Democratizing Work: Redistributing power in organizations for a democratic and sustainable future

Historical Power Struggles and the Disempowerment of Workers

Worker rights and involvement have not been central in management theories during the last half century. Yet workers’ lack of power in relation to capital holders has been a core social problem since the Industrial Revolution. Foundational thinkers such as Marx (1891) and Polanyi (1944) were deeply concerned with the exploitative and dehumanizing nature of capitalist employment. They viewed capitalism as an engine for increasing inequality between workers and capital owners and understood social movements as essential for achieving a fairer balance of power and better working conditions. Polanyi’s (1944) concept of the “double movement” describes this push and pull between market forces and social movements, with the market worsening the exploitation of workers and social developments arising to protect them. Indeed, this tension between the control and empowerment of workers has been ever-present over many decades.

On one side of this equation, collective organizing and developments in firm governance such as codetermination have increased worker power. During the first half of the twentieth century, the union movement won significant gains for workers, enabling them to unite within and across firms to negotiate better pay and working conditions (Kochan & Kimball, 2019). Today, different models of union organizing, social dialogue, and social partnership continue to be important mechanisms for incorporating workers into the governance of firms and economies around the world (ILO, 2017). Also during the twentieth century, codetermination arose in some countries as an important mechanism for enabling workers and their elected representatives to take part in decision-making at the firm level. Codetermination’s roots reach back into the nineteenth century, and since its implementation in Germany following World War II, it has come into practice in a number of countries, especially in Europe (McGaughey, 2015). Models of collective bargaining and worker participation in firm governance vary across sectors and national contexts, but throughout many parts of the world, these mechanisms provide a formal voice for workers in decision-making and provide structural representation aimed at counter-balancing the power of capital owners.

On the other side of the equation, since the 1970s, neoliberalism and the prioritization of shareholder value (Friedman, 1970) have eroded worker power and undermined workers’ interests and well-being. During this period, CEO and average worker pay have drastically diverged, driven in part by the unchecked decision-making power of boards controlled by shareholders (Kim, Kogut, & Yang, 2015; Mishel & Davis, 2015). Economic insecurity has risen (Western, Bloome, Sosnaud, & Tach, 2012). Firms’ pursuit of higher profits has made work increasingly precarious (Kalleberg, 2011), contributed to the rise of the “fissured workplace” and unstable employment relationships (Weil, 2014), and motivated firms to institute widespread policies such as just-in-time scheduling that create adverse consequences for workers and their families (Harknett, Schneider, & Luhr, 2020; Schneider & Harknett, 2019). These headwinds for workers have coincided with a sharp decline in union participation, especially among private sector workers in the United States (Rosenfeld, 2014), which in turn has been associated with stagnating wages and rising income inequality (Kochan & Kimball, 2019; Western & Rosenfeld, 2011). Thus the dominance of neoliberalism has eroded workers’ ability to engage in collective organizing, consolidating the concentration of power in the hands of capital holders.

As a result, by the start of the Covid-19 pandemic in 2020, workers’ lack of power was particularly salient. This disempowerment of workers is problematic for individuals, organizations, and societies. Experiencing a lack of control at work is associated with negative consequences for workers, such as mental strain, job dissatisfaction, lower self-esteem, and worse health outcomes (Fast, Gruenfeld, Sivanathan, & Galinsky, 2009; Karasek, 1979; Pfeffer, 2018). When workers suffer these consequences, organizations bear the costs of lower productivity and performance (Taris & Schreurs, 2009; Tenney, Poole, & Diener, 2016). In addition, when workers lack structural power in their firms—the right to formally participate in organizational decision-making—they are unable to protect their own rights and interests (Yen, Battilana, & Aguirre, 2022). This structural disempowerment contributes to societal-level patterns of inequality in resources and well-being that have implications beyond the boundaries of corporations.

Indeed, workers’ disempowerment profoundly contradicts the very tenets of the democratic project of our societies (Ferreras, 2017): the idea that all human beings are born “free and equal in dignity and rights” according to Article 1 of the Universal Declaration of Human Rights, and as a consequence can participate in the government of their own lives. From this perspective, Anderson (2017) frames the problem of worker disempowerment by conceptualizing employers as “private governments,” arguing that “for most workers, employment in large firms brings with it subjection to arbitrary power that extends beyond their work lives” (p. xi). Analysing this reality from a sociological angle and echoing a long research tradition in organization studies, Ferreras (2017) suggests conceptualizing firms as political entities constituted by two classes of investors: capital and labor. Shareholders invest their capital, while workers invest their lives to make organizational activities possible. Yet despite the fact that companies affect the lives of both parties, most companies recognize and promote the rights and interests of capital investors to the exclusion of workers, who are not only affected, like the capital investors, but governed, in their everyday working lives, by the rules of the firm (Ellerman, 1990). This unequal relationship between capital holders and those who work for the firm is reproduced through relational processes within and across organizations (Tomaskovic-Devey & Avent-Holt, 2019). As such, shareholders and the board members and top managers who represent them retain near-absolute control over most work organizations, while workers lack the power to shape firm decisions, even those that greatly affect them (Battilana & Casciaro, 2021a; Emerson, 1962). In the next section, we turn to the need to democratize firms to help correct this imbalance of power.

