Industrial Revolution to 1980: The History of Industrial Democracy in Denmark and Norway
Haug, Ralph, International Journal of Management
This paper is a brief discussion of the early history of industrial democracy in two Scandinavian countries: Denmark and Norway. Specific attention is paid to the evolving labor laws and the impact they had in creating these truly unique nation-wide approaches to cooperative management-labor relations. It is interesting to note that these two nations and their neighbor, Sweden, developed along such similar lines, but still maintained their individual characteristics and philosophies towards the democratization of the work-place. It is also clear that industrial democracy in Scandinavia meant much more than employee representation on the board of directors. It encompassed all employees participating in the decision making process from the individual worker on the shop floor, through various cooperation committees or works councils, to the board of directors, and even outside of the organization.
In the first paper in this series, the author argued that the early Swedish experimentation with employee participation and workplace democracy provided significant lessons for the rest of the world (Haug, 2003). This paper attempts to provide an understanding of how the two other Scandinavian countries, Denmark and Norway, faced with the same pressures and issues as everyone else coming out of the industrial revolution, also evolved unique approaches to labor relations. On purpose this history lesson is incomplete. The reader is taken from the Industrial Revolution to 1980. Since, it was in the economic downswing of the late 1970's and early 1980's that some of the Scandinavian practices were found to be unrealistically excessive, this is a reasonable place to stop. The reader is encouraged to make comparisons between the Scandinavian experiences and other nations' of which he/she is familiar with in order to develop a true appreciation for how these two nations evolved such unique approaches to management.
History of Danish Industrial Relations
In 1857 the Danish government abolished the guild system via the Free Trade Act. The initial result may have improved the employment opportunities of some workers, but it certainly removed both the masters and the apprentices from the protection that the old guilds had provided. This action coupled with increasing industrialisation led to a worsening of the working conditions, a reduction in real wages, and deteriorated housing, especially in the larger cities such as Copenhagen. In 1871, the Danish section of the International Workers' Union was organized as a reaction to the above mentioned conditions. It drew some of its political inspiration from the Paris Commune of the same year. This time period is considered the true beginning of Danish trade unionism (Boelsgaad, 1983a & 1983b).
In 1872, 2,000 Copenhagen bricklayers struck for a ten-hour working day. Clashes with the police occurred resulting in the banning of the International Union and the jailing of some of its leaders.
During these early years it was often impossible to separate the trade union movement from the progressive political movement. In 1876, the Social Democratic party was organized with 6,000 people attending the first convention. The following year some of the police were involved in bribing two of the workers' leaders to emigrate to America. This and other pressures helped to reduce some of the impetuousness of the politicalunion connection. In 1878 the political and trade union movements separated into two different entities. Although independent, to this day there are extremely close ties between the trade union movement and the Social Democratic Party.
Throughout this period pressure was exerted on the Danish Parliament to make child labor illegal. Legislation accomplishing this fact passed the parliament. Many also lobbied parliament to provide aid for destitute persons over the age of 60 and to remove the criminal status of unions. In 1891 these ideas were also enacted into law by a concerned government. In 1898 the trade union movement had grown to the strength of over 70,000 members. The Danish Federation of Trade Unions (DLO), a national organization of trade unions, was established shortly thereafter. The employers feared the power of such an organization and in 1899 joined together to form their own federation, the Confederation of Danish Employers (DA), as a counteracting force. These two groups collided in a four-month strike idling over 40,000 workers. However, this action was very different from most American and other European strikes because it was conducted with calmness and order. The strike ended after a period of intense negotiations between DLO and DA. This settlement became known as the September Agreement, or the "Constitution of the Labor Market". In the main element of the agreement both sides acknowledged the other side's right to organize. According to the agreement, both confederations must come to some form of understanding and abide by it for a two-year period (i.e. the length of the collective bargaining contract). This form of collective bargaining remained in force until 1960 when it was replaced by an Act which created "The Basic Agreement" to regulate labor market activity.
In 1910, an Industrial Court and a Conciliation Board were created to help solve industrial disputes. DLO helped to push these acts through parliament as well as the 48 hour week in 1920, the 40 hour week in 1974, unemployment insurance in 1907, the right to holiday pay in 1938, five weeks paid vacation in 1982, among other employee related actions. This record of progressive legislation is impressive and quite similar to that of the other Scandinavian countries.
In the 1970's over 70 percent of the Danish workforce were union members. DLO had over 1.3 million members organized into 37 national trade associations. The basic unit, organized at the work site, is the Work Club. Members of different unions may belong to the same work club and vote for the election of the Club shop steward. The shop steward represents the interests of the workers at the plant level.
