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.
Back to the matter at hand... having workers in the board helps, but doesn’t secure raises.
So there were no soaring profits to distribute at the time, and wage restraint agreed by the unions was one of the factors in bringing Germany back (note: not "the" factor, as usual there were many).
I never said that a government is to blame for financial stagnation or decline.
I was referring specifically to Schröder's and Merkel's tenure as chancellors (2000-2018). I was wrong to add the 90s, although it is debatable if the above strategy was already planned by Kohl.
> Thou not clear on how they are responsible for having companies produce massive profits and keeping wages low.
You have to look at this in the EU context, otherwise it's hard to grasp. For any kind of group, which share the same currency, there must be a surplus recycling mechanism in place. Y. Varoufakis has talked extensively about the lack of surplus recycling, which was and is today a major design flaw and probably the reason the EU is going burst.
In a common currency group, where no one can devalue, the exporting countries will have positive surplus vis-a-vis non-exporting countries. To revert the flow, exporting economies must invest in infrastructure (build schools, universities, public swimming pools, stadiums, roads, airports, setting up social services, public internet infrastructure, welfare which translates in jobs, etc.). The action of building infra will create scarcity in the labour market: companies will struggle to keep underpaid workforce. The secondary effect is that products, will be become more expensive. At that point the positive surplus will become balanced or negative... Then the same process should be repeated.
Of course there are a lot of important details, but hopefully you get the gist.
The moral hazards inherent in a "handful of powerful leaders who represent the interests of $GROUP" doesn't change much when $GROUP is "workers" instead of "shareholders". Executives and union organizers are often two sides of the same coin in that respect.
But you have to compare it to the alternative. The question is whether the incremental amount the union gets from management over what the employee would have gotten for themselves is more than the overhead/corruption cost of the union.
For shareholders of public companies there is little choice. If you own $1000 each worth of a hundred different companies, you're not going to have the time or incentive to manage them all properly yourself (and neither is any other individual shareholder), so the benefit of hiring a board to do it is worth the cost.
The math is a lot different when you only have one employer and you're getting ~100% of your income from them. In that case people have a strong incentive to do their own research and try to get the best possible employment for themselves. It's the same reason most companies with a single owner are owner-operated.
About the only thing a union is going to get you is leveraging its monopoly power, which only works against monopolistic employers that have enough margins to pay you more without themselves becoming uncompetitive and also individually represent too much of the industry to just let everyone walk out and hire all different low level employees.
This is why, for example, unions worked well for workers in the dominant era of the Big Three American auto companies, and much less well now that they have aggressive competition from Japan, Germany and Korea.
But their cars are a lot better now. A lot more people died back then. Other people wrote scathing books and passed new laws. Uncompetitive markets are terrible.
Unions claim to represent labor, but due to a confluence of laws, there's no guarantee that they actually do, as pointed out above. Even within a union, politics exists, and those who are influential and important are able to extract resources away from those who are viewed as dispensible.
You last sentence is true for any human organization. Politics exist and those with power sometimes take from those who don’t.
That includes unions.
Actually they don't. They either represent a political organization or some other interest group. The workers only take a passive role in the whole process.
Saying "a political organization" is misleading because it evokes an image of a super-PAC or something else overtly political, and saying "some other interest group" glosses over the reality that, yes, you could call unions interest groups that represent their workers for collective bargaining, but again, that's misleading.
The fair way to phrase this is "Labor organizers represent a union that's trying to unionize a new workplace," but that obviously sounds less sketchy.
And the workers take a verrrrry active role in the process, especially any that become involved in the organizing themselves, up to and including being fired (illegally, because firing someone for labor-related activities is not allowed).
* Not a union member, but I hate seeing anti-union and anti-labor tropes trotted out, especially on a group that usually prides itself on accuracy.
I think it's more because the national guard is only necessary to suppress large-scale riots, and there aren't enough executives all in the same place to make even a small-scale riot. Executives who are charged with crimes can be individually arrested.
But all of that is beside the point, because I'm comparing union leaders and organizers with executives.
> The only change in this in the US was the brief history after WW2 where FDR and Truman wielded outsize political power and the country saw the ills of the gilded age because of the enormous impact felt by the average person during the great depression.
