Transnational Research Associates

The Viability of Democracy in Business Organizations

Art Madsen, M.Ed.

Organizational behavior is as complex as it is challenging. When congregating in groups, people sometimes function predictably and rationally, while at other times their behavior seems erratic and counterproductive. If the high-pressure dynamics of profit, loss, success and failure are entered into the behavioral equation, along with psycho-social components of rivalry, competition and assertiveness, then even basic decency is frequently compromised. Under such conditions, democratic ideals can hardly be expected to survive.

From the earliest days of the Industrial Revolution in Europe and the United States, it became obvious that – within commercial and manufacturing contexts – democratic ideals were in peril. There were ardent attempts on the part of Management to suppress basic worker rights, as we view them today, through imposition of such managerial systems as Taylorism, reflective of placing ‘target’ industrial achievements well ahead of human rights, priorities or feelings. Many of these practices continue today in corporations and organizations with top-down autocratic structures. To what extent democracy, as we understand the term in the generic sense, has been undermined in these institutions depends, in most instances, solely on the degree of benevolence and liberality of the upper echelon administrative and managerial personnel controlling the firm.

Because of the lack of credible guarantees and assurances that workers will be treated fairly by management in most firms, however, there has grown up a highly charged and polemical dialogue on the issue of the nature and extent of ‘democracy’ in business organizations. Therefore, this paper intends to examine several of the major points of contention between these two opposing forces (management and labor), and will touch on best practices developed for resolving confrontations arising from perceived threats to democratic values within industrial or commercial settings. Additionally, the importance to future management personnel of maintaining at least the appearance of democratic values within a given company will be briefly addressed.

In analyzing labor-management relations, many theorists feel that the nature of business itself precludes an egalitarian approach toward workers and subordinates. Indeed, autocratic managers totally disregard the rights of workers, and turn eagerly toward ‘democratically’ rewarding, of all things, their shareholders. Mario Gabelli, for example, claims that democracy is best represented within a firm when shareholders are treated equitably by management! Amazingly, he goes so far as to establish, in the name of Ghandi, a Shareholders’ Magna Carta guaranteeing the rights of those owning stock, to the apparent exclusion of the rights of his own company employees laboring valiantly to create profits for others (Gabelli, 1999). This twisted distortion of the true meaning of democracy is as ironic as it is unfair. Gabelli would doubtless argue that democratic ideals are purely relative and can be applied, as a whim, to all or none of the elements within a firm.

This somewhat skewed interpretation of democracy leads us to set forth the primary salient features of legitimate democracy within a firm. Figure I, below, provides a contrastive view of Top-Down Autocracy and several Democratic Ideals within two entirely differently managed firms. The relative merits of these two distinctly competing managerial systems form the focus and substance of the on-going dialogue in many companies, such as Boeing, where emotions ran high and tempers flared on these very issues last year. This ‘break-down’ validly reflects the ideological orientations of both types of companies, and clarifies the problem-issues at the base of most labor-management argumentation.

Top-Down Autocracy Favors<------------------------> Democratic Ideals Yield

Cheap Labor , Minimal Benefits

Collective Bargaining, Workers’ Rights

Pitting Workers vs. Management

Harmonious Multi-Level Consultation

Strict Hierarchical Power Structure

Power-Sharing Where Applicable

Corporate Primacy in Decision-Making

Mediation, Negotiation , Communication

High Productivity, High Profit

Profit-Sharing, Efficiency, Pride, Quality

Sources: Adapted from Leon, Coastal Post, 1996, Furdeck, Minn. Network, 1992, and Mokhiber, Corporate Predators, 1999.

Figure I

During annual union negotiations in most American firms, the concepts and attitudes reflected above usually surface. Because of the vociferous debates that result from confrontation of opposing ideological forces within many firms, workers, according to Furdeck (1996) have begun to reorganize under an approach dubbed "New Unionism." Such strategies might appear, at first glance, to improve the chances for sustaining viable democratic processes within industries; however, the influence of capital and the white-collar hierarchy is considerable and should not be underestimated. Under the Western system of capitalism, management represents the Board of Directors, plus shareholders, and must reflect their will. In Japan, by contrast, there is an increased tendency to listen to employees and to benefit from their insight and valuable experience. At the top of one food manufacturing firm, Kameda Seika Co., Ltd., its President, Takeshi Kanazu, has expressed his large company’s philosophy as incorporating the values of "democratic management", in addition to progressive "planned managerial policies" (Kanazu, 2000).

