Following 11 hours of negotiations, China Airlines’ striking pilots and management reached a preliminary agreement on Feb. 13. During the strike, the company initially refused to give in to the Taoyuan Union of Pilots’ demand that the airline add 91 pilots.
The strike cost China Airlines NT$200 million (US$6.5 million) within just a few days. Considering that hiring new pilots would only cost NT$500 million per year, the refusal was a miscalculation on the company’s part.
During the strike, the pilots were not paid, passengers were inconvenienced and the Treasury lost money, so everyone lost, which only goes to show that when the government meddles in private law, it affects corporate governance.
The government holds less than half of China Airlines stake; as such, the company’s budget, finances, operations and personnel management are not bound by the regulations stipulated in the Administrative Law of State-Owned Enterprises (國營事業管理法).
However, as it holds about a 45 percent stake through various government agencies, it is able to appoint the chairperson and president as its representatives, giving it substantial control over the carrier without legislative oversight or being accountable to the public.
Even more controversial, China Airlines has 18 subsidiaries that are not supervised by the legislature. These have a become a means for issuing political rewards, fully demonstrating the ineffectiveness, lack of responsibility and influence-peddling that is the result of the government meddling in private law.
The China Airlines pilots submitted five demands: improve long-haul flights (those longer than 12 hours); create a more transparent system for copilots’ training and promotion to protect their rights; not pressure or threaten union officials while ensuring that the benefits and rights reached in the agreement are given exclusively to union members; remove unsuitable company managers that had soured employer-employee relations; and follow EVA Air in paying year-end bonuses in full, and including this in the agreement which applies exclusively to union members.
Had these demands been proposed in Germany, they would not have been decided solely by the employer, but would have been determined together with employees.
In 1976, Germany passed the Mitbestimmungsgesetz (Codetermination Act), which stipulates that workers’ codetermination rights are equal to management’s in decisionmaking.
The Betriebsverfassungsgesetz (Works Constitution Act) of 1972 sets forth 14 areas in which employees’ codetermination rights apply.
These important laws were implemented in post-war Germany to promote a more humanitarian work environment and realize the concept of economic democracy. They are core laws for Germany’s implementation of a socially just and free economic system. These laws can be credited with the low number of strikes in Germany and the short period of time needed to resolve those that do occur.
The China Airlines pilots’ strike fully exposed shortcomings in corporate governance in Taiwan. Management, in particular, views the company’s pilots as subordinates rather than business partners. This is a bureaucratic approach showing an utter lack of corporate and economic democracy that runs counter to proper corporate governance.
It further demonstrates that Taiwan, while having joined the ranks of developed nations, still lacks a legal institution regulating employee-management co-determination, giving rise to an increasing number of social conflicts and dissonance.
A company is never a private matter, as its financing, labor force, land and raw materials are all taken from society’s resources.
In that sense, corporate governance and profit distribution should refer to the German legal institution of co-determination between employees and management rather than being monopolized by a company’s chairperson, president or other representatives.
By implementing a co-determination system, companies can avoid exposing their representatives to moral hazards, which are frequent in business operations today.
Lin Terng-yaw is a lawyer.
Translated by Chang Ho-ming.
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