Democracy in Management: A Proposed and Predictive Assimilation of Some Political Terms in Business Economics and Corporate Governance

Abstract

This paper aims to focus on wider usage of some predominantly political terms like democracy, voting, expansionism, gender equality, etc. in relation to democracy in management. It also seeks to introduce relatively or altogether new terms like quasi command and control framework, left wing management and management left. Along with six points of corporate democracy provided by Gratton (2004), the paper seeks to append seven more points to elucidate the broader concept of the same.

Keywords: corporate democracy, democracy in management, leadership, management left, left wing management

Introduction

Democracy in management is a relatively silent process which is being directly referred to at a very low to medium frequency. The main development of democracy in the corporate world is taking place by the means of implementation of people or follower oriented leadership theories. Situational leadership theory and transactional leadership theory are the main theoretical frameworks in this regard. The paper is of an analytical variety and it is not divided into the conventional portions like literature review and case study. Rather, it examines both business and political literatures from book, journal and web resources pertaining to proper reliability and professional value. Several cases have been referenced, although they are not discussed in details.

Democracy: A Management Perspective

First, we need to define democracy. Democracy is mainly a political term. However, according to Co-operative Business Consultants (2008), “There is a lot being written about democratic management at present.” So, the concept of democracy is being introduced in corporate governance as well. Therefore, those who advocate adoption of democracy in corporate governance and managerial practices must agree that democracy (the term or system) is applicable to subjects other than politics like society, economics, social policy, public administration, social work and even science and technology^[1].

Defining democracy, we can hold according to Bryce and Bryce (2004, p. 20) that “The word Democracy has been used ever since the time of Herodotus to denote that form of government in which the ruling power of a state is legally vested, not in any particular class or classes, but in the members of the community as a whole. This means, in communities which act by voting, that rule belongs to the majority, as no other method has been found for determining peaceably and legally what is to be deemed the will of a community which is not unanimous. Usage has made this the accepted sense of the term; the usage is the safest guide in the employment of words.”

Should we impose this definition of mainly political democracy on corporate or management democracy as well? The general trend appears to be so.

According to Gratton (2004), decentralization of the process of decision making, as has been pointed out by Bryce and Bryce (2004), is the essence of democracy in corporate management. If not decentralization of the decision making process is done, or in other words, more people are not involved in the decision making process, it is impossible to differentiate between the opinions of majority and minority and any system of voting becomes unpractical. So, according to Gratton (2004), democracy must have high degree of both shared purpose and autonomy. The relationship between the individual and organization should be an adult to adult relationship and not a parent to child relationship. Individuals are investors of their human capital and they can withdraw their investment. So, individuals must be able to develop themselves and express their distinct qualities. Individuals must be able to determine their conditions of keeping the association with their employer. There should not be liberty to some individuals at the cost of that of others. Individuals should have obligations and accountability to the organization and to self. (Co-operative Business Consultants, 2008; Gratton, 2004)

So, democracy in corporate governance can be based on mainly six points:

1. Individual-organization relationship
2. Consideration of human capital as an investment from the employee side
3. Freedom to develop and express^[2]
4. Nature of employer-employee association
5. Equality in terms of freedom
6. Obligation and accountability

Gratton’s (2004) proposition that democratic enterprise involves liberation, freedom, flexibility and commitment in business can be testified by the researches carried out by Rosenstein, Ofek and Harel (1987) which were conducted several years ago. Organizational democracy brought positive changes in the world of corporate governance in Israel and increased productivity in several cases. The practice helped in developing better industrial relationships and understanding in the community. The results may be utilized to develop a modern and decentralized way to achieve business goals for common benefit.

The case of HCL (an MNC based in India) is an example of practical implementation of democracy in corporate environment. This implementation is based on shareholder democracy. Discussing the similarity between workplace democracy and shareholder democracy, Nayar^[3] puts forward that “Management started becoming more accountable to shareholders 20 years ago. Companies have only become better. That democracy, or reverse accountability to shareholders, has brought positive energy into the stock market, and a huge amount of value has been created. It has not created chaos. Shareholders are not telling business what do, but it has created a higher accountability. The same principle applies to employees in knowledge businesses. It unlocks energy, ideas and growth.”

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^[1] In the sphere of science and technology, the case of Galileo can be considered as a case of undemocratic persecution. Moreover, researches on ‘memory of water’ can be regarded as an example of democracy, i.e., accepting unproven opinions for wider debate in the world of physical sciences and alternative medicine.

^[2] For both the management and the workers. Both sides should be open to criticisms and suggestions

^[3] The CEO of HCL in the year 2007