Abstract
Over the last few years the ‘Volkswagen Law’ has both attained the status of an effective real-life protective shield, preventing hostile takeover of Volkswagen by Porsche, and has assumed a flagship role in political and academic discourse, symbolizing a democratic alternative to neoliberal capitalism. The prominent status the Volkswagen Law has today is somewhat surprising, given that for a long time the Law – despite its obvious virtues – remained a highly specialized issue. Detailed knowledge about how it worked could be presumed only among members of Volkswagen’s executive and supervisory boards, among legal experts, and among certain European Commissioners who still seem to consider the law as an unlawful restriction on the free movement of capital. 1 From a trade union perspective the long prevalent emphasis on the idiosyncratic character of the Volkswagen Law must in retrospect be seen as a missed opportunity. Representing the legal-institutional basis for co-determination on the Volkswagen supervisory board, the Law has indeed provided a good example of positive industrial relations for more than 50 years, with the individual paragraphs of the law obviously functioning as an effective governance and control instrument for the representatives of labour and the Bundesland of Lower Saxony on the Volkswagen supervisory board. The diachronic perspective reveals something less obvious but nevertheless very much characteristic of Volkswagen: the gradual development, on the basis of the Law, of a closely-woven co-determination structure and a culture of responsibility which remains crucial for Volkswagen as a means of overcoming crises as well as coping with all sorts of new challenges.
In a nutshell: the legal character of the Volkswagen Law
De jure and first and foremost the extended co-determination rights on the Volkswagen supervisory board are the result of interaction between Lower Saxony’s 20 percent holding in Volkswagen and the specific provisions of the Volkswagen Law, first adopted in 1960 and amended in December 2008. The following core principles are enshrined in its Articles III and IV: maximum voting rights limited to 20 percent of nominal shares, an 80 percent majority obligation for approving resolutions at the general meeting of shareholders (compared to the 75 percent stipulated in the German Corporation Act) as well as a two-thirds majority for supervisory board decisions on the construction and relocation of production sites. This means that neither Lower Saxony nor the employee representatives can be overruled in strategic decisions, i.e. unilateral corporate action is prevented and the danger of a hostile takeover significantly reduced. All these specific protection rights found in the Volkswagen Law were recently integrated into the Volkswagen corporate charter when the company approved its ‘Comprehensive Agreement for an Integrated Automotive Group with Porsche’ in 2009. The reason for this is to be independent of any adverse legal ruling resulting in the Law’s possible abolition in the coming years.
The Law’s long-term cultural effects
At least as relevant with regard to the Law’s democratic potential is its indirect impact on both national and international co-determination policy at Volkswagen. On the basis of the Volkswagen Law employee representatives at the car maker have over the years attained the status of strategic actors capable of enhancing the level of co-determination and adapting its function and structures in line with Volkswagen’s internationalization. The conflict over the establishment of a production site in the United States (Westmoreland) at the end of the 1970s became the test case for strategic supervisory board decision-taking upholding employee interests. The Westmoreland case illustrated for the first time in Volkswagen’s history that building up additional production capacity outside Germany would endanger production sites and employment within Germany, in this concrete case the Emden site in northern Germany. The institutional power position of the employee representatives on the supervisory board led to two crucial results. First, it fostered employment guarantees for the German production sites and, secondly, it gave birth to a fundamental principle characterizing the work of the Volkswagen Works Council and IG Metall until today: the need to conceive a forward-looking strategy allowing the long-term survival of the domestic site in question while at the same time unreservedly accepting the overall necessity for Volkswagen to internationalize production. The Westmoreland conflict made it clear that the extended (known as ‘qualified’) co-determination rights of the employee representatives on the Volkswagen supervisory board could – together with Lower Saxony – be used as an instrument both for fostering an employment policy preventing unilateral corporate decisions at the expense of German production sites and for allowing a well-balanced internationalization policy upholding employee interests.
