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"Revolution in the Firm"
Book Review by Philippe Arnaud

The Book of the Week
Le Monde, Paris, Cahier Economie et entreprise

Revolution in the Firm
LE MONDE ECONOMIE | October 9, 2012
by Philippe Arnaud


Are we on the cusp of a revolution in the firm? A new book by Isabelle Ferreras seeks to revive the debate over corporate governance with a bold idea, which she calls “economic bicameralism.”

Ferreras, a professor of sociology at the University of Louvain [Belgium] and an associated researcher at Harvard, explains that the firm is now one of the institutions occupying the most space in our daily lives. But democracy stops at its doorstep. In some ways, she observes, firm relations recall feudal relations, where some partners are “more equal than others.” The capitalist firm remains the locus of “instrumental rationality;” that is, of a logic that wants actions to be taken with regard to an end – maximizing profit for shareholders. It is not instrumental rationality itself that Ferreras is contesting, but the idea that capital investors are its best guarantors. If employees are suffering today, she writes, it is because they are torn between their aspirations for justice in the workplace and a “system of unilateral governance.” If the social contract is to be rebuilt, then capital owners must forge a new compromise with what Fererras calls the firm’s “capital investors.”
In a learned detour, the author recalls the English invention of modern bicameralism, the condition for a “legitimate, reasonable, and intelligent government.” In the 17th century, Montesquieu described bicameral government thusly: “The legislative body being composed of two parts, the one will check the other by their mutual preventive faculty.” He added: with the executive, “they will be forced to act in concert.”
But how, in concrete terms, would bicameralism function in a firm? The author imagines a two-branch government, composed of a Capital Investors’ House of Representatives and a Labor Investors’ House of Representatives. “No decision could be made without the agreement of at least 50 % + 1 of employees representatives.” Ferreras does not skirt around potential objections to her idea, which she covers one by one at the end of her work, in particular describing what distinguishes bicameralism from German-style “co-management,” or Mitbestimmung (codetermination), which remains “unicameral.” Ferreras argues that bicameralism would not be a factor for gridlock. To the contrary, it would foster the participation of all stakeholders in the firm.
Is it the vocation of employees to take on part of the firm’s managerial power, or at least to establish a firm balance of power within it? Is it normal, in the 21st century, for employees to have no say over the tools of their trade? Whatever the answer, this significant essay gives us food for thought.