Are leadership and democracy truly compatible?

Can true democracy really be practiced in a business? Would one employee – one vote make it possible not only to run a company but also make sure it’s profitable? Definitely, if you are a small jointly owned company. But how about a huge multinational with say, 250,000 employees?

leadership, democracy, company, government

Is democratic leadership that makes everybody happy just an illusion?

Imagine if all employees had to vote before a decision was made. Everybody would be looking after number one and the company would not only be ungovernable but lose money as well.

Fair decisions based on dialogue

Different stake holders having their say and aiming for fair and emphatic decisions based on dialogue is definitely not only possible, but already practised in a multitude of companies.

Democracy – next fad in leadership theories?

With all the current emphasis on empathy in leadership I can’t help wondering if democratic leadership will soon become fashionable? The timing is right because many employees feel they have been badly treated by management during the economic crisis.

Leaders are solely responsible

As a leader you are responsible to the board, share holders and all employees. There are no excuses for chosing the wrong path. You, and only you, are accountable and pay the price if your decisions fail. Or as President Truman put it, the buck stops with you.

Show me a truly democratic government

In all democratic countries politicians are elected because they promise the electorate they will do X,Y and Z. However,  once in power they frequently proceed with doing something else. Sometimes because they discover that what they would like to do isn’t possible for, usually, financial or legal reasons. Isn’t democracy more of a concept than reality? How much say does the electorate really have? The fact that a lot of politicians say what the electorate wants to hear and then do something else, doesn’t help. To get votes by pretending you stand for something you don’t is not how democracy should workk. But that is what happens in most countries.

In fact I don’t believe you can find any democratically elected government in the world that hasn’t failed to deliver on quite a few of their promises. As we all know, private companies operating that way would eventually cease to exist.

Staff can’t have more influence than board and shareholders

It’s impossible to allow employees to have more impact on decision making than the owners and board of directors do.

Sometimes taking decisions can be severely difficult and you will have to defend them not only to shareholders but colleagues as well. It’s particularly hard if you don’t agree with some of the decisions implemented. But you still have to be able to handle criticism for them and make sure as many as possible understand, accept and are motivated by your decisions.

Do you believe perfect democracy exists in any company or government in the world? How much more democratic can the corporate world get without jeopardizing the businesses? Is it possible to ever satisfy all and sundry and still be profitable and grow? A bit of a Catch 22, isn’t it?

(Photo: yeowatzup – flickr)

108 responses

  1. As you say, Catarina – democracies don't really exist anywhere as politicians invariably fail to meet election promises. Switzerland may well be the country with the greatest degree of participation by its citizens in the "business" of running the country due to its frequent referendums.

    In a company, the concept of having everybody with an equal say in all matters would result in chaos, and would so be unworkable.

    Perhaps countries should be run more along company lines with the shareholders(taxpayers) having a say proportionate to the shares they own (tax they pay)… Contentious, I know, but it would mean that those who avoid tax would have no real say.

  2. Everything, when taken to a extreme is not good. When a leader does only what he thinks is right, without taking into account what his followers think, becomes a tyrant and when he only does what the majority says he may lose some good opportunities. I don't think a business could be run as a true democracy because the leader in a company is the leader not only becasuse he can integrate other's ideas into his decisions but because he knows enough of the business to make decisions on his own

  3. For sure NO on a startup or a turn around, on an institutionalized and established company you can have some democratic decision making committees but the Board and the shareholders assembly has to be controlled by someone or a Group, that when needed makes things happen when the collective wisdom is wrong.

  4. Hi Catarina, I agree with you that true democracy in business or politics is more of an ideal that can't truly be carried out with positive results in either situation. Think about how hard it is to get three people to agree on one thing. Can you imagine trying to get an entire company to all agree on the same thing? No decisions would ever get made and nothing would get done. A leader should care about what the people think, try to do what is in the best interest of all and listen to what others say, but in the end, the decision making power needs to remain in the hands of a select few.
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  5. Hi Catarina,

    Another great thought provoking post. Reading it made me think back to a story of a company where the employees were shareholders and became involved in all decisions. There was a book written about it, although I can't remember the name. Apparently the company became very successful.

    In most multinational companies it just wouldn't work as far as I can see because to make the big decisions you have to have all the information as well as the skills and experience to make the decisions.
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  6. Hi Alexa

    Hi Alexa

    This is an interesting question…. with challenging remarks but I wanted to add my five cents:

    You ask: "Can true democracy really be practiced in a business?":

    Businesses do not necessarily have leaders but managers instead (hired guns) Second, business is not democratic because those that provide the capital needed decide while others such as workers can influence the process only.