The qualified co-determination rights as they exist at Volkswagen do not mean that the works council is nothing but a veto player systematically opposed to any Volkswagen internationalization strategy. In fact the opposite is true. Qualified co-determination enables Volkswagen to consolidate its internationalization strategy in two ways, internally and externally. Internally, the Volkswagen Law requires the works council to precisely justify its decisions. Just as any internationalization project can basically be prevented via the two-thirds majority stipulation, in reverse each new plant opening or closure or takeover must be thoroughly explained and justified to the employees. Bearing in mind that the latter are responsible for the re-election of the works council, any decisions taken without their approval would always carry the danger of substantially damaging the works council’s power position. From an external perspective the works council and IG Metall have the task of closely monitoring Volkswagen’s internationalization in order to prevent any undermining of trade union rights at the new plants. The aim is to prevent at all costs any neutralization of domestic trade union power, as this is indispensable for providing the Volkswagen Law with real ‘clout’.
Over the last 40 years, works council and IG Metall action at Volkswagen has been characterized by three different strategic priorities aimed at counteracting any neutralization of power and legitimation: first, the 1970s struggle for the recognition of basic trade union rights in the overseas plants; secondly, the successive building of institutionalized international interest representation in the 1980s and 1990s; and, thirdly, from the 1980s until today, international networking among trade unionists with its decisive catalyst function for the legal and institutional advancement of international trade union policy at Volkswagen. All three priorities are described below in greater detail.
Trade union rights in overseas plants
The first contacts between German trade unionists and their foreign colleagues in the 1970s were the result of violations of fundamental political, human and trade union rights in Volkswagen’s overseas plants. In Brazil during the military junta employees were not allowed to set up employee representation bodies, while in South Africa under Apartheid it was forbidden for employees to join a union. Hence, at the core of the first IG Metall and Volkswagen works council demands were the unrestricted right to join a union, recognition of trade unions as collective bargaining partners, and the right to trade union action within and outside the company. IG Metall and the works council ensured that any information about violations of trade union rights was directly reported to the Volkswagen executive board. Within the corporate human resource and industrial relations department a unique post for international industrial relations was created. Furthermore individual employee representatives on the supervisory board were given the task of building up contacts to foreign colleagues and providing information on foreign plants. All these measures were essential for the successive development of an international trade union policy at Volkswagen, making it clear that improving living and working conditions overseas were not just a pious hope but could be achieved effectively through determined political action. As a result of IG Metall intervention, both the South African automobile union NAAWU and the free Brazilian metal union at Volkswagen became officially recognized collective bargaining partners. Perhaps most important, the conflicts of the 1970s showed that grievances in foreign plants could only be effectively remedied when international trade union policy and solidarity were no longer treated as a one-off topic for certain idealistic internationalists but instead as a wide field of continuous and institutionalized action by all kinds of trade union activists.
International works council structures
From the second half of the 1980s onwards the priorities of international trade union policy at Volkswagen shifted, away from the fight for common trade union rights within the group to an effective defence against a race-to-the bottom between the different plants worldwide. The takeovers of SEAT and Skoda saw Volkswagen benefiting from production sites with comparatively high technological and organizational standards and low labour costs. The difficult task was to prevent production sites being played off against each other. The union counter-strategy was to internationalize the Volkswagen principles of ‘cooperative conflict resolution’ and ‘solidarity-based employment policy’. To achieve this, it became necessary to transform the existing loose contacts with foreign colleagues into binding forms of institutionalized cooperation and coordination. The conviction among works councils and IG Metall that this was the correct path to take was strengthened due to increasing distributional conflicts between German and foreign sites about products and production capacities. This led in 1990 to the foundation of a European Works Council at Volkswagen – the first in the European car industry and four years ahead of the European Works Council Directive. But even this turned out to be just an interim step. Volkswagen’s subsequent expansion into a worldwide production network in which international production flexibility was considerably increased through the introduction of the platform strategy and modularization led, eight years later, to the establishment of a Global Group Works Council. Beside normal crisis intervention this body gained fame through two international framework agreements: the ‘Social Charter’ ratified in 2002 and the ‘Charter on Labour Relations within the Volkswagen Group’ ratified in 2009. The latter represents the ambitious and so far unique intention of an enterprise to introduce participation rights at its foreign sites in line with the German co-determination concept. These rights are to be implemented via ‘site-specific participation agreements’ negotiated between management and employee representatives at each site. Though the road to full-scale implementation throughout the Volkswagen group is long and strewn with obstacles, the ‘Charter on Labour Relations’ has the potential to improve considerably participation rights at foreign plants and thus to sustainably preserve the high standard of qualified co-determination at Volkswagen in Germany.
