larger boards—the average is nine members.) By far the worst you can do is to make your board extra large. When unsavvy observers see a nonprofit organization with dozens of people on its board, they think: “Look how many great people are committed to this organization! It must be extremely well run.” Actually, a huge board will exercise no effective oversight at all; it merely provides cover for whatever microdictator actually runs the organization. If you want that kind of free rein from your board, blow it up to giant size. If you want an effective board, keep it small." — Peter Thiel More board members may increase intransigence, decrease oversight (cover over who is really making the decisions and who is not), and turn US corps more bureaucratic. Many totally rational worker ideals (keep comfy job) are often very opposed to a company's ideals (upgrade technology, take new risks, automate) that may disrupt current workers in favor of fewer workers or different workers. Boards beholden to current workers may sacrifice a lot of progress to keep things comfy, at the expense of future workers and jobs. I get why, as this article describes, it happens in Germany and is suggested for the US. But on the face of it that mandating board composition is probably not the best way to help workers in companies. There is probably some better way that throws less sand into gears, that involves fewer attempts to mortgage the future of a company for its present workers, etc. Obviously it "works" in germany, for some amount of "works," but it should need no explanation that US companies as a whole are able to move faster, and in high tech, often with higher wages(!!) than in Germany. Sorry that my perspective is dragging this in a tech centric, but everyone should ask themselves: Why are tech workers wages so low in Germany compared to the USA, if they have workers on the board? It seems unaddressed in this discussion so far, which I think is a great discussion to have. But lots of people so far are acting like its obvious that the German model will lead to higher worker salaries but its... not true already in Germany, for tech at least.

thrill 8y ago
IME, Peter is spot on. The most ineffective board I ever sat on was a charter school board. There was so much representation present that nothing could get decided in the time allotted. This was, in retrospect, perfectly optimized by the administration of the time - they did whatever they wanted, and unless it really upset a large number of people, nothing changed.

prolikewh0a 8y ago

Corporate boards in USA don't include workers because workers would pull money away from the shareholders and executives in the form of pay raises and better benefits for lower level employees.

e40 8y ago
Unless they had a majority, that is not true. Having 1 or 2 workers on the board would be a good thing, I believe. Too many boards are out of touch with what goes on in the company.
- ProAm 8y ago
  > Too many boards are out of touch with what goes on in the company. Do you have examples of this?
  - yardie 8y ago
    TSLA
    - ProAm 8y ago
      How are they not in touch with what is going on in the company? The chairman seems extremely aware and involved with it. Im not being sarcastic, I'm really interesting in how/which companies people think the board is out of touch and how they are out of touch.
    - Joky 8y ago
      You had to pick THE company whose CEO is actually spending a large part of his time in the factory?
    - mysterypie 8y ago
      I had to google TSLA to realize it was Tesla. What's up with using stock symbols? You saved one letter by not writing Tesla.
  - 8y ago

_rpd 8y ago

tl;dr: the author's answer to the question in the headline is that US unions have become too weak to negotiate adding union representatives to corporate boards.

pm90 8y ago
I wonder how much of the "unions are horrible" view that most of us have today was just a effective marketing campaign, much like the "welfare queen" stereotype. Weakening unions seems to have caused much more damage than whatever evils they were accused of (profligate compensation for unproductive workers)
- asmithmd1 8y ago
  Most of it is marketing. Notice how hard companies fight whenever there is an attempt at unionizing a workplace. My wife is a member of a nurses union and it is nice to have a contract with your employer (something all top executives have) instead of work conditions being at the whim of a manager. A downside of most contracts is there is little room for performance bonuses - almost all contracts are based on time in the union and not performance. The effect is an A player and a D player all get the same wages and benefits. There is no reason a union contract has to be structured this way, but for some reason they almost always are based on time and not performance.
  - asmithmd1 8y ago
    So what does every nurses get in terms of pay and benefits after they are all averaged together? A pretty good deal! After 20 years almost $100/hour of work, 1.5X that after 40 hours per week. 6 weeks vacation, paid sick time and paid major holidays. The contract is renegotiated every 2-3 years to keep the rates increasing with inflation
    - rileymat2 8y ago
      Are you sure about your numbers outside of a few select localities with high cost of living? https://www.payscale.com/research/US/Job=Registered_Nurse_(RN)/Hourly_Rate/e57a1cea/Late-Career https://www.payscale.com/research/US/Job=Registered_Nurse_(R...