By way of contrast, Grossman (1998) presents, in his on-line article entitled "Challenging Corporate Power", a lengthy overview of how damaging improperly constrained corporate power and policy can be to society as a whole. It almost seems as if Japanese business executives, across the Pacific, have learned this lesson somewhat better than have American businessmen who forge ahead, sometimes blindly, implementing injurious and non-democratic policies adversely affecting society as a whole. However, that’s the external consequence of power gone astray.

Not only can we see that the definition of "managerial democracy" is different depending on from whose perspective the concept is being viewed, but we can also see that "world-views" differ considerably. In the United States, classic corporate democracy would seem to be an underdeveloped notion, because autocracy generally dominates; whereas, in Japan, social organizations, including businesses, have evolved toward a clearly delineated broadening of control and participation.

How can poor labor-management relations, characterized by a restriction of democratic values, be improved in the United States? The University of California at San Diego, among hundreds of other institutions, sponsors periodic conferences, seminars and colloquia focusing on just such issues, in a variety of industrial or technical business fields (Agre, 1996). During these seminars, speakers address the most sensitive issues and propose solutions aimed at strengthening values that are considered most conducive to harmonious management-labor relations. It would be inaccurate to suggest that all of these seminars propose a reinforcing of democratic values where they don’t belong – but most of them, in this forward looking age, are eager to develop a model that improves efficiency, worker-satisfaction and hence profitability. This often entails the refinement and clarification of fundamental legal dilemmas, as pointed out in Bixby (1996, passim), and results in the development of "best practices", such as mediation, negotiation and dialogue, to smooth over rough spots in intra-corporate activities. Other practitioners, such as organizational psychologists, are consulted during the seminars and resolution of sometimes extremely divisive issues can be achieved.

During these industry-wide presentations, or frequently during conferences held within the company itself, the importance of developing a suitable balance between autocracy and democracy is stressed, particularly in terms of the company’s future personnel relations. West emphasizes this point, as well, in his Management Review article stressing the nature and importance of ‘genuine democracy’, as defined within a corporate context (1995).

In light of the foregoing analysis, what can be concluded about the projected viability of ‘democratic values’ in contemporary industrial and organizational settings?

Clearly, democracy can be eroded within a business if efforts are not made to maintain its influence. Most firms prefer an autocratic or hierarchical top-down management style; however, the sternness of this approach can be offset by incorporating one or more of the "best practices" outlined in this report. In particular, dialogue, communication, mediation, and power-sharing at all levels of the corporate structure lead most observers to believe that ‘the boss can remain the boss’, but that workers can ‘have their say’ in the best interest of company performance and productivity.


Agre, P., Moderator, "Working in the Networked Economy", Second Technical Session, Society and the Future of Computing, University of California - San Diego, 1996.

Bixby, M., Beck-Dudley, C., Cehon, P., The Legal Environment of Business: A Practical Approach, International Thompson Publishing, New York, N.Y. 1996.

Furdeck, C., "Ross Perot and the Authoritarian Corporate State", Minnesota Network, Minneapolis, July 1992.

Gabelli, M., "Shareholders’ Rights: A Ghandian Approach to Governance" Gabelli Funds, Inc. Mutual Funds On-Line, Rye, New York, 1999.

Grossman, R., "Challenging Corporate Power", Z-Mag, Provincetown, Massachusetts, 1998.

Kanazu, T., "A Guide to the Company", Kameda Seika Co., Ltd., Nigaata, Japan, 2000.

Klein, P., "Concepts of Value, Efficiency and Democracy in Institutional Economics", Journal of Economic Issues, March 1996, 267-277.

Leon, S. "Corporate Control and Democracy Cannot Co-Exist", The Coastal Post, February 1996.

MacLagan, P. Management and Morality: A Developmental Perspective, Sage Publishers, Thousand Oaks, California, 1998.

Mokhiber, R, Weissman, R. Corporate Predators: The Hunt for Mega-Profits and the Attack on Democracy, Promotional Site, 1999.

West, C., "Genuine Democracy", Management Review, June 1995, 57-59.