An appeal for corporate democracy

An appeal for corporate democracy

By Rochman Achwan

JAKARTA (JP): In the very near future, Indonesia will enter a
new and difficult era on the road towards becoming an economic
and political democracy.

The signs are visible. The rise of resentment in public and
private corporate sectors continues unabated. Beginning with mass
demonstrations by employees of the Jakarta public water supply
firm, followed by civil servants of dissolved government
ministries and continued by employees of Bank Bali.

Resentment tends to expand, touching other modern sectors as a
consequences of macroeconomic restructuring. If in the last two
years the public arena was occupied by series of communal violent
incidents, in the months to come Indonesians will witness the
breakdown of corporate solidarity in various sectors of
corporations.

This calls for a plea of moralism, directed at state leaders,
corporate employers and employees to halt it, considering the
widespread danger of its political implications.

The breakdown means that a process of economic exclusion is
under way, expelling a majority of employees out from their
corporations. This should not only be understood as loss of jobs,
but more importantly, as a loss of social status and of identity.
A plea for moralism should not be interpreted in the same way as
state leaders' appeals to avoid dirty, corrupt business
practices.

It also has to be interpreted as the materialization of an
institutional way of mediating between conflicting interests in
any corporation. This sort of "social bridge" sows the seeds for
the rise of corporate trust, lubricating business performance.

Such a social bridge is not only important for adjustment to
economic globalization, but is also a precondition for the rise
of democratic corporate governance. Policy makers seem to
overlook its importance in the implementation of economic
restructuring. Current Russian economic restructuring can be
cited as an important case in point.

Observers lament that the Russian transition to a market
economy has arrived at a point contrary to the predictions of
economists. Many public corporations have run out of industrial
steam and are facing difficulties paying salaries.

As sociologist Vladimir Dakhin vividly illustrates in his 1999
book, huge numbers of unpaid employees are leaving corporations,
looking for opportunities in the informal sectors. They then
participate in public demonstrations, expressing unclear
political demands to the ruling powers.

The Russian transition is characterized by the rise of
"vagrantification" -- a process by which the public arena is
fully occupied by hundreds of disjointed and unclear political
demands. Most trade union leaders contribute to this process by
shifting their allegiance to ruling politicians rather than to
their members. A public arena as a medium of economic salvation
ceases to function as a medium used for the settlement of
political disputes between the state and society.

The most alarming consequence of such vagrantification is the
continuing rise of dangerous social associations in Russia, in
which groups of people organize economic activities by means of
violence. Criminal gangs, like professional hit squads and drug
traffickers, are increasing. The failure of Russian economic
restructuring should not be attributed to the operation of the
market economy itself, but it has something to do with the
absence of social bridges in an economic society. Corporate trust
as the essence of morality is missing, and therefore incapable to
shape benign social bridges.

What lessons can be learnt from the Russian case? Indonesian
corporations have the potential to slip into a Russian-like case.
Almost all the prerequisites are already in place, shaping a
necessary condition for the breakdown of corporate solidarity.
Downsizing of management, the feebleness of trade unions and an
absence of state social policy over corporations can lead to the
failure of benign mediating institutions to grow.

The absence of such institutions might lead employers to lay
off their employees. The skilled unemployed together with
unskilled unemployed will fill an ocean of Indonesian
unemployment. The public arena will be dominated by the
conflicting demands between supporters of economic freedom and
supporters of solidarity with the unemployed in the months ahead.

Today, Indonesians are beginning to witness new political
episodes of the battle between those two conflicting demands. The
recent mass demonstrations by Bank Bali's employees are one case.
On the surface, the employees demand the rejection of the
management's steering of, and later taking over of, Standard
Chartered Bank. This would be against the supporters of economic
freedom. The way in which this case is settled will determine not
only the future of skilled employees in Indonesia, but also the
future of foreign investment in Indonesia.

The time has come now to create a so-called "trilateral
agreement" between the state, employers, and employee
representatives. It should stress the importance of mutual
sacrifice, and employee reduction should be a last resort. Such
agreements were practiced and helped revive economies in a number
of continental European countries in the early years after the
end of World War II.

Employers and employees should be able to create institutions
that peacefully mediate conflicting interests within
corporations. The intention to share a social burden now seems to
emerge, as long as employers are willing to transparently inform
employees over problems and strategies for healing their
corporate ills.

A drastic reduction in working hours, rather than laying off
people, should be the goal. By doing so, employers would be
treating employees not as a commodity but as human beings.
Corporate trust as a source of morality would begin.

This strategy of creating business morality is a prime concern
in the history of German corporate industries. Today, Germany is
considered as the country with the most democratic industrial
governance, and its corporate industries are the most productive.

Rochman Achwan PhD, is a senior lecturer in Economic Sociology
at the University of Indonesia.