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to shareholders, though it may have contributed something to inflation. They also bring out-and this is the point of special importance that this success is due chiefly to conditions which cannot simply be written off as special case but can very well be reproduced in other industries and countries. For co-determination to succeed it must first, it seems, be introduced by manageable instalments, a few firms at a time. Secondly, it must be introduced not in isolation but against the background of a mature tradition of industrial relations and as part of a well-developed network of employee representation in and out of the firm, including in particular strong unions and effective plant bargaining and consultation. Thirdly, the powers of the various groups and organs involved in co-determination must be balanced in such a way that none can dominate the rest or expect to achieve its own ends without cooperating with them. There must be a balance between employees' own representatives, for example between the influence of the union, the works council, and employee directors, or between those employee directors who are nominated by the union and those directly elected by employees, as well as between the employee and the shareholder sides. Fourthly, it is useful if not essential to have a clear-cut division between executive and supervisory functions at board level, such as is ensured by the distinction between a Supervisory and an Executive Board. These are stringent conditions, but ones which other industries and countries can perfectly well hope to attain.

It is precisely the success of the more advanced form of codetermination, and the fact that the conditions under which it has been achieved are not special to coal or steel nor to some temporary, unrepeatable, set of historical circumstances, which have created a problem for German company lawyers. Here is a system which works, has lasted many years, has powerful political as well as trade union backing, could well be extended, and is unlikely to be withdrawn. It has come to be taken for granted.

This has forced to the surface a basic contradiction in German lawyers' thinking. The law says that a company is to serve a wide range of interests, that executive directors are to manage "on their own responsibility", and that employee directors on Supervisory Boards are to enjoy the same rights and influence as directors representing shareholders or public owners. But legal thinking has been geared to the idea inherited from much further in the past that,

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whatever the law may say, in reality the driving force behind a company is and must be the investors (public or private) who provide its capital, that executive and supervisory directors should look principally to investors' interests, and that profit, payable to investors, is nearer to being the sole than the key criterion. Now, of a sudden, it appears that major industries can do very well for themselves and even for their shareholders, in good times and bad-the coal and steel markets have been difficult, and there have been serious problems of pricing and redundancy-under a system in which employees and their unions share power in full equality with private or public shareholders.

Further, the co-determination movement cuts across what have hitherto been separate legal categories of company. In the coal industry, for example, it extends to State and private firms—both may have the ordinary constitution of a company-and to public companies, private companies (GmbH), and the special legal class of mining companies. Over and above considerations arising from co-determination, there is a demand in Germany as in Britain the Jenkins Committee registered and acted on it-that legal requirements affecting the public, for example those on the publication of accounts and reports, shall be similar for all sizeable enterprises whatever their legal form. The need for common rules on co-determination has added to the demand to consolidate the law relating to sizeable enterprises of all types.

From all this, after a confused beginning in the early fifties, has arisen a debate over the idea of Unternehmensrecht, a single code of enterprise law applicable, if not to all enterprises, at any rate to all above a certain size. A firm, as the central thesis of "enterprise law” puts it, is a plural society, the meeting-place of many interests. It is the business of firms' constitution-makers and of the professional executives who act as entrepreneurs to weave the demands these make on it into a coherent whole, so that each firm may act with one will though not by the will of a single interest. The basis on which a firm is constituted is primarily a free and equal contract between capitalists (public or private), employees, and professional entrepreneurs. The owners of capital and labour, as independent contractors, agree to pool their resources for an enterprise likely to be profitable to them both. To this end they contract with entrepreneurs, experts who may be identified with the members of the Executive Board and whose professional responsibility and indepen

dence of the other parties the exponents of "enterprise law" tend to emphasise, and agree to put themselves under their leadership.

For the duration of the contract the resources put into the pool by both capitalists and labour are subordinate to the entrepreneurs. Special bodies of law are needed to protect both capitalists and workers against exploitation by the entrepreneurs during the time of subordination, and also to regulate the internal relations between shareholders and between the various classes of employee. But fundamentally a firm results from a single contract, under a single body of law in which all parties have their place. The entrepreneurs, under this contract, are answerable to one or both of the original contracting parties for the use made of the resources which these parties put at their disposal. Under traditional company law they answered to shareholders, whether public or private. Today, especially in the light of the experience of co-determination in coal and steel, the supporters of "enterprise law" argue that they should answer equally to employees.