    Even in a cooperative you do not have a true democracy since the members would on general things during the annual meeting while those chosen to manage make the operative decisions.

    Thanks so much for sharing. Urs

  7. In my previous company, workers could not really influence the decision of the managers. We can give suggestions but still, they will rather choose their own disposition because they believe that is right and that's good for the company. It's the reality.

  8. Pure democracy works well in small groups but there are definately "economies of scale" when it comes to larger ones. This is the primary reason why most western democracies like the US end up with a "representational" democracy, which does not serve the individual as well, and places too much power in the hands of the politician who ostensibly "serves" their constituency. In business organizations we can see a similar model where functional departments and divisions have managers that "represent" their operating areas and speak for them as necessary. How much democracy leadership and management chooses to derive from this input varies widely. From my own observations, I think business has more opportunity to leverage the principles of democracy than government does – but in the end – I think the results are pretty much the same. Politics most often wins out over the will of the constituents. While I don't see an inherent incompatibility between leadership and pure democracy, I just think it becomes too hard to integrate the two in large organizations.

  9. Democracy in business.

    As Yogi Berra said, "In theory there is not difference between theory and practice. In practice there is."

    In business, democracy is fine. But the marketplace will be the determining factor.

    Democracy demands that everyone participate in the process. Thus, we shall look at some of the participants of days gone by.

    If you sail that way, you'll fall off the edge.
    That'll never get off the ground. If God wanted me to fly, he'd have given me wings.
    The motor car? Noisy, smelly toy for the rich. It will never replace the horse.
    Talkin' pictures? Folks don't want to listen to all that chatter. They want to see real acting.

    Democracy in business?

    No motor car.
    No Aeroplanes.
    Silent Films
    No Television

    It takes ten people to say yes but only one person to say no.

    Laws are not made for the law-abiding.

    Congress made the President commander in chief of the military, not chairman of the committee in chief of the military.

    Statues are erected to leaders, not committees.

    Or, as Teddy Roosevelt said: Put the best person you can find in charge and get out of his way.

    Regards,

    Slim
    My recent post Why I Read Newspapers

  10. If democracy truly exists, let all the voices be heard even the lowest rank position. They do conduct General Assembly, but tell I tell you, still their ideas are used and applied. I think democracy in corporate is impossible to achieve.
    My recent post Does Big Butt Prolongs Life

  11. The fact that the majority decides doesn't matter when it comes to huge multinationals with an abundance of low skilled labourers Oliver. When they are in majority their choice would determine the future of the company. How many of them would understand big and complicated issues and hence be able to vote on them?

  12. Certainly, on a larger scale (as in the case of countries and multinationals) true democracy isn't possible. The number of opinions and options being offered in any decision making process would prevent business from moving forward, and I think you're right that most people would look out for their own best interests.

    Although, even in smaller companies or organizations, I think you'll still run into similar problems. Not everyone is born to be a leader, so it makes sense to allocate power to those who show a predilection towards it (or, at the very least, invite it upon themselves). Obviously, there are going to be issues with this type of system (especially when you add complicating factors like profit margins, lobbyists and leaders who promise X and do Y), but I think overall, an organization will grow faster when power is centralized than in a true democracy.
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  13. Seems you agree with me Keyuri. Trouble is when we vote for a politician he/she then proceeds to do the opposite of what was promised when elected:-) Catch 22, isn't it?

  14. I think you’ve failed to make a critically important distinction: In a true democracy, the citizenry collectively make its own decisions, and every citizen has an equal say. With the possible exception of Switzerland, I don’t think any government on Earth is a truly direct democracy. Certainly, the USA isn’t–it’s a republic, not a democracy. In a republic, although citizens theoretically retain control of their government, they elect representatives to run it for them.

    The American founding fathers were very suspicious of democracy, and intentionally designed a republican system of government so that the “mob” could not take over the new nation. In a democracy, a majority of citizens can vote to abolish individual rights, but in a republican system, citizens have unalienable rights that cannot be voted away by the tyranny of the majority.

    Any corporation in which a board of directors is elected by, and responsible to, the corporation’s shareholders is displaying a republican system of self-governance—not a democracy.