The Case for Democratizing Work

Today the taken-for-granted model for organizing work is largely top-down and management-led. Yet such a hierarchical and often undemocratic model is not the only way to organize economic and social relations (Atzeni, 2012). Here we discuss why it is critical for moral and instrumental reasons to grant workers access to and control over valued resources and decision-making in organizations (Battilana & Casciaro, 2021a; Emerson, 1962).

Workers need to be able to participate in organizational decision-making in order to ensure their ability to protect their interests. Managerial and strategic decisions in which most workers have no say shape workers’ work and non-work lives (Ferreras, 2017; Hsieh, 2005), contributing to or even creating the serious threats to well-being and financial security that many workers face (Kalleberg, 2011; Pfeffer, 2018). As Hsieh (2005) points out, virtually all decisions made in economic organizations affect workers. Managerial decisions dictate or limit which tasks workers perform and how they may act within the workplace; they determine key features of working conditions, such as safety, compensation, and opportunities for advancement; and they determine strategic-level decisions such as what and how much firms produce, and where firms are located. Of course, these decisions affect workers directly within the context of employment. They also profoundly affect workers’ lives outside of work, shaping their ability to sustain themselves, how they spend their time, and the kinds of commitments they can make to their families, friends, and communities. Given the far-reaching effects of these decisions on their lives, workers should have a right to participate in them (Brenkert, 1992; Ellerman, 1990). Firms can ensure that workers’ interests are structurally represented by formally guaranteeing workers the right to participate in decision-making processes. Democratizing work thus injects the principle of collective bargaining into the very heart of companies in order for those who invest their labor to have a collective say over the ends as well as the means of the shared endeavor that is the firm (Ferreras, 2017; Ferreras, Battilana, and Méda, 2020, 2022). In democratically organized firms, workers actually have a say in essential questions such as: What services should we provide? What products should we develop? Who should benefit from them? How can effort and rewards be fairly distributed? And, who should be chosen as CEO?

Beyond the practical need for workers to protect their interests and control their own lives, there is a strong moral case for democratizing work organizations. Though many of the arguments for worker participation and empowerment in organizational scholarship rest on economic reasoning, Collins (1997) argues that the authoritarian model that dominates firms should be rejected on ethical rather than economic grounds. Scholars have argued that firms are in essence political entities, and that democratic participation is the only way to ensure the just and legitimate exercise of authority within them (Ferreras, 2017; McMahon, 2017). This line of argument draws a parallel between firms and the state, positing that “if democracy is the only legitimate form of government in the state, it should also be the only legitimate form of governance in the firm,” and recognizing that “to the extent that their voices are not represented on the board of directors, employees in a classic capitalist firm are similar to disenfranchised citizens in an undemocratic state” (Landemore & Ferreras, 2016, p. 56). The right to participation is thus a fundamentally democratic issue of freedom (Brenkert, 1992) and one of justice and equality (Landemore & Ferreras, 2016).

It follows that workers deserve to be able to protect their own rights and interests and to have true power and control over their work and non-work lives, and this argument alone is sufficient cause to commit to the effort of democratizing work. But there is another important reason to undertake this transition; namely, that democratizing work also may play a key role in helping solve the social and environmental problems facing our societies. Businesses are increasingly expected to attend to their social and environmental performance in addition to financial performance (Freeman et al., 2020; Henderson, 2020; Kaplan, 2019), and there is emerging evidence that democratic organizing can more effectively help companies pursue these multiple objectives (Battilana, Fuerstein, & Lee, 2018).

The evidence for this insight comes from the literature on hybrid organizing, which has often focused on organizations that simultaneously value social and environmental objectives alongside financial ones (for reviews, see Battilana, Besharov, & Mitzinneck, 2017; Battilana & Lee, 2014; Besharov & Mitzinneck, 2020). For these organizations, often called dual purpose or triple bottom line organizations, pursuing social, environmental, and financial objectives is central to who they are and what they do. Combining these goals, hybrid organizations often face tensions and tradeoffs when making decisions (Battilana, Obloj, Pache, & Sengul, forthcoming; Hahn, Figge, Pinkse, & Preuss, 2010; Smith, Gonin, & Besharov, 2013; Wry & Zhao, 2018). Recent research suggests that democratic organizing and power-sharing strategies may be key features of organizations that successfully navigate these tensions (for a review see Battilana and colleagues et al., 2018). For example, in their study of a natural food cooperative, Ashforth and Reingen (2014) found that formal meetings and ritualized processes enabled deliberative decision-making and power-sharing. These features facilitated the ongoing prioritization of both financial and mission-related goals, such that a balance was maintained over time, and groups with different priorities shared power. Similarly, Battilana, Sengul, Pache, and Model (2015) found that “spaces of negotiation” enabled organizational members who were separately responsible for social and financial objectives to discuss and address the tradeoffs they faced, diffusing tensions within the organization. These qualitative findings highlight the importance of deliberation and power-sharing to facilitate conflict negotiation and to ensure that the organization continues to account for multiple objectives over time.