This completely misses the more relevant fact that the US represented 50% of the global economy at the time (due to every other industrialized nation being absolutely devastated by the war) and reinvested much of their remaining wealth into rebuilding both their allies and their former adversaries, which led to an unsustainable period of "catch-up" economic growth that faded just as soon as the Germans and Japanese started doing a better job at manufacturing than the US did.
> To answer your question directly there are most definitely executives tied to organized crime.
Citation needed.
Speaking of glossing over - let’s not pretend that the history of violence in the US labor movement was all one way...
That is the key. Executives are taking the lion's share.
https://www.cnbc.com/2018/01/22/heres-how-much-ceo-pay-has-i...
If you follow Phaedrus's telling[0], introduced as "Partnership with the mighty is never trustworthy" -- all of it:
"I take the first portion because of my title, since I am addressed as king; the second portion you will assign to me, since I’m your partner; then because I am the stronger, the third will follow me; and an accident will happen to anyone who touches the fourth."
Other versions from around the world typically have the lion taking a majority of whatever is being divided, and whenever possible, everything.
--- [0] https://en.wikipedia.org/wiki/Lion%27s_share#The_Phaedrus_ve...
Or do you propose returning Chinese workers' wages to 1978 levels in order to afford restoring American wages?
Unfortunately to American workers, it turns out that the workers who enjoyed the upside were some of the poorest in the world and not the very expensive American workers of the mid-1900s.
Fortunately to American executives, they started the race ahead of everyone else and with their multinationals corporations captured most of the upside from globalization.
True, but it's been increasingly overvalued since the middle ages with the liberalisation of compound interest. That particular activity is zero sum and will concentrate wealth in one end until real wealth generation (farming, mining and refining of the results of the former two) becomes infeasible. Right now it's Venezuela, my bet is South Africa being next. Europe in our lifetime.
I agree that if you split the CEO pay it does not affect so much the employees.
I just wanted to highlight is that the CEO does NOT want the employees in the board as they may see the CEO's salary as unfair. So, to protect his own salary, the CEO keeps employees out of the structures of power.
Then we can argue if is that lack of power the one that keeps or not workers salaries low. But workers are not represented becuase is against the CEO best interest so her own salary can grow unchecked.
If it's a low margin business, it will go bankrupt.
Note that in the past several years, shareholders have experienced massive returns due to rising corporate profits, largely because corporations have held workers' wages stagnant throughout the economic recovery/boom.
Either the board is corrupt and is wasting company money on their executive buddies and the shareholders ought to discipline the board (and perhaps putting some salt-of-the-earth workers on it may be a good way to do that, but certainly no silver bullet), or they pay what they need to keep the executives from jumping ship and go work for a competitor, and they are in fact not overpaid. I suspect there are companies that fit in either category.
What's interesting though is that Germany is an industrial powerhouse compared to the US.
There are two reasons for that.
1. The US has the stuff she develops produced abroad (IT, Computer, Phones etc.), mainly due to tax reasons (Produce in China, sell to Hongkong, sell to the US, major mark up in HK is done tax free).
2. German companies don't not pay their engineers. You can make more as a dog walker in the US or an English teacher in China than as many engineers in Germany.
The DAX is up 37% since 2015, the S&P500 is up 74%. (That's as far back as DAX goes on Yahoo finance.)
Workers representatives are picked to represent workers in negotiations and discussion, and their job is to spend the whole day figuring what's going on.
Do you have examples of this?
The problems in a company are obvious for most workers.
I agree that workers see things that management doesn't, and good managers are aware of that and work hard to overcome it. However, having seen both sides of that coin, workers also lack awareness of many issues and constraints. They think, 'why don't we just do X? It's obvious!', without realizing that X would cost the company a major investor or partner, or put the company in the crosshairs of a dangerous competitor; or that X would divert resources from a higher priority; or that the CIO, who is great in every other way, opposes X and it's not worth alienating them; etc.
The workers at best see a part of an individual tree, but the job of the board is to manage the whole forrest considering how the entire world is at that moment and where it will be in 5 or 10 years in the future.
I have friends that were laid off (in the end) and the problems in their company were obvious to them. They did not even bother trying brining it up (hint: Never do!).
