German business votes with its feet

May 24 2006 by Brian Amble Print This Article

A growing number of German companies are rejecting their country's controversial laws on worker representation on the board and considering registering as public companies in the UK.

According to the Financial Times, thanks to a requirement that forces all firms with more than 500 employees to reserve a third of board positions for workers representatives – and those with more than 2,000 staff to reserve half the seats on the board – a number of medium-sized companies are considering following the lead of Air Berlin and moving out of Germany altogether.

Moreover, the report points out, an astonishing 30,000 German firms have registered themselves in the UK since 2002 to escape the costs of incorporating at home.

The UK is also the favoured option for French entrepreneurs escaping their own labyrinthine web of regulatory overkill – although for how much longer, given the British government's strenuous efforts to ramp up the regulatory burden, remains to be seen.

When will Europe's politicians learn that business florishes only when they stay out of the way?

Older Comments

Of course you are right in that government forcing labor representation on the board is an inane policy. Just as inane, however, is that labor feels they need such representation. That is a clear sign that management is stuck in the old control paradigm - that business is some grand Marxian struggle between labor and capital. It should be pretty clear by now that both sides lose in that model.

The power of Toyota's business model is that it is a fundamentally different economic model than the old ROI scheme, and it creates an economic environment where capital and labor are on the same team - with dramatic results. If managers would stop looking at all of the Toyota industrial engineering tricks in the factories, and start looking at how Toyota is managed, they would begin to see why the few truly lean manufacturers out there perform so well.

If the management of those German companies does not figure that out soon, they can move their headquarters to the Amazon rain forest and it won't matter. They are doomed to fail.

Bill Waddell USA