In some firms, especially "mammoth" firms, defined by one group of writers as those with two or more of the characteristics of 20,000 employees, DM 1 billion annual turnover, or DM billion of assets1 it is argued that entrepreneurs should answer also to representatives of the public in a sense wider than that of the State as shareholder, though there is some dispute as to how representatives of the public in this wider sense should be elected. All firms under "enterprise law" should in any case be bound by a single code of obligations to the public in such matters as the publication of accounts and statistics (including statistics of turnover), of company reports and of data on controlling interests.

A constitution on these lines, drawing on the traditionally wide definition of objectives in German company law, on the experience of co-determination, and on the traditional division between the Supervisory and Executive Board, should, it is proposed by a number of legal writers and by the DGB, apply to all firms, public or private, which meet two or more of the criteria of 2,000 employees, DM 100,000,000 turnover, or DM 50,000,000 of assets, perhaps with the additional provision just mentioned for public representation in "mammoth firms".

It would be wrong to suggest that the movement for "enterprise

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law" in Germany is anywhere near final success. Opinions are still strongly divided. The debate goes on, sometimes heated, picking up one after another the many points of technique and principle which need to be settled before legislation can be drafted. It is unlikely to end soon. Major revisions of company law in Germany are preceded by debates which may easily extend over fifteen or twenty years. The contents of the Companies Bill at present before the German Parliament, a bill of the Jenkins type, making some important advances, particularly over controlling and subsidiary firms, but principally tidying up the details of existing law, have been debated since the end of the second World War. The most enthusiastic proponents of "enterprise law" do not expect a fully fledged code of it to emerge until well on in the seventies. But meantime the debate itself is giving rise to a body of thought whose development anyone concerned with a more fundamental reform of companies than Jenkins envisaged will do well to follow.

The debate in Germany has also another lesson to teach. It is traditional to think of directors, managers, investors, and generally of the "employers' side", as the driving force in industrial progress. Employees find themselves propelled by entrepreneurs and technologists along paths which may seem to them not only unfamiliar but alarming. It is not surprising that they often hold back, resist, and prove hard to convince, nor that they often react to change in ways better understood as cries of alarm than as rational calculation.

But in the area of "enterprise law" the boot is often on the other foot. The driving force in the movement for "enterprise law" in Germany has come not only from some academic lawyers but also, and so far as political and industrial effectiveness is concerned primarily, from the trade unions. It is directors, managers, investors, company lawyers, and financial journalists who are being shaken out of their traditional ways and propelled along paths unfamiliar and alarming to them. Often their reaction is precisely that which among employees takes shape in restrictive practices. In following the history of "enterprise law" in Germany through the years, one feels again and again a sense of irritation at the rationalisations in which representatives of these groups wrap what appear to be irresponsible, unrealistic and purely destructive criticism. Have these people, one asks oneself, any contact with reality at all? They have. But it is a contact of the same kind as that of the shop steward who utters some wild and apparently irresponsible accusation at a meeting on

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a threat of redundancy. It is a cry of alarm, not a statement of fact, and must be judged and given treatment as such.

The German approach to company law reform recognises more effectively than the British that this is a highly sensitive area for the parties most immediately concerned in it, even when the reforms in view are of the essentially technical kind at present before the German Parliament or proposed in this country by Jenkins; still more, of course, when they are of the fundamental kind involved in "enterprise law". A debate extending over years is deliberately provoked. The Government, years in advance of actual legislation, circulates one or more drafts of a Bill not as a finished expression of Government policy (though the Government does not conceal its own views) but to promote discussion. Experts and interested organisations publish their own memoranda and drafts or amendments to drafts. In public and in professional circles a vigorous exchange of views goes on. A procedure of this sort is inevitably slow. It is less sharply focused than procedure (as in the case of Jenkins) by Committee or Royal Commission. But it has the great merit that when at last decisions are taken there has been a real and full debate in which all have had the chance to participate, and not merely the impinging of a multitude of memoranda on a tribunal which cannot itself be cross-examined. All have been informed, difficulties and alarms have been brought into the open and worked through, and as near as possible a unanimous view has been achieved. The difference between the British and German procedures may not be very important when it is a case of adding detailed amendments, on Jenkins lines, to a body of legislation with which all are in any case familiar as a going concern. It could be very important indeed when the amendments required are of the more fundamental kind which this broadsheet has discussed.

CONCLUSION

The process by which major social changes take place shows a characteristic sequence of phases. A new trend of social policy appears, is debated in principle, and after a fierce struggle is in

ism. Have the principle accepted. But acceptance in principle does not by any hop steward w practice. A second phase is needed in which, without re-disputing

means imply that it is fully developed or working successfully in

the principle, the crude initial attempts at applying it are recon

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