onetimeusename 8y ago

I could be mistaken but I believe there are rules in place for public and private companies, as well as non profits, regarding director independence and employees are not considered "independent directors". This came, I believe, as a result of the Enron scandal. Surely this has some role in why employees are not on boards. Here is a link to a Nasdaq policy on the matter[1]. [1] https://www.sec.gov/rules/sro/34-47516.htm https://www.sec.gov/rules/sro/34-47516.htm

stretchwithme 8y ago

How would a board seat even represent all of the employees? Would the arrangement be any less corrupt than the way unions represent workers? Would organized crime get involved? Employees have power over the company. They can leave it for another company. At any time, actually. Companies have to compete for employees. Of course, employees CAN own stock and accumulate enough to get a seat, assuming they can agree. And that, of course, is the problem. Employees won't agree on everything so the majority of employees will get represented and the rest of the employees will not be represented. Winner-take-all decision making opens the door for corruption. It plagues our democracy. Why shouldn't it also plague corporate decision making? If you had an arrangement where employees voted on board issues and the YES employee votes were proportionally assigned to the YES side of the board vote and the NO employee votes were proportionally assigned to the NO side of the board vote, that would make a little more sense. But that would mean the workers would have to be privy to the board's discussions, which means the world will know what they discuss. So, without that proportionality, the employee representative can actually make backroom deals with the other board members. Deals that might benefit him but cost those he represents a lot.

AmericanChopper 8y ago
>Winner-take-all decision opens the door for corruption. In any representative decision making body, any individual decision is going to be a `winner-takes-all` decision for whoever likes the outcome. However representative bodies tend to need to make compromises over time, to make sure all of their constituents receive some of what they want.
- stretchwithme 8y ago
  Sorry, that should have read "Winner-take-all decision making opens the door for corruption." I'll correct this. It's the representative that is winner-take-all. And that gives him or her all of the power of those he allegedly represents. And that means he can be an influence peddler. This is the primary flaw in the US democracy, at least in its current form. In the original arrangement, the Senate was not affected by this and it was harder to game the entire system.

jnordwick 8y ago

Just ditch the Unions and most of the Wagner Act. VW tried to create a workers board in TN similar to the German model, but the UAW got in the way. https://www.nationalreview.com/2015/12/adversarial-labor-laws-volkswagen-tennesee/ https://www.nationalreview.com/2015/12/adversarial-labor-law... I saw a quote from a German labor leader (I think) saying American unions are overly adversarial against firms and don't care about keeping them running. I think a lot of firms would gladly include worker representation in various form an there isn't a need to create laws to require it.

ppseafield 8y ago
Isn't the history of labor abuse, company towns/script, corporate thugs at the ballot boxes, etc., a counterexample? Does Germany have a similar history? IIRC most German engineering firms are privately owned, many of them family businesses. Negotiations would definitely be easier than with typical large, publicly traded US companies. Edit: I should add that I'm not necessarily defending hostile unions, or unions that do more harm than good. On just pointing out that the labor/corporation relationship in the US has been less than friendly.
- zaarn 8y ago
  Germany does have a history of abusing labor, notably from the 1800s, back then if you worked in a factory you likely didn't make enough to live, so your wife worked there too as well as your kids once they're old enough to cry. A lot of social reforms followed eventually, in part due to pressure from worker parties, and we got most of the labor law up to 1919 when the weekly hours worked was limited at 48 hours. Up until 1945 the laws around labor were updated continuously and around 45 they were cleaned up and unified. This included a lot of other stuff like overtime payments, break times, required time between work shifts, etc. Unions also started appearing in that timeframe, first ones in ~1850, and that interacted with the labor law. Around 1870, Labor Unions were integrated into the corporations, which at that point basically consisted of the rich factory owner and the starving workers (cliched, but that was the situation here). The unions immediately went about fixing that and were subsequently banned out of fear (by pressure through the rich factory owners) and then later unbanned again. (Then in the two following wars abused and centralized) The modern history is less interesting, there is some abuse through the unions but in general they had collective bargains which enabled workers to get a labor contract between their union and the corporation which basically sets the hours worked, compensation levels, days off per year and various other parameters. Having such a contract basically rids you of most of the protections afforded by the state since you're now in the union and the union is strong enough to negotiate fair labor conditions for you (if it isn't this doesn't apply). If you're not part of the union then this also doesn't apply, this is only if you're part of the union (though usually the collective labor contract is favorable and people use those even if not in the union). Generally unions don't have a purely negative image (unless they manage to piss off a lot of people like when you effectively halt public transport). Most of them work along with the corporation to protect workers, ie if the corporation is short on profit they'll suggest that instead of firing a lot of people they could reduce hours worked instead.

jstewartmobile 8y ago

Having rank-and-file employees on the board seems a little iffy. Maybe it would work if the ownership had some interest in employee perspectives and well-being--like in the Filene case. Filene strikes me as an outlier though. Without that interest, you're just putting high schoolers up against an NFL team--no match for the wealth, power, and credentials of shareholders and their representatives.

s73v3r_ 8y ago

I would hesitate to say that the US system arose out of completely "voluntary" agreements. In the US, most employees, even if they were to band together, have nowhere near the bargaining power to be able to negotiate a seat at the table. As the article itself showed, when companies started falling on hard times, or even when one manager became aghast that the workers were sharing in the profits, the employee councils were out.

Kinnard 8y ago

No mention of startup employee compensation and board structures? Seems like a conspicuous elision.