DLO negotiated contracts for its member unions. The other major labor organizations are the Joint Council of Danish Public Servants and Salaried Workers (FTF), with 333,000 members and The Central Organization of Academics (AC), with 100,000 members. FTF did not have the right to negotiate for its member unions while AC could negotiate for some of its constituent units. Politically, both FTF and AC were independent of political parties while DLO remained closely connected to the Social Democratic Party (Boelsgaard, 1983a & 1983b, Harrison, 1976).
Industrial democracy in Denmark resulted in multiple types of participation, all generally considered fairly successful. In this context, the Danish experience was similar to that of the other Scandinavian countries.
Starting in 1947 joint consultative committees for production efficiency, at the plant level, were established by agreement between DLO and DA. When this agreement was amended in 1970, significant changes were introduced involving the employees more closely in participating in the decision making process. Any industrial enterprise with over 50 employees, at the request of either the employer or a majority of the employees, must establish a cooperative committee. The size of the committee depended upon the total number of enteiprise's employees. The members served a two-year term of office. Management nominated one-half of the seats (although they may be filled by members of a supervisory staff union). The other half of the seats were assigned to members of unions affiliated with DLO.
The Cooperation Committees strove to improve working conditions, job satisfaction, and the firm's efficiency and competitiveness. These Committees were given three basic rights. First, they were entitled to information relating to the economic condition of the firm. second, they had the right of coinfluence, meaning management must consult with the Committee on subjects regarding general managerial policies involving the day-to-day running of the firm. Finally, the right of codetermination obligated both parties to strive for agreement and to ensure that agreed principles were in fact implemented. Most of the Committees' efforts were of a consultative nature (Smith, 1974).
In 1973, the Danish Parliament legalized employee representation at the board level. Unlike other Scandinavian countries, this form of representation is not automatic. All companies with a capitalization of over 4,000,000 Danish Kronas (DKr) must have both a supervising Board of Directors and a Board of Management. The Board of Directors is elected by the shareholders and then appoints the Board of Management. If a majority of employee representatives in the Consultation Committee, or if one or more of the unions representing at least 10 percent of the work force, or 10 percent or more of the actual workers, request an election for board representation, then it would be held via a secret ballot of all employees. Any employee who has worked for the company for at least one year is eligible to run for the office of director. This second election, like the first, is not under control of the union. Employee directors are elected for a two-year term of office. Two seats on the board are reserved for them (Harrison, 1976).
Employee representation on the Board of Directors was only one aspect of industrial democracy in Denmark. The major employee influence on the decision-making process occurred on the shop floor and through the use of Cooperation Committees.
Industrial Relations History
Norway's Industrial Relations history is very similar to that of the other Scandinavian countries. Industrialization began during the 1800's with a few small firms concentrated in agriculture, forestry, and fishing. Because of the mountainous nature of the countiy, these industries were scattered throughout many coastal and valley locations. The lack of other natural resources, such as coal and iron ore, prevented the growth of the smoke-stacked industries typical in other European countries such as England and Germany. Norway's population base was geographically diversified. This resulted in labor usually available close to the few industrial sites (Goss, 1979). Norway had a homogenous population without the traditional class differences that were found throughout Europe during this time period (Bohveg, 1976).
The Trade union movement entered Norway during the last few decades of the 19th century. This union growth parallels the other Scandinavian countries. The Printers organized the first union in 1882. In 1899 a national federation of unions was formed to help labor obtain its goals. By 1980 the Norwegian Federation of Trade Unions (NLO) had 39 national member unions (NLO, no date).
The union movement had strong ties with the Norwegian Social Democratic Party since the party's founding in 1887, This affiliation always occurred at the level of the individual trade union rather than through NLO. It is important to remember that during this period Norway was not an independent country, rather part of the Swedish-Norwegian monarchy. Many internal affairs were decided by the Norwegian parliament, but the Swedish government made major decisions. The Norwegian labor movement was linked to both the Social Democratic Party and to various employers in the continued pursuit of a free and independent Norway. This concept of national sovereignty was a major point of difference between Norway and other European countries, especially her Scandinavian neighbors.
In 1900 employers established an employers' federation to counteract the influence of NLO. The Norwegian Employers Confederation (NAF) quickly developed a policy of negotiation with NLO over labor issues. From the beginning both organizations tried to settle conflicts in a peaceful manner with few or no work stoppages.
In 1905, Norway demanded separation from Sweden and mobilized for war. Considerable pressure was exerted on Sweden by both England and Germany to accept a peaceable solution, which did occur. The Norwegian Parliament invited a Danish prince to come to Norway as the first King in a restored monarchy. he accepted and as Haakon VII, he, along with his English wife Maud, became the driving force behind an independent and more democratic Norway.
