Workplace Democracy: Can Employees Manage Themselves?

Corporate guardians create what Heilbroner calls “a veil that obscures understanding and recognitions that, were they present, would cause ‘economics’ as well as market societies to look very differently from the way they do.”61 Lifting that veil, he sees a system of free enterprise that prizes freedom only for guardians and organizes work for non-guardians in very demeaning ways. It requires workers to subordinate themselves to employers in ways that not only are counterproductive, but would actually be illegal in other areas of life–particularly those which have outgrown the medieval tie to property.

Look, for example, at a typical wage-earner’s employment “contract.” From the perspective of property rights, wage earners rent their work capacity to the company. But this capacity is only a promise. From the guardian’s perspective, work must still be “extracted” from the employee, the way gold is dug from a mountain. To the worker, the company has rented only the opportunity to receive a yet-unspecified contribution to the enterprise–one both parties assume will be consistent with the contributive standard typically applied to wages: namely, that employees will generate at least as much money as they cost. Corporate guardians, on the other hand, believe they have already purchased a certain minimum return on their wages–at least a normal profit, and hopefully much more.

Unfortunately, despite carefully crafted job descriptions and negotiated union contracts, most workers and managers don’t know precisely what tasks workers will be asked to perform over the entire employment period, which can theoretically last a lifetime. Time, therefore, becomes not just the essence of a wage contract, but almost its entirety, and the potential for inequity becomes greater the longer the employer’s return on wages exceeds normal profit while the employee continues to have no say in how that surplus is generated and distributed.

Now, classical economics assumes any transaction price–including the wage for labor–is based on a free-market exchange. In an employment contract, however, the price of labor is necessarily determined before the full terms of the exchange have been established. In this way, gainful employment is more like a marriage than a market transaction. The “obey” part is clear and begins on the first day; but the “love and honor” part–what the firm will ultimately rely on for an employee’s loyalty and productivity—depends on a lot of things that have yet to happen. Corporate guardians assume they have rented motivation as well as capacity, and motivation is more closely associated with psychology than economics. From this perspective, real-world productivity–in fact, the whole idea of an employment contract–is really a question of emotions and politics. If we truly believe that the democratic process, even the highly flawed version used in representation, is the best way to make political decisions, why do we stick with the obsolete feudal system of “rents and fealty” when it comes to work and wages?

One reason the current system of voluntary servitude has persisted so long is the ability of guardians to control productive resources, parceling them out mostly to other guardians or to favored groups on advantageous terms. Under such terms, employee compensation can be equitable only by accident, since an unknown and virtually unlimited number of alternate uses for those resources have been foregone once they have been allocated for a specific corporate purpose, such as “hiring Bob” or “adding a new store to the chain.”

This point may seem trivial or academic, but it creates many practical problems. On the job, it means that the act of work–as a way of harnessing society’s productive resources–is, to use Heilbroner’s terms, “inextricable from exploitation.” It is an alternate way of exercising political power that bypasses even a nominal democratic process.62 Such exploitation, while desirable from the guardian perspective, is expensive to enforce. When jobs are plentiful, employee turnover is high as workers seek more equitable compensation and better working conditions elsewhere. When jobs are scarce, the temptation to squeeze greater returns out of an anxious workforce can turn even considerate managers into tyrants. This doesn’t mean today’s “wage slaves” are worse off than yesterday’s real slaves, only that an economy run by guardians can never achieve all it might and flunks any broad-based test for fairness.

Thus we see in guardian-dominated private enterprise the same phenomenon we saw in representative government: guardians who believe their dependents are incapable of self-direction and behave in a way that makes that fallacious belief seem true.

Most proposals for workplace democracy are based ultimately on this one central premise: that all notions of economic hierarchy–from the capitalist’s contributive standard to Marx’s value-added standard–must go. Work, these theorists say, must be evaluated in terms of its overall worth to society, not just its conversion to a marketable product or service. After all, a job is far more than a paycheck or one element in a product’s price; it is a locus of control, a point of concentration for creative and productive human powers, a source of personal identity and self esteem. When these things are strong, workers (and the community around them) tend to be psychologically healthy. When they are weak, individuals and societies suffer.

For example, people who love their jobs seldom refer to them as “work.” People who consider their jobs to be part of a larger, positive definition of themselves–as human beings and members of society—let that feeling spill over into other parts of their lives, transmitting it to their peers and children, who are then more likely to approach their own vocations with a similar attitude. If that confidence and optimism is based even in part on these people’s ability to direct their own lives and collaborate with others reasonably well, then it contains all the seeds necessary for a flowering of consensual democracy.

International management guru Charles Handy said that “When the assets of an enterprise are primarily its people, it is time to rethink what it means to say that those who finance the enterprise can in any sensible way ‘own’ those assets.”63–a self-evident truth that has two big implications.