JumpCrisscross 8y ago

Tech companies' employees usually receive equity. Perhaps we could provide an incentive for giving stockholding employees, collectively, with a Board seat. This Board member would represent stockholding employees' interest, not all employees, and so find natural alignment with the broader shareholder base. It's probably not the final solution, but it's a moderate and prima facie sensible step. Carrots which to mind include: * Lower reporting requirements from the SEC; * Tax benefits from state tax authorities or the IRS; * Limited liability shielding in employee lawsuits; et cetera.

dannyw 8y ago
Employees receive stock options, which are not yet equity. Employees generally also have to sign away their rights to vote.
- JumpCrisscross 8y ago
  > Employees receive stock options, which are not yet equity These vest and are exercised. Biasing representation, at least initially, to those who have been at the company longer and bought their stock seems prudent. > Employees generally also have to sign away their rights to vote Above is a proposal to amend that.

mbostleman 8y ago

There are something like 25,000 companies in the US with revenues over $100 million. How is it that 25,000 actors - who at that level of revenue are likely pretty sharp business people that are highly motivated by the bottom line - are not coming up with this idea on their own?

perfmode 8y ago
are you invoking the efficient market hypothesis?
- mbostleman 8y ago
  Actually I think it's more akin to Natural Selection.
  - perfmode 8y ago
    has the notion of natural section which you’re invoking been articulated in a way that can be shown to be applicable and falsifiable with respect to your claim?

useful 8y ago

I'm pretty sure I can get a job if my company dies. Workers don't have a good incentive to offset the human need to want more more in worker wages which may be counterproductive to the long term viability of a company to compete.

hirundo 8y ago

Why doesn't the mechanic who fixes my Volvo have a vote in my choice on whether to replace the clutch or where to drive it this weekend? Because it's my Volvo, and my money I'm spending on it not his. He can choose to work for me or not, but can't reach in my wallet or choose a destination. Certainly he is a stakeholder in such decisions. But that doesn't make it his choice. If a law is passed that gives my mechanic a vote on such things it would partially transfer the car's ownership from me to him, a redistribution of wealth. Whether you consider that to be justice or theft or both or neither, it isn't a great incentive for me to own a car or hire someone to fix it.

citation_please 8y ago
HN loves it's metaphors and analogies. This one falls apart quite quickly because the transaction between you and your car mechanic is orders of magnitude more elastic/liquid than that of a employee and an employer. This is why the laws that govern those transactions are wildly different. Once your car mechanic's single source of income is your transaction, which feeds their children and puts a roof over their family's head (as is the case for many employees), then maybe we can revisit this analogy. Finally, because your analogy was so weak, I would also recommend to reexamine your opinion on employee rights at large, because they may be formed around similarly broken logic. Remember, the more your neighbors are protected from poverty and destitution, the less likely they are to be caught in a lifestyle of drugs and violence, which also benefits you and your family.

deleted 8y ago

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sunstone 8y ago

Because according to American accounting standards workers are an expense and not an asset.

hirundo 8y ago
definition of asset: 1. A useful or valuable quality, person, or thing; an advantage or resource: proved herself an asset to the company. 2. A valuable item that is owned. The accounting term is closer to the second definition. I assume that you don't think a company should consider a worker to be "a valuable item that is owned."
- adiusmus 8y ago
  Given how I’ve been treated by various corporations, I’d say that plenty of companies consider workers as “a valuable item that is owned”. I had a clause in one contract they tried to insert that stated I was not allowed to work in any company that was a client of theirs or start a business of my own that might compete against them. My lawyer laughed out loud at that clause.

iamleppert 8y ago

A good movie about why this is a bad idea is “Other People’s Money” (Danny Devito). Employees will always optimize for themselves, eventually leading to the destruction of the company. In power law systems, the enemy of efficiency is local optimization. The very thing that allows the behemoth corporations of today to exist and scale to work is the fact that there are compounding factors working - which is the work of the board. These factors would be less likely in a more locally optimized system, which would naturally result in the case of employee run corporations where the employees are treated fairly. I think it says a lot that many of the most large corporations are the result of this kind of organization structure. It’s clear that this isn’t the best structure for human beings but is probably very much needed by very high level business like the tech industry. Do you really think employee run business would have led to enough free capital and accumulation of wealth to invest billions of dollars in a pair of AR goggles?

rileymat2 8y ago
Minor Quibble: Many times the CEO is both an employee and has a voting seat on the board.

nameisu 8y ago

america was built by businesses for businesses

all_blue_chucks 8y ago

Why would this even be a question? Boards are nothing more than a way to represent owners. You can't have shareholders vote on every single decision.

throw2016 8y ago

The simple answer is to privilege capital over all else. And in the US it denotes the triumph of capital and dilution of the value of labour. It's as if labour is an afterthought and not an integral part of value creation. This bitter struggle has been ongoing for the last 300 years and has seen the rise of communism, socialism and other struggles. And its going to continue. The solutions are simple but entrenched interests with capital will obviously protect their interests.