    Direct democracies do not need leaders, since decisions are made through the collective will of the citizens. But even in representative democracies, the people retain ultimate control of their government: All they have to do is vote to get rid of any government, or government official, they don’t like.

    The fact that the majority of eligible U.S. voters–to take one example–rarely vote does not mean that the electorate has little, or no, control over its government. It simply means that most of the electorate has chosen not to exercise that control. The electorate has not relinquished its authority, because voters can sweep a government or an individual out of office at any time.

    And, of course, many U.S. states have constitutions enshrining the right of citizens to overturn legislation through the referendum, to propose legislation through initiatives, and to shorten an official’ s term with a recall election.

    The problem you seem to be ascribing to “democracy” has much more to do with voter apathy than with the inherent flaws of any representative system of government.

  15. I found this to the case with a company I worked for a long time ago. They changed the management structure and wanted me to get approval from a committee of individuals who didn't want that responsibility and all had different opinions. It was a nightmare and eventually that all fell apart.

    I can definitely tell that you have plenty of people voicing their opinions on this topic. As they should because there is so much wrong with our government today. But what's the answer? Darn good question. Will it ever be fixed? Probably not! There are too many very opinionated people in those positions with a lot of money and frankly, that seems to be all that matters to them. To heck with the rest of us.

    Thanks Catarina.. I do enjoy hearing other people's opinions on this topic and you definitely have received a lot of comments. Keep up the great work.

    Adrienne
    My recent post Confession Time- My May Stats Are In

  16. You raise important points, as do your commentators. Democracy sounds like a great idea, but you can't run a business if every vote is counted alike. It's hard enough to do so in a government (and those with money always seem to have a bit more influence in any case).

    Ideally, an employer should at least make employees feel that they have a voice.
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  17. Catarina — Unfortunately, most politicians will make any promise to get elected without the commitment to following through once they're in office. As you know, there is a battle raging in the U.S. about gun control laws. The National Rifle Association has such a huge influence on lawmakers that almost no meaningful legislation has been passed to limit the use of hand guns and semi-automatic rifles here. However, after the massacre of 20 children in Newton, CT, families of shooting victims from around the country have descended on Washington to make their voices heard. It's hard to ignore a mother whose 6-year-old child was murdered. So ordinary citizens, when speaking in one voice, can have a powerful impact and it looks like we will have gun control legislation passed at last. Democracy is very sloppy. In a dictatorship, one tyrant rules. In a democracy individuals can have a voice but they need to come together around an issue if they want to have a real impact.
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  18. Hi Catarina,
    This is an interesting question. Here in the U.S., there is some research suggesting subcontracting and outsourcing are increasing in frequency which will likely lead to a decrease in full time employment. Also, social media sites like Facebook operate largely on the content creation of millions of individual businesses and individuals. Arguably, these users are a hybrid. They certainly are customers, but in a way, some also take on the role of quasi-employees. They create content which social networks use as both the service and product of their operations and receive compensation in the form of traffic and community. But both contractors and users are more autonomous than employees. Is this democracy? It's certainly an evolution in work.
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  19. A true democracy is rare. Even the US isn't a true democracy. It is as you said, an ideal. When you're a business and have to get things done, to take all thoughts, opinions and considerations into a decision it would stop the process of doing business, not a good thing. It really is a balance between being thoughtful and honest in what your intentions are. Many will accept that not all opinions are worthy or can be heard. They need just want to know what is and isn't part of the process.
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  20. I dont believe pure democracy is possible either. I can only imagine that it would bring things to a grinding halt. It is a nice ideal but not really practical.

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  21. Democracy is a system to choose leaders who are accountable. They are accountable to the ones who chose them as leaders. What they do once chosen as a leader is often not what they thought they would do nor what they said they would do. However, in a democracy, they are still accountable for their decisions and actions. Even company directors are accountable to the shareholders. They must be re-elected on a regular basis. Democracy is not about voting on every decision. It is about choosing leaders and then holding them accountable for their decisions and actions.

  22. As you said, Catarina, another fad. If anything, I've been inveighing against the fads and fashions of organisational analysis, group dynamics, consensus building, and every other idea to come down the pike as a sorry substitution for management.

    This idea seems like another of the many inflicted on business for half a century.

    Regards,

    Slim
    My recent post The Side Street Journal Weekly 3-10 April 2013

  23. Having run a small business, I don't think a true democracy would work although I think businesses run best if the employees feel that their work and opinions are valued. Further, although employers don't necessarily legally owe employees an explanation for their actions, my experience is that this goes a long way towards getting people on board.

