When democracy gets invited into a large public corporation
GM once built a new car division based on true power sharing. America needs experiments like that again.
Note: Don’t miss the next meeting of The Headstrong Club, a live conversation between Danielle Allen and Ben Rhodes, former Deputy National Security Advisor under President Barack Obama, on April 29 at 1:15PM Eastern.
In 1981, at the peak of the Japanese small-car onslaught, General Motors was forced to scrap its plans for a new American-made model – the S-car – to take on the imports. After years of publicly denying a Japanese competitive advantage, GM finally concluded that it simply could not compete on a manufacturing cost basis.
At the end of 1983, a Joint Study Committee made up of GM managers and UAW union members was announced to rethink how to build a small car. In just three weeks, the 99-member committee developed a “statement of philosophy,” not about car manufacturing but about workplace culture in the factories where the new cars would be made. This statement reflected the kind of management-labor relationship they believed was necessary to compete. Note that the focus was not on workplace democracy per se, but rather about institutional survival, job security, and company values.
The committee’s statement read, in part:
We believe that all people want to be involved in decisions that affect them, care about their jobs, take pride in themselves and in their contributions, and want to share in the success of their efforts.
By creating an atmosphere of mutual trust and respect, recognizing and utilizing individual expertise and knowledge in innovative ways, providing the technologies and education for each individual, we will enjoy a successful relationship and a sense of belonging to an integrated business system capable of achieving our common goals, which ensures security for our people and success for our business and communities.
Committee participants also explained how this philosophy would help GM meet its goal of reducing costs and improving quality. It would, they said, give small groups of workers wide latitude to participate in developing company policy, even to the point of reviewing the company’s annual plan. It would enable teams of workers to create job descriptions for group and team leaders, instead of the other way around. And it would allow hourly workers to participate in developing their own work rules.
Under that approach the committee laid out, non-management employees would be accorded job security, authority, and responsibility for their own operations, as well as equal respect and status with management. One nuts-and-bolts symbol of that: The parking lot and cafeteria would be shared equally.
Ultimately, the Joint Study Committee’s structure promised to change the long-embedded, noncooperative, transactional mode of interaction between management and union employees. A new environment of trust between management and labor, it was believed, would reduce the need for management layers and supervision – in other words, it would dramatically cut overhead. In this way, joint-decision-making — power sharing — would become a building block of competitiveness.
The tangible result of all this collaborative work was GM’s decision in January 1985 to go forward with its “clean sheet” approach to building a competitive small car in the U.S. under the Saturn nameplate, funded by a $5 billion GM investment. Prior to this investment, many of the principles and practices embedded in the new Saturn Corporation were codified in the corporate-wide 1984 labor contract between GM and the UAW.
The creation of Saturn Corp., together with the 1984 labor contract, illustrates that GM’s dire competitive fight for survival was sufficient to force the kind of reciprocity, exchange of job security for changes in work rules, and power sharing described above. And sure enough, throughout the 1980s, GM recorded significant improvements in quality and productivity, as well as reduced absenteeism, grievances and unauthorized work stoppages.
This history shows that a relational environment can be created at designated facilities at large public corporations when the economic incentives are sufficient.
But it also showed, as time went on, how difficult it was to export Saturn’s relational environment to the rest of the company, as we’ll see below.
Power sharing and democracy
The Saturn story is instructive, but it raises a deeper question: What separates democracy-supporting companies that make power sharing stick from those that abandon it? The answer lies not in competitive circumstances — those change — but in a durable commitment to a principle that must underpin any lasting relational work environment: Reciprocity.
In previous columns, I have argued that power sharing is the most practical means of creating a relational and democracy-supporting work environment for most U.S. businesses, one in which decisions affecting employees are made with them, not for them.
What makes power sharing work is a commitment by all members of the enterprise to the principle of reciprocity, which means exchanging benefits freely, without one party dominating the other. Where there is no voluntary exchange, there is no reciprocity and, thus, no power sharing — only power hoarding.
In the absence of domination, by contrast, negotiated exchanges establish each interacting party’s “reserve price” for cooperation. In profit-seeking organizations where reciprocity is adopted as an operating principle, shareholders typically hold a preeminent position with expectations of a return on their investments sufficient to compensate them for the uncontrollable and often unknowable risks they bear. This expected return is, of course, the shareholders’ reserve price – their required rate of return -- for risking capital in the enterprise.
But shareholders are not the only party with a reserve price. Other parties — employees, suppliers, customers, creditors, neighbors, and guardians of the environment — have their reserve prices, too, related in part to the risks that they bear through their participation in the life of the enterprise. Employees who feel underpaid or disrespected eventually quit or disengage, costing the company time and money in the form of oversight, discipline, and frequent turnover, hiring, and onboarding. Suppliers deprioritize difficult customers when margins get squeezed too thin. Communities that bear the environmental costs of a plant — the noise, the pollution, the truck traffic — will eventually demand regulation, land use reform, or legal action when those costs get too high.