These findings come from a relatively small body of emerging work, but they nonetheless suggest that democratizing organizations and sharing power may be instrumental to a future in which organizations can successfully pursue social and environmental goals alongside financial ones. To help organizations make this transition, management scholars can build on existing research not only on hybrid organizing, but also on other extant forms of democratic organizing, which we turn to in the next section.

A Reality That Already Exists: Possibilities for More Democratic Organizing

Alternative, more democratic models of organizing have long existed and been studied by scholars in both management and other disciplines (Atzeni, 2012; Parker, Cheney, Fournier, & Land, 2014). These settings are a starting point for management scholars aiming to build a deeper understanding of the process of democratizing work and its implications, and they can provide a roadmap for bringing some of these ideas and practices into mainstream organizations and research. Here we highlight two key alternative forms of organizing—codetermination and cooperatives—but there are many others, such as rotating savings and credit associations (Hossein, 2016) and sharing and gift economies (Schor, 2020), that also illustrate how alternative organizational models are already operating in many parts of the economy.

Models of democratized governance that structurally empower workers are common in some parts of the world. In particular, the German codetermination model became prominent in the mid-twentieth century and has spread to countries across Europe, including Austria, Denmark, Norway, and Sweden (Gold & Waddington, 2019; McGaughey, 2015). Codetermination gives workers seats on their organization’s board of directors so they can vote on strategic decisions that affect them, such as pay ratios, CEO selection, or how to adapt to a global pandemic. Some models of codetermination also mandate employee participation in day-to-day firm governance through “shop-floor representation laws” or “works councils,” which enable workers to weigh in on establishment-level decisions regarding working conditions, hiring, and more (Jäger, Noy, & Schoefer, 2021b).

Research on codetermination has found that participation in firm governance is associated with positive outcomes for workers. For example, Gregorič and Rapp (2019) found that Scandinavian firms with board-level employee representation were less likely to reduce employment during the Great Recession, suggesting that worker participation on boards helps protect workers’ jobs during times of crisis. Other recent analyses have found moderate positive effects of codetermination on wages, job stability, and productivity (Jäger et al., 2021b), and on job quality (job security, health, subjective job quality, and wages) (Harju, Jäger, & Schoefer, 2021). Noticeably, these studies have found small to moderate positive effects of codetermination for workers, which may be explained by its redundancy with other social institutions (e.g., unions) and informal norms (e.g., informal worker voice) in the countries in which it is implemented. In addition, workers typically only have a minority position on boards, which weakens their ability to meaningfully shape decision-making. Different countries require varying proportions of worker representation, typically ranging between one third and one half of board members. Even in German firms with over 2,000 employees, in which workers control fifty percent of board seats, a chairperson appointed by shareholders most often casts the tiebreaking vote. ¹ Taken together, this evidence suggests that codetermination, in conjunction with other institutions such as unions, can increase worker power and well-being, though workers’ influence often remains limited by their ultimate subordination to shareholders.

Cooperatives are another important model of power-sharing with a long history around the world that can offer important benefits to both workers and societies (Forcadell, 2005; Rothschild & Whitt, 1986). Worker-owned cooperatives are structured to give workers a vote on their organization’s governance, and they explicitly prioritize workers’ interests, and often other social or environmental goals as well (Paranque & Willmott, 2014; Rothschild, 2009). Research has shown that, relative to traditional firms, cooperatives more often prioritize maintaining employment in times of financial stress and therefore help stabilize employment during crises (Delbono & Regianni, 2013; Garcia-Louzao, 2021). Recent research has also found that cooperative forms of organizing foster social trust (Sabatini, Modena, & Tortia, 2012), can make work less alienating (Kociatkiewicz, Kostera, & Parker, 2021), promote the values of collectivity, egalitarianism, and autonomy in a workforce, and create spaces in which diverse opinions can flourish and be productively debated (Kokkinidis, 2015).