In 1907, the paper and cellulose industry suffered a serious labor dispute. The Norwegian Parliament established a fact-finding commission to investigate the use of compulsory arbitration as a possible solution.
In 1915 the government passed a law on arbitration that required parties to the dispute not to use strikes or lockouts to settle problems. Instead, the Act on Labor Disputes required arbitration as the vehicle of settlement. This law was in force until 1935 when NLO and NAF negotiated the first "Basic Agreement" which called for voluntary arbitration. The key to collective bargaining became a series of basic agreements enacted over a period of years. The 1935 agreement, often called the Charter of Labor, stated that no stoppage of work or other labor conflict should take place during the life of the contract. The concept of both employers and employees voluntarily accepting the details of a contract during its existence was crucial for the Charter's success. The employer's right to manage and assign work was generally accepted in Norway and did not appear in the basic agreement (Goss, 1979). The other main parts of the basic agreement are the right to organize; the rights and duties of shop stewards, lay-offs, and short-term work (Harrison, 1976).
World War II was a major factor in the history of the Norwegian labor movement. In 1940 German forces occupied Norway. The King, Government, and many civic leaders escaped to England and the U.S. to continue Norway's struggle to regain freedom. The occupation forces banned the Norwegian Labor movement, factories were converted to military use, and most finished goods were diverted to Germany. The individual members of NLO and NAF frequently formed resistance groups (Vigness, 1970; Petrow, 1974; Goss, 1979). In 1944 employer and union representatives helped to establish a Wages Board to prevent labor disputes by establishing wage and working conditions if the parties failed to reach agreement by negotiation. This was compulsory arbitration and remained in effect after the war until 1952. In 1945 Norway was liberated and the public soon became aware of the roles played individually and in concert by many NLO and NAF Members within the resistance movement.
The basic agreements were continued by legislation in 1947, 50, 54, 59, 62, 66, and 1969. Each agreement was based upon the premise of labor organizing and negotiating with management collectively. In addition, the agreements recognized the importance of democracy in Norwegian life both outside and inside of the work place.
The concept of industrial democracy in Norway can be regarded as a logical extension of the representative democracy found in the democratically elected political bodies and labor organizations (Royal Norwegian Ministry of Foreign Affairs, 1083). The cooperative efforts resulting from the hardships of World War II were a major determining factor pushing Norway further along the path of industrial democracy. Other reasons stem from a series of events in the early 1960's: unions' radical wings were defeated on the issue of nationalization of private industry; communist activists lost political clout; the image and goals of the Social Democratic Party became unclear after 30 years in power; younger people, as in other Western nations, were dissatisfied with the present state of affairs; and both employers and labor organizations saw the need for some changes in Norwegian industry to meet the challenge of the growing power of the common market (Goss, 1979).
As a result, in 1961, a joint committee of NLO and the Social Democratic party was established to study all aspects of industrial democracy. The chairmanship was in the hands of Tom Aspergren, the President of NLO. In 1965 the committee reported the following major recommendations. First, the employees and shop stewards should be better educated, as they would then be better equipped to take part at all levels in the decision making process. second, the Basic Agreement should be modified to provide employees with the right to obtain more necessary information so that they could make more intelligent decisions. Third, the Company's Act should be amended to allow employees equal representation with shareholders on the Boards of Directors. These points became the basic planks of the Social Democratic Party during the 1960's.
Also in 1962, both NLO and NAF agreed to form a research group to study industrial democracy. Both organizations and the government financed the studies. EinarThorsrud from the Work Research Institute in Oslo and Fred Emery of the Tavistock Institute in London led the academics involved. This was the beginning of the classic group of studies conducted in Norway on industrial democracy, job design, and codetermination, leading to the SocioTechnical Systems concepts (see Bolweg, 1976; Emery and Thorsrud, 1969).
The results of the studies were important for furthering the growth of industrial democracy. Since 1948, employees had to be appointed as directors of state owned large operations. The law was extended to cover other state-owned operations in 1950. The Thorsrud study argued that active employee participation on the board was not the appropriate vehicle for increasing industrial democracy. Rather, the study suggested that specific tasks and roles should be changed within organizations to create situations where employees would have much more decision making power. The emphasis was to be on change at the group (shop) and individual levels, as well as the upper levels. Much of this work is related to Herzberg's concept of vertical job loading, allowing the employee more decision making power in how his job should be structured and accomplished (Herzberg, 1968; Cummings, Thomas and Christopher Worley, 2001).