    In a true democracy, there is a tyranny of the majority. This is why our Founders (here in the US) set up a government with checks and balances. The Supreme Court is the least democratic of our institutions, but is often the body that looks out for the rights of minorities in our society.
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  24. Good post as always Catarina. Leadership is essential for any democracy to survive, and within the confines of a business even a coop needs to have a board of governors. Not everyone knows , or wants to know the big picture, nor are they qualified to make a decision because of that. In theory electing leaders to represent the people's interest is a good system, but as we all know politics often comes down to money like everything else in this world.
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  25. It's an interesting question. There are certainly times when it feels like the drive to engage employees is leading management down this path, but just as governments can't be run like businesses, business can't be run like government. The objective of a business is not to serve the majority of employees. Their input is valuable and can bring terrific insight, but insight isn't vision. The more employees, the broader the spectrum of priorities and then a process that forces agreement based on general knowledge not expertise. No business runs effectively without a vision, a concise list of priorities, a focus on the customer and clearly defined strategic goals.
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  26. A corporation is a kind of repressive socialist state where every worker is equal but each must respond precisely to collective authority. The corporate genome – the sequenced and mapped skills of work and workers — is leadership's archive, containing the plans for each type of worker, the master program for generating a 10-thousand-worker company from a single thought, and the life cycle instructions that guide it from birth to adolescence and maturity.

  27. Businesses do not exist to promote equality . . . even non-profits are very competitive. It's not just a matter of some sort of "harmony" within an organization, but also between them – if there is disharmony between, then eventually there will be within an organization.

  28. I think there is value in getting input, but someone needs to take the responsibility for the final decisions.
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  29. You pose a good question. I have never believed (since I was old enough to understand the government and form my own opinion) that we were purely democratic. Sure, we have the right to vote. But how many elections would have been different if it was based on amount of votes alone? It is reasons like that that politics become difficult to understand.
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  30. I think that people want to believe that a true democracy can be put into place and work, but I don't see that happening in a government or in a business. There needs to be voices heard, but ultimately not everyone can have a say in decisions because everyone will not come to the same conclusions. Interesting idea though!
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  31. Right now you can see in the USA that leadership and democracy don't necessarily go together. Our politicians, right on up to the top, are doing what THEY want. Not necessarily what the public outcry calls. It's about winning the next election, to stay in office, to retain power, to whiddle away a little more at – democracy.

    As always, an thought provoking post.
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  32. Leadership and democracy are compatible provided the culture of the nation, company, institution or organization is democratic. For the most part, people in democratic societies expect leadership within the bounds and constraints of their democratic institutions. Great leaders understand and work within those constraints by exercising influence, rather than outright control. By contrast, when we move to an autocratic society people expect a strong leader who is willing to act outside of democratic and other social constraints. Results are what matter with the latter. In other words, the culture of power and the power of culture go a long way to set the expectations on what leadership looks like. Like most things involving people, context matters.

  33. Catarina in the USA we are so far away from being a democracy, there's not enough time or space for me to rant. We have a despicable group of gangster politicians who have: 1) voted themselves exempt from taxes which the rest of us by law, have to pay, 2) voted themselves retirement with all benefits for life, even if they serve just 2 years, find me work like that in the REAL world, 3) do NOT vote for what a majority of people say they want but instead vote the majority of their votes based on lobbyists and the most corrupt corporations are willing to pay them.

    Democracy around the world? I don't see it. Where is it Catarina?
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  34. I do not believe democracy is a sensible process for any businesses. If it is, it is wise for a very small number. Now pushing decision making down to those doing the work as much as possible makes a great deal of sense to me, but not democracy.

    For government I think real democracy makes more sense. And the internet makes it more practical. But still it is not practical. The representative governments – like the USA – is the best model. People elect others to craft laws, oversee the executive branch and vote on laws.

    The current result of the USA representative form of government is pitiful in my opinion. We chose to elect people primarily that raise the most money. They do this by serving those that give them cash (so they get the most money). Obviously if they are serving those that give them the most cash they are not serving the interests of the country.

    The fault lies with the voters choosing to elect and re-elect extremely corrupt politicians (and their political parties). Until we stop doing that we will get the same results the current political parties have been providing for decades. It is very unlikely they will spontaneously start putting the interest of the country above the interest of those giving them cash. We have to replace them with people that put the country fist. Until that is done, we can expect a continuation of what we have been getting.