International trade union networks
Prior to the institutionalization of international-level employee representation at Volkswagen was the foundation of the still-existing InterSoli initiative launched in 1982 by trade unionists at Volkswagen's Wolfsburg headquarters. InterSoli stands for an international network of trade unionists, including Volkswagen shop stewards and works council members, full-time Wolfsburg IG Metall union officials and trade unionists from several international Volkswagen plants. InterSoli’s core tasks involve supporting trade unions at foreign plants, building close relationships and mutual trust with other trade unions, explaining circumstances at foreign Volkswagen plants to colleagues in Germany as well as regular communication and information about any real or potential labour dispute within the group. The existing InterSoli working groups cover different geographical areas. The currently most important areas and working groups are the German-Ibero-American Network and the Central and Eastern European Network. InterSoli’s specificity and basic strength lies in its capacity continuously to adapt its structure and function to Volkswagen’s ever-changing internationalization strategies. Starting as a politically motivated vehicle for achieving equal humanitarian, political and trade union rights within the Volkswagen group, InterSoli has over the years kept pace with Volkswagen’s transformation into a global production network, becoming a strategic initiator for group-wide regulation. In this respect the ambitious goal is to leverage the long-standing mutual trust existing between InterSoli members to achieve minimum standards throughout the Volkswagen group. These include minimum social policy standards at enterprise level, the regulation of temporary agency work and implementing a binding frame of reference for defining minimum wages at each individual plant. Crucial for achieving these goals is the close interaction between the InterSoli network and works councils. The results of the joint work and discussions among InterSoli members ideally serve as a basis for works council members at European and global levels, providing them with the necessary bargaining power vis-à-vis management. The international Volkswagen trade union network InterSoli thus functions as the basis for labour regulation, tightly coupled with institutionalized employee representation in the European and Global Group Works Council.
Conclusion
The three different strategic priorities described above arose in the wake of the Volkswagen Law. The Law is the centre of gravity for international trade union policy at Volkswagen and of pivotal importance for balanced evolution throughout the group. The specific protection of German production sites guaranteed by the Volkswagen Law has over the years engendered a particularly virtuous mechanism: for reasons of fairness and justice IG Metall and the Group Works Council see themselves under a political obligation to pursue a forward-looking employee representation policy protecting the interests of all employees throughout the Volkswagen group. The Volkswagen Law, contrary to recurring EU-level criticism, does not constitute a supplementary privilege for German production sites but instead ensures international solidarity within such a highly complex organization as the Volkswagen group. The necessary precondition for this is that all actors in the co-determination process fulfil their tasks with a high degree of responsibility and for the sustainable good of all Volkswagen employees throughout the world. In doing so, extended and qualified co-determination rights are definitely not a particularistic and national privilege but instead play a decisive role in keeping a multinational company of the size of Volkswagen manageable and controllable in both a functional and social manner. It is therefore necessary to be extremely vigilant from a political perspective, ensuring the continuity of the Volkswagen Law as the basis and guarantor of qualified co-determination rights and effective international trade union policy.
Footnotes
Funding
This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.