This is not to say cooperatives are a panacea, or that they are immune from the pressures facing for-profit companies. The “degeneration” hypothesis posits that, over time, many cooperatives tend to succumb to the pressures of the neoliberal, capitalist systems in which they are embedded (Storey, Basterretxea, & Salaman, 2014). For example, cooperatives face pressure to internationalize, replace worker-members with non-member workers, and concentrate power in the hands of a managerial elite, which can erode cooperative and social values (Bacq, Battilana, & Bovais, 2022; Bretos & Errasti, 2017; Flecha & Ngai, 2014). At the same time, scholars have also studied the potential for cooperatives to “regenerate,” reinstituting cooperative values and democratic practices (Flecha & Ngai, 2014; Storey et al., 2014). Research has further documented the conversion of traditional organizations to cooperative forms, such as in the case of Mondragon’s conversion of a capitalist subsidiary into a mixed cooperative (Bretos & Errasti, 2017), or the conversion of firms in financial distress into worker-owned cooperatives in Argentina (worker-recuperated enterprises, or empresas recuperadas por sus trabajadores) (Vieta, 2014). On the whole, these studies point to the ongoing potential to form and sustain more cooperative organizations even within a capitalist environment that presents stiff headwinds for alternative organizations. The insights from this body of work can help us understand the challenges of transitioning from traditional to more democratic organizational forms and can suggest strategies for doing so.

Democratizing Work: A Call for Research

These settings, in which various forms of democratic governance and participatory decision-making are already being practiced, are rich contexts for developing research that can support the transition to more democratic and sustainable work organizations. In addition, both traditionally profit-oriented (e.g., Turco, 2016) and explicitly hybrid (e.g., Battilana et al., 2015) companies are experimenting with ways to enable worker voice, facilitate deliberation, and generally improve collective decision-making. As Adler (2022) notes in this issue, even some of the largest capitalist corporations already involve workers in shaping corporate strategy today. All these initiatives need to be improved upon and studied to help achieve a fairer distribution of power while pursuing social and environmental goals alongside financial ones.

Here we identify key areas for future research. First, we outline the need for further extensions of research on alternative forms of organizing. Second, we raise questions about the relationship and distinction between hierarchy and democracy that urgently need to be addressed. Third, we highlight the link between organizations and inequality, and we discuss the importance of attending to demographic differences and diversity to ensure that efforts to empower workers are genuinely inclusive. Last but not least, we call for research to investigate the link between questions of power and purpose in organizations. We conclude by explaining why research in each of these areas can play an important role in helping to create a democratic and sustainable future.

Conclusion

As we face the climate crisis, the scourge of inequality, and continuing threats to democracy around the world, it is clear that organizations need to change. Here we have argued that, though firms have contributed to these problems, they now must, and can, play a central role in addressing them. Societies need to move away from today’s extractive neoliberal economic model, which maximizes financial returns for capital holders at the expense of workers, communities, and the environment. Transforming the internal governance of firms by democratizing work is one key part of this transition (Ferreras, 2019).

Democratizing work, however, is not the only change we need. Organizations will face external resistance as they attempt to transition to more democratic forms of organizing, because our social and economic systems are not currently designed to support them. We therefore need to adapt our institutions and norms—including financial systems, accounting and reporting practices, labor policies, and culture—to support and promote democratic organizing (Battilana, 2021; Battilana & Casciaro, 2021b; Block & Hockett, 2022; Kochan & Kimball, 2019; Yen et al., 2022). These transitions will require great investments of time, money, and energy, but there are good reasons to believe that they have the potential to eventually create benefits for society that far outweigh these costs.

As one example, democratic education and participation in organizations can not only strengthen our firms, but can also strengthen our political democracies. Empowered workers who are accustomed to exercising decision authority in their organizations are likely to build capacity as citizens to participate in elections and other democratic processes, such that participation at work can serve as a training ground for civic participation (Budd et al., 2018; Pateman, 1970; Wu & Paluck, 2020). By contrast, disempowered workers experience an absence of capacity to make choices about the conduct of their own lives, which they expect—and enjoy—in the polis. Democratizing corporations could potentially help address the political corruption stemming from firms’ undue power, which is eroding democracies around the globe (Nyberg, 2021). These synergies between workplace and political democracy point to an important opportunity for organizational scholars and political scientists to work together as we rethink our economic, social, and political organizations and systems for a fairer and greener world.

The transformations envisioned here are, we realize, daunting, but the work we have reviewed shows that they are within reach. Models for sharing power and democratizing organizations already exist and can be adapted and extended to help build a better future. As scholars, we can contribute to this journey through empirically and theoretically rigorous scholarship. Our scholarship must speak directly to the urgent problems we face and help spur action to address them (Howard-Grenville, 2021). This journey will require of us to become less siloed, to learn from extensive scholarship in other fields, and to maintain our own sense of purpose. We have far to walk on the path to democratizing firms, but the possibilities before us are real and achievable.