By on July 28, 2011

One of the many defining differences between this year’s contract negotiations between the Detroit automakers and the UAW is a new possible concession on the table: boardroom representation for the union. Inspired by the German system of works councils and union representation on supervisory boards, UAW President Bob King told Bloomberg that

If I had a magic wand, I’d take the German law and put it in the U.S… Workers should have representation on the board

But, in a thoughtful editorial, the Detroit News’s Daniel Howes warns that board representation may be more of a challenge to the union than a benefit. Howes notes

The UAW’s pursuit of board-room seats, to the extent it becomes a key demand in this post-implosion bargaining season, is fraught with potential complications. Among them is the cultural misperception that what is deeply embedded in Germany’s corporate reality is easily transferrable to 21st-century industrial America.

Don’t bet on it. Thanks to federal bailouts, the union’s health care trust funds have representatives on the boards of GM — Vice Chairman Stephen Girsky — and Chrysler Group LLC in former Michigan Gov. Jim Blanchard. But neither the Wall Street veteran nor the professional politician carry the kind of labor pedigree typically found on the labor side of, say, Daimler AG or Volkswagen AG.

Yes, retired UAW President Ron Gettelfinger occupied a labor seat on the defunct DaimlerChrysler AG supervisory board, a reflection of the German concept of Mitbestimmung, or co-determination, that has governed corporate Germany since the early 1950s.

And, yes, two UAW presidents — Doug Fraser and then Owen Bieber — sat on the Chrysler Corp. board following the No. 3 automaker’s near-miss with bankruptcy, its federal loan guarantees and the concessionary contracts that followed.

But the experiences, which culminated each time in the union relinquishing its board seats, offer a valuable lesson: being inside the room confers responsibility, meaning you can’t credibly denounce decisions made there that adversely impact hourly employees or product allocations.

A board seat also means you don’t always get your way. Just ask Gettelfinger, whose fellow board members green-lighted the plan to sell Chrysler to the sharpies at Cerberus Capital Management LP, accelerating a downward spiral at Chrysler culminating in bankruptcy.

Howes brings up a incisive point: ever since the bailout, the union has struggled to convince its membership that its VEBA stakes in the automakers don’t fundamentally align its interests more closely with management than workers. This challenge and the resulting worker backlash has defined the union since the bailout, with anger erupting into scenes at NUMMIOrion Township and the Detroit Auto Show. And if UAW leadership gives up concessions that might benefit workers in exchange for a seat on the board, the rank-and-file will feel (with good reason) that their representatives have taken the new kumbaya tone too far, and are selling them out to cozy up ever closer to management. With its credibility with its own workers already hurting, the union should shelve its dreams of a board seat and focus on benefiting the workers it’s supposed to represent.

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12 Comments on “The Case Against UAW Representation On Automaker Boards...”

  • avatar

    With its credibility with its own workers already hurting, the union should shelve its dreams of a board seat and focus on benefiting the workers it’s supposed to represent.

    The UAW, management and shareholders can only really prosper when the big three make good cars for which people are willing to pay full price. They all need to be on the same page – just representing workers short term interests rather than the long term viability of the company is what caused so many problems to begin with.

  • avatar
    DC Bruce

    There is the further complication (not mentioned in the DetN column) that, under the corporation law of all major U.S. states, board members have a fiduciary duty to the company. Thus, in the U.S., at least, a Board of Directors is not some sort of mini-legislature where all of the “stakeholders” get to have their say on behalf of the particular constituencies they represent. The “business judgment rule” gives wide latitude to the decisions of board members, but it’s not unlimited. A shareholder — or a group of shareholders — always has the right and ability to sue directors for breaching their fiduciary duty, and it would not be a defense for the union rep to say “I was acting in the best interests of my constituency — the UAW”; in fact, that would be an admission of liability.

    The only alternative would be for the union director to recuse him/herself from decisions involving the union — which kind defeats the purpose that his/her members believe exists for him/her to be there in the first place.

    • 0 avatar

      Excellent point I had not considered. Unless I’m missing something – lawyers speak up here- the BofD’s fiduciary duty is to the shareholders. You don’t get to “represent” particular constituencies (as Bruce points out with the mini-legislature example).

      If a decision is in obvious conflict with what is best for the SH’s, as would be the case from a labor point of view, then you have a lawsuit factory (or even worse, fleeing shareholders).

  • avatar

    Don’t all the UAW members–together–haven enough shares of the company to place their own board member?

  • avatar

    It would never work – Germans have company (not industry) based unions that generally are much less antagonistic than the UAW. However, even with the German model, they suffer from spiraling costs and are looking to produce elsewhere.

  • avatar

    they’re all basically lacking in understanding retail automotive so what difference is there? another BK is coming, or transition to Chinese ownership. GM cannot continue…period.

  • avatar

    GM should have shut down for a year and moved all factories to right-to-work states, decades ago.

  • avatar

    I would have thought VW would have learned all it needed to know about the UAW from its Westmoreland experience.

    However, board meetings would be a lot more entertaining if the UAW members ran the refreshments committee..

  • avatar

    Not always, but much of the time the kinds of things discussed at corporate board meetings tax the intellectual capabilties of the most seasoned corporate executives, deeply familiar with financial, tax and operating issues. Yes, there are plenty of buffoons sitting there too but, by and large, there are sharp people in the room. Union representatives are not the business experts I would look to for solid decision making in the board room. The only thing they are experts in is increasing costs, reducing efficiency, and killing businesses.

    • 0 avatar

      “The only thing they are experts in is increasing costs, reducing efficiency, and killing businesses.”

      I’m no union fan, but stereotyping their intellect isn’t useful. I think giving them some insight into the ‘why’ of board decisions would go a long way toward developing a team attitude.

  • avatar

    This article actually makes the case for why the UAW should have a board seat – by having a board seat, they can no longer sit on the sidelines and cry about being disenfranchised.

    If the definition of the union is to systematically oppose every board decision, then I suppose the article is correct. But if the union is supposed to work in concert with the board for the greater good of the company and its workers, then board representation makes sense.

    The UAW needs to decide what its true role will be, whether it will be a chronic complainer (no board seat), or team player (board seat).

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