First, since an enterprise’s assets include goodwill–the loyalty of its customers, its creditworthiness, and its reputation in the community–then a corporation’s roots run deeper into society than any specific expectation of profit. Further, the valuation of goodwill, like transactions in an efficient market, is a decentralized, reciprocal activity. Guardians by themselves can’t command it. It makes no sense, then, to arbitrarily grant control over so important a shared asset–one with very real economic consequences–to a handful of guardians, excluding in the process the many material stakeholders who actually establish its value.

Second, it reminds us that economics is a social science. Economic activity is as much about psychology, sociology, and politics as it is about aggregate demand and market theory. It is a group-based way of making decisions and solving problems that involves myriad stakeholders, not just a tiny fraction of people who were lucky or clever or ruthless enough to monopolize the guardian function. For if a business’s “people assets” are not chattel, then they must be something else; and in a democracy, they are citizen-workers who not only have the right, but the responsibility, to be self-governing.

Of course, accepting workplace democracy in principle and achieving it in practice are two different things. For consensual participation to replace coercive economic guardianism at least two major areas must be reformed: property law and moral expectations.

Many populist crusaders think that if we can only “throw the rascals out”–replace a few greedy cads with enlightened souls like themselves–our troubles will be over. Unfortunately, even a benevolent despot is still a despot and replacing bad guardians with good guardians does nothing to democratize the system; in fact, it just entrenches it more deeply by removing the daily irritants that remind people how guardianism stunts their growth. It took centuries of statutory and case law, and a long tradition of rigorous academic and philosophical debate, to create the awareness we have today about property, rights, inequality, and fairness. Although many of us can imagine a better, more democratic world, most of us can’t imagine it, don’t have time to imagine it, and even if we did, see nothing but headaches trying to achieve it. What’s more, current law is on the side of guardians, not democrats.

Thus, it is unreasonable to expect a board of directors or management team to suddenly champion meaningful democratic reform in the workplace when doing so would violate their own corporate charter and any number of contrary legal obligations. Pathbreaking experiments led by bold “Spartacus” types who rebel despite these forces are admirable and necessary to show what can be done, but their genius and sacrifice will be wasted until the deep pool of anti-democratic laws, regulations, institutions, and traditions can be drained, at least a little. In short, any new, directly participative social contract must be based on laws and regulations that do not require citizens to surrender their basic democratic rights in order to survive–to earn a living as a participant in an economic venture.

Finally, the existing legal-rational system regarding the rights of property can never be made more democratic until we rethink our moral notions about who gets what. Specifically, we must uncouple the entrepreneurial and financing functions from an automatic presumption of proprietorship. Instead, we must as a matter of course extend the tangible and psychological benefits of ownership to the other factors of production as well, not just to those who contribute the first dollar or idea. There is no compelling reason (save our feudal heritage and natural inertia) to suppose that other relationships can’t pay off as well or better in motivating people to innovate and persevere; and there is much to suggest that this motivation will be even greater if we tap the enormous psychological energy released through direct consent.

The main problem with automatically linking one group of stakeholders to proprietorship while excluding all the others is that these anointed guardians can appeal to the coercive power of the state to enforce their will. Thus, when it comes to the economy, the might and majesty of the state is aligned not with democracy (nor does it mandate any determination of the common good and expression of the general will), but with guardians whose authority rests on medieval institutions of property. This may have been a good idea in the Middle Ages, but the inequities it has spawned ever since have caused innumerable ills, many of which are with us today.

Fortunately, there is a growing sense that corporate executives and government bureaucrats, as well as the boards of directors and elected officials who oversee them, are today more accountable for their acts than in previous generations, and are less entitled to the presumed prerogatives of a guardian class. Similarly, a philosophical and judicial consensus is building that “objectified” relations–that is, those relationships formalized by laws, regulations, court and political procedures, and contracts–do not exist apart from the actions, needs, and desires of the agents who created them.64 A government may say who “owns” a mountain, and how human beings may use a particular mountain, but it can never dictate the nature and character of mountains. In the past, we’ve tended to confuse the permanence of the mountain with the permanence of our laws regarding them. This obscures some important truths: namely, that life belongs to the living and that while mountains (or factories or apartment buildings) don’t need a moral system, people do. If we respect our moral rights as self-directing citizen-workers, our behavior with respect to property will become more moral, too; and those mountains may indeed lend their permanence to our institutions.

  1. 61. Heilbroner, Robert L. Behind the Veil of Economics: Essays in the Worldly Philosophy. New York: W.W. Norton & Co. 1988.
  2. 62. Ibid.
  3. 63. Fortune, Oct. 31. 1994. 162.
  4. 64. Gould, Carol C. Rethinking Democracy: Freedom and Social Cooperation in Politics, Economy, and Society. Cambridge: Cambridge University Press. 1988. 112-113.

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