Abstract: Can Democratising the Firm Strengthen Democracy? How History Can Help the Anglosphere Better Understand What Has Happened on the Other Side of the Participation Rubicon in Germany and Why It Is Important to Us Now
In 1951-52 West Germany decisively crossed the participation Rubicon by enacting its system of codetermination giving employees and unions a role in firm governance. In the ensuing decades codetermination has been mostly of fleeting and peripheral interest to Anglophone scholars and has been critiqued using narrow economic criteria. However, in The Rise and Fall of Democracy, John Keane nominates codetermination as a form of monitory democracy designed to check the arbitrary use of corporate power. This paper finds support for Keane's reconceptualization in three highly influential books: State of the Masses (Emil Lederer, 1940), Germany: Jekyll and Hyde (Sebastian Haffner, 1940), and Fear of Freedom (Erich Fromm, 1941/42). As historical artefacts they provide a fascinating insight into the thinking of exiled German dissidents about how democracy could be rebuilt in Germany following the defeat of the Nazi dictatorship. All three emphasize the importance of expanding democratic institutions to firms as a bulwark against totalitarianism. Reconceptualizing codetermination as a democratic institution has several implications. Not only will it allow scholars to use alternative theories to better explain the longevity of this institution, but it has revealed the deep normative biases that have impoverished the public policy debate in the Anglosphere about corporate governance. Understanding codetermination's historical rationale underscores the central role corporate governance plays in either weakening or strengthening democracies.