In the absence of total domination by capital, for each of these groups of stakeholders, their continued participation in and support for the enterprise depends on a favorable exchange of benefits — or at least something above break even from them.
Because exchange relationships in business change, reciprocity is best understood as a procedural matter based on dialogue and periodic revisits of prior agreements, with room to renegotiate when one party has been shortchanged.
Where does this work in practice?
One place to look is at companies founded and led by activist-minded entrepreneurs who pursued reciprocity in creating relational work environments as an expression of their own beliefs systems. Examples include Publix Markets, W.L. Gore & Associates, and Patagonia. Each has a public record of continuing power sharing and estimable commercial success.
Significantly, the shares of these companies — all controlled by founding families — are not publicly traded, giving their leaders room to operate on their own terms. However, publicly listed companies that have attempted to create relational work environments (often by becoming employee owned) typically have been forced to do so by dire competitive and financial factors. When this pressure subsides, old habits tend to return.
Saturn’s rise and fall, and other experiments with employee forums
In 1994, Saturn was the third best-selling car model in the United States. But despite its early success, the venture ultimately failed because senior GM executives outside of the Saturn Corporation subsidiary could not see the competitive benefits of a new kind of organizational culture.
GM insisted on managing all its automotive divisions centrally, and leadership at both GM and the UAW demanded that Saturn get in line with traditional ways of doing things. GM wanted Saturn to be like the rest of its offerings, a compilation of standard GM parts with a different nameplate, not a different kind of car manufactured and sold in a different way. Corporate executives lectured Saturn that the corporate GM way was more profitable, because it used the same parts across many automobile platforms. Saturn cars soon became more generic and lost their differentiated consumer appeal.
GM and the U.S. auto industry were not alone in experimenting with non-adversarial worker–management committees on quality of work, cost savings, training and work conditions.
Before the Saturn experiment, there were thousands of joint committees established at the plant level during World War II to increase wartime production. During the economic adjustments of the 1980s, circumstances forced the textile, clothing, semiconductor, telecommunications, and health care industries to forge more cooperative labor-management relations.
There is also a long history of industry-level forums with management and employee representatives working at the national level, including in garment manufacturing, construction and textiles.
Today, that history continues. KaiserPermanente has nearly 4,000 teams of management and labor representatives that give employees a direct voice in their work. The Ford Motor Company and many others instituted teams at the plant level. Levi Strauss is well known for its diversity, equity, and inclusion teams spread throughout the company.
And in 2023 as the impact of artificial intelligence on the future of work and employment levels emerged in industries as disparate as Hollywood script writers and auto workers, one of the nation’s leading labor experts, MIT professor Thomas Kochan, called for “opening up labor law to allow and encourage a broader range of participation and representative processes” in the workplace through employee advisory boards to give workers some say in how AI and other such technological innovations are deployed.
Without such forums, nonunion workers have little meaningful way to influence policy affecting their livelihoods.
A much-needed democracy renovation
The good news, however, is that we have a long and continuing history of firms experimenting with relational engagement and other elements of democracy-supporting management practices upon which we can build.
The less good news involves the status of federal labor law. Many of the collaborative committees or forums cited above are only allowed under the National Labor Relations Act (1935) in companies that are unionized. The National Labor Relations Act prohibits nonunion employer-worker collaborations, leaving millions of workers without a voice exactly when one is most needed.
What’s clearly required is amending section 8(a)(2) of the NLRA, which prohibits the creation of nonunion worker–management committees. To prevent management from controlling or manipulating them, advocates have suggested that workers must support their creation through a free and fair election and must have the power to dissolve them by withdrawing that consent. In 2024, Senator Marco Rubio (R-FL) introduced legislation to this effect. Such legislation deserves reconsideration and support today.
Power sharing, as this history shows, depends on forums where negotiation and consensus-building can take hold. In the final column of this series, I will identify the principal types of forums in our political economy, comment briefly on issues involved in establishing a forum, offer a few rules of operation that can shape the results of a forum, and call attention to several aspects of agreement-making that are common to most power-sharing exercises.
This is the third in a series of columns by Malcolm Salter on expanding equality in the workplace and making corporations more democracy-supporting. These columns were adapted from his book, The Fading Light of Democratic Capitalism, published by Cambridge University Press in 2024.
And when all those young eager employees working for Saturn started getting OTJ injuries, aches and pains as they aged, and retirement was on the horizon, Saturn shut down the manufacturing and cut them off at the knees.