Now a major consulting firm is trying to restructure the company. They have zero understanding of the business (niche) and based on his former perspective of the company many decisions are major major mistakes (e.g. they only see the profits that a business devision brings in but they don't see how many other divisions rely on that business devision to bring in their business).
He had a genius idea (trust me) how to combine two different fields that could have started a complete new business division with basically close to zero start-up cost. He never bothered brining the idea up because "this company is too conservative to even consider this".
So, a guy with a tremendous insight into the problems and possible solutions goes totally unnoticed. And this is just one example.
The market does not seem to be good at optimizing for long-term outcomes, bluntly.
At the last large corporation I worked at, they got rid of most of the inside embedded device engineers and outsourced design to India and Japan. The reasoning was probably something like we spend $X on engineering staff here, whereas we could spend $Y to outsource development of the same products, where $Y < $X. Whoever made that decision made a fat bonus and left. The time necessary to determine the real value of that decision takes a few years, after that guy was gone. Anyway, most of the outsourcing ended up being a huge waste of money and put one of our flagship products a year behind schedule. The company has since moved embedded development back inside.
It's not so much that the market favors "short term" growth. The market favors high-risk high-growth (which usually only works short term and requires an exit) over low-risk low-growth (which is usually fairly stable in the long run).
Profits today can be easily invested in another short term profit project tomorrow. Therefore, I say long term should be done by a foundation that has the explicit goal to achieve, rather than a corp whose sole purpose is to make profit.
So we've all now universally accepted the Friedman doctrine?
You're aware that the Friedman doctrine isn't held as an inherent truth everywhere and by everyone, right? Not every culture sees corporations as having the sole moral duty of maximising shareholder value with no regard for societal wellbeing.
Society's wellbeing < shareholder's value < executive's value
1. https://www.nytimes.com/2008/10/24/business/economy/24panel....
The S&P500 has done extremely well, long term.
Corporations are essentially feudal, and one of the biggest unstated goals is to maintain and signal class power differentials.
You don't do that by including social inferiors in board-level deliberations - no matter how inane, misguided, and ultimately self-destructive those deliberations turn out to be.
Here is one example of a board-level decision that a majority of workers would have said was a very bad idea, but which executives decided to complete anyway.
It's really ridiculously easy to list other examples from corporate history:
https://www.theguardian.com/lifeandstyle/2018/mar/30/homebas...
The reality is that there’s a point of decreasing returns for productivity. If the “happy workers make more money for the company” truly had a positive ROI, then the market would pay it. There’s plenty of capital willing to make long term investments that would take companies private to jack up wages.
Comical. "The Market" is far from perfect - especially in more monopolized industries. Consider the 2008 housing crash for a recent[1] example where "the market" did not behave rationally across a wide swath of professional investors. Add to that the fact that the "someone" in your example is most likely part of the noblesse oblige themselves and will default to respecting the opinion of the board (no matter how wrong) and not the workers.
> If the “happy workers make more money for the company” truly had a positive ROI, then the market would pay it.
Most often, the market behaves like a gradient descent algorithm - seeking slightly more optimal operating conditions without rocking the boat too much. This normally leads to finding local minima, not global ones. The most notable exception is "startups", where the initial conditions of the search may be radically different than a typical big-co - sometimes leading to better results.
Now consider that most medium-to-large companies have been operating for years (maybe decades) on the assumption that cutting costs - including wages - is the best way incrementally optimize profit. Reversing direction would mean going back uphill for a while as the culture, employee attitudes, and recruitment pipeline slowly change in response. How many boards do you think would put up with years of declining profits during the attempt to find the better way?
This doesn't mean that there aren't examples of companies that take this approach even for low-skilled labor[2][3]. Just that it's rare because of conventional wisdom and the corporate politics involved in making it happen.
[1] An even more recent example is Theranos - where companies that should have known better bet big on partnerships with a vaporware medical company against the explicit advice of consultants they had hired to advise them on these matters.
[2] https://www.businessinsider.com/costco-pays-retail-employees...
Shareholders don’t act rationally, but the market eventually does.
Citation needed. I hate to bring up 2008 again, but the market first acted irrationally by over-investing in garbage CDOs and then "corrected" in a way that would have tanked the economy without massive public intervention. If that's rational behavior than perhaps we should nominate the next person drunkenly weaving between two lanes for Driver of the Year.