Norway has had work councils in manufacturing firms beginning in the 1920's. These councils, composed of workers and managers, were designed to advise management on productivity problems. During the 1960's, several studies were made on the effectiveness of these councils. One third were found to be quite effective, one third were considered somewhat effective, and one third were ineffective or inactive (Goss, 1979).
The purpose and nature of the Works Councils did not change considerably throughout the 1960's and 1970's. They remained advisory in nature, however the 1974 Basic Agreement did require all firms with over 100 employees to have active works councils. They were permitted to make decisions on matters at a departmental level if management provided them with the authority.
The 1966 Basic Agreement created Cooperation Council at the national level. Composed of six members, three appointed by NLO and three by NAF, the Chairperson of NAF and the President of NLO alternated as Chairperson and Vice Chair on a yearly basis. The Cooperation Council's primary purpose centered around providing information and advice to the individual Works Councils. It also supported training on cooperative efforts and produced literature on specific subjects related to industrial democracy and labor-management relations.
Influence from other European countries, notably Germany and Sweden, encouraged the Norwegian labor movement to actively seek employee representation on the boards of directors of joint-stock companies. On January 1, 1973, such a law was enacted. The employee board representation exempted privately owned companies and cooperatives, as well as state organizations, but it did affect all other companies with over 50 employees. The law called for a Corporate Assembly to supervise the furthering of the company's objectives and to make final decisions on matters concerning substantial investment, rationalization, reorganization, the appointment and dismissal of the board of directors (Goss, 1979; Harrison, 1976). The Corporate Assembly must have at least twelve members, of which one third are elected by the employees and two thirds by the stockholders. The assembly elects the board of directors. Up to one third of the board, or about two members, can be elected to represent the employees. The Commercial Banks Act of 1961 in which the employees are represented by one board member covers savings and commercial banks. Insurance companies are not required to have employee representation on the board (Royal Norwegian Ministry of Foreign Affairs, 1983).
This Norwegian conceptualization of industrial democracy is probably the most balanced approach among the Scandinavian nations. In this context, to the Norwegians, industrial democracy means growing employee participation at all levels of the organization. The emphasis is not primarily at board representation because the belief is that this is too far removed from the average worker. The emphasis is also not on legislative action, such as in Sweden, but rather on negotiation and cooperation. Goss (1979) feels that a three-strand approach summarized the Norwegian position, based on increased shop floor participation, cooperation at the plant level, and the opportunity for shared control in the Corporate Assemblies. This approach appears to be quite logical and consistent. It is based upon the historical context of Norway, a homogenous, basically classless, society, with long established concepts of local political democracy, a peaceful union-management background, and close cooperation between all Norwegian groups during World War II.
Is industrial democracy the logical extension of employee participation or the harbinger of commercial anarchy? The early Scandinavian experiences can support both sides of the debate.
As summarized in the first paper of this series, criticism of industrial democracy centers on two principle arguments. First, workplace democracy vests employees with rights that have been unfairly and forcefully removed from the owners via the use of legislation (Thimm, 1980). Politically, this argument has some merit, but the reality of the situation is that in the two countries represented in this paper, the most power the employees obtained was one-third of the board seats and that occurred in Norway. Power is more one influence and information gathering than one of votes. The second criticisms is that the unions, rather than workers, are the real recipients of industrial democratic power while the goal of independent democracy is to empower workers. This criticism is somewhat warranted, particularly at the board level. In the earlier paper, it was shown that in Sweden, the Swedish Trade Union Confederation controlled who sits on the board as an employee representative. In Denmark, the situation was quite different with any employee having over one year's service was eligible to stand for election. In Norway any employee is also eligible to be elected.
On the shop floor and in the various work committees is the actual area where industrial democracy offers the greatest potential for workers to attain true power. The studies conducted in Norway by Thorsrud and Emery and those conducted in all of Scandinavia under the supervision of the International Research Group have consistently supported this proposition (Bolweg, 1976; IDE, 1981).
At the conclusion of the previous paper, the author stated that history of Swedish industrial democracy illustrated that there are many valuable lessons for contemporary managers to learn from the positive experiences in Sweden. This conclusion also holds true for both Denmark and Norway. The Scandinavian industrial democracy movement of the 1960's and 1970's has shown that all three Scandinavian countries have benefited greatly from industrial democracy The lessons learned are applicable to contemporary managers from many other countries.
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Publication information: Article title: Industrial Revolution to 1980: The History of Industrial Democracy in Denmark and Norway. Contributors: Haug, Ralph - Author. Journal title: International Journal of Management. Volume: 21. Issue: 2 Publication date: June 2004. Page number: 135. © International Journal of Management Dec 2008. Provided by ProQuest LLC. All Rights Reserved.
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