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.