  35. I don’t think true democracy can work in a large business. First, the logistics would be so difficult decisions would never get made. Second, each employee has his or her area of expertise, but often doesn’t know enough about all aspects of the business to make the best choices. However, I also think leadership that doesn’t value its employees and their knowledge, allow them some autonomy within their spheres and accept their input is doomed to fail.

  36. I don’t think a true democracy can work in most business. Maybe a small business. For instance, the few companies that are actually owned by the employees. I found a list of the largest employee-owned companies in the US. If it hadn’t been for your post I would have never looked.

    Number one is Publix Super Markets with 160,000 employees. The rest are much smaller. In fact, most have less than 10,000 employees.

    I think democracy works best when kept small. Big becomes messy. I just checked and found this site that says there are three basic types of Democracy:

    1. Direct Democracy (Switzerland)
    2. Preisdential Democracy (USA and France)
    3. Parliamentary Democracy (UK, Germany, Spain, Italy)

    Except the definition for Presidential Democracy says the President is elected by the people and the people do not elect the U.S. President. The Electoral College with about 500 people does that. What does that say about the U.S.?

    Is the U.S. really a democracy after the Supreme Court ruled in Citizen’s United that corporations are equal to individual voters, and what about a democracy with a crony capitalist economic system that allows corporations and/or billionaires the ability to actually buy and control elected state and federal representatives all the way to the White House?

  37. Great questions! It is definitely easier to make decisions with a small one person business. But, you don’t necessarily have feedback that would come with having a company with more people to help you get to that decision. The leader takes on the responsibility of making decisions but it is important that they take others viewpoint into consideration. A leader needs to lead and if workers don’t feel appreciated, then they won’t follow.

  38. The concept of democracy in business is a great one. In reality though, I’m not sure how plausible it would be. Especially once you bring things like shareholders into the mix with a big company, you have too many people with varying needs and agendas.

    The best employers realize that it is important to keep both the employees, the board, and shareholders happy and find some middle ground. Some people by personality do a better job at rallying people together and finding a compromise. However, it is impossible to meet everyone’s needs and there will always be upset on some level. And it is certainly not always the majority that wins.

  39. Catarina, I don’t believe it’s possible for democracy to exist in corporations, although I do believe that upper level management would benefit greatly from listening to their staff and getting their input. All you have to do is think of committees – they can meet for a year to discuss one issue and rarely come to a unanimous agreement.
    The same with government. They worry about support, power, getting re-elected. Those are their priorities.

  40. A true democracy is rare and idealist. Even here in the United States we don’t have a true democracy. Can you imagine how quickly business would come grinding to a halt if it had to take into consideration the thoughts, wishes and opinions of every employee? It’s just not feasible and most people realize and accept that.

  41. Hello Catarina

    I think this post truly speaks for situation of Pakistan.
    You are saying about the worth of one vote, but what can be situation, when a single person is stamping 1000 of votes for one person. Rigged elections can bring what type of results and I really like, when you said,”However, once in power they frequently proceed with doing something else”. The reasons are right, it can be when there are financial constraints etc. But I am wondering when in a poor country like Pakistan few families rule the country and come to stage turn by turn, promise people to bring back the looted money and then after establishing govt. what constraints are there, that stop them to do what they say in their campaign. Secondly, why we Pakistanis are so stupid that every time believe same person. What do you believe that democracy is solution for country like Pakistan?
    I am sorry, may be I am bit off the post, but as you have vast experience with international politics, may be you can shed some light on these questions. I hope I make sense as well.

  42. An interesting discussion. Democracy at the corporate level has no chance of succeeding without an engaged employee base that feels invested in the company that they work for. I think it has become less common for employees to think in terms of growing with their employer. Instead they often are looking to use their position as a stepping stone to move on to something else. I don't know that you can come up with a perfect democracy in a corporate environment but you can make meaningful moves in that direction which may pay off in terms of the commitment of the staff.

  43. You can't have a true democracy in a company. You can try to achieve consensus but the final decision always rests with the leadership, otherwise you will have chaos. What concerns me is that the leadership is not always looking out for the best interests of the organization. They enter into illegal practices. Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland plc and UBS AG have agreed to plead guilty to felony charges brought by the U.S.Department of Justice for conspiring to manipulate the price of U.S. dollars and euro. What does that say about our leadership in business — and government where scandals are reported every day.

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