Financialisation of wages and works councils’ policy: Profit sharing in the German metalworking and electrical engineering industries

Abstract

IntroductionFinancialisation is a big challenge for German works councils. The growing importance of the markets and the reorientation of corporate governance by serving shareholder interests, introducing short-term profit targets and focusing on a profitable core business can hardly be reconciled with long-term growth strategies and high employment stability that have been identified as main features of the German coordinated market economy and that have traditionally been supported by works councils on plant level (Hall & Soskice, 2001). The financial concept of control (Fligstein, 1990) affects works councils' policy by putting pressure on employment and labour standards (Dorre, 2009; Sauer, 2013). In a financialised environment the works councils have to fight actively for the safeguarding of jobs and the preservation of labour standards in the firms. This is one of the main reasons for the spread of local alliances of work during the last decade (Rehder, 2006).Profit sharing is an important aspect of financialisation (Breisig, 2009). For some years now, press and television reports in Germany on high profit-sharing bonuses for employees covered by collective agreements have been a regular feature of the spring months. Besides large companies in the chemical industry and banking, these reports tend to focus particularly on the large German car manufacturers. According to Bispinck (2011), the bonuses paid in 2010 and 2011 are the main reasons why the reduction in the wage drift (i.e. the difference between the wages actually paid and the collectively agreed rates), which had begun as long ago as the 1990s, has now come to an end and actual pay in Germany has for the first time risen more sharply than collectively agreed rates. At the same time, profit sharing is one of the main issues of works councils' wage policy in the German system of labour relations, based on the legal right of codetermination in case the company wants to change given standards of fringe benefits and wages paid by the companies above the level of the collective bargaining agreements. In most of the industries, among them the metalworking and electrical engineering industry, profit sharing is paid on top of agreed wages in collective bargaining.Given the problems of financialisation and the central role of works councils in plant level regulation of profit sharing, this paper aims to analyse policy and practice of the works councils in implementing and regulating profit sharing in the companies. There are four questions that will be tackled: First, how do the main patterns of regulation of profit sharing in the plants look like? Second, in how far is profit sharing coupled with the broader trend of financialisation of corporate governance in the companies, and what are the rationales used to legitimise profit sharing in the plants? Third, what are the positions and strategies developed by works councils with respect to profit sharing? And fourth, what are the effects of profit sharing both on the development of wages and on the position of works councils in plant-level labour relations?The analysis is based on the results of a research project financed by the HansBockler-Foundation in the years 2012 and 2013 in the course of which we made use of three methods. First, we evaluated various sources of data on profit sharing like the Socio-economic Panel (SOEP) and the IAB Company Panel in order to get an im- pression of the spread and dynamics of profit sharing. Second, we surveyed and analysed the agreements on profit sharing in the forty largest firms of the metalworking industry as far as they exist. In this way, we could identify patterns of plant level regulation of profit sharing with respect to the definition of profits, the entitlements of employees or procedures of codetermination. In addition, third, nine case studies in large companies of the metalworking industry were undertaken. The cases have been selected in accordance with the metalworkers' union IG Metall and were to represent practices of profit sharing, mainly along the value chains of the automotive industry where profit sharing is most widespread. …