Ground Floor: In the 1990s everyone working in financial markets knew all about IG Metall, the leading German union whose wage negotiations were a barometer for pay talks throughout the country.
German markets rose and fell depending on the outcomes of IG Metall talks, the results of which were watched as keenly as economic data from the Bundesbank.
IG Metall had a reputation for being a fierce negotiator, wielding significant power on behalf of its members.
Unions have a particular strength in Germany because workers' representatives hold up to half of the seats on the supervisory boards of large companies. This should be a good thing because it should help management and workers to have a say in their joint futures, but it hasn't always turned out like that - for the companies or the unions.
The main concern of those opposed to the current situation is that the relationship between the companies and the unions, far from helping to foster a mutual understanding of the best way towards growth and profitability, has resulted in management following the line of least resistance and making decisions based on short-term views linked to union demands. It means that sometimes the management board will shy away from making difficult choices because it is impossible to implement them based on the strength of the union representatives' opposition.
While the working relationship between unions and companies once seemed to cement Germany's European economic superiority credentials, now it seems to have engendered a dangerous apathy towards the future. Many analysts suggest that the relationship has evolved into one where union representatives support the chief executive in return for concessions towards themselves or their members.
As you read the reports of the current Volkswagen (VW) investigation, you can see where it can all go horribly wrong.
VW has always been a major employer in Germany and its management, unions and government are all linked into its decision-making processes. (The state of Lower Saxony owns around 18 per cent of the shares and German chancellor Gerhard Schröder once sat on the supervisory board.) Pay and conditions are generally good, with the workforce earning, on average, 20 per cent more than those in other German car manufacturers.
Last year VW chief executive Bernd Pischetsrieder, who joined the firm from DaimlerChrysler, put a range of cost-cutting measures to the board. IG Metall reacted with predictable fury as VW's chief suggested that up to 30,000 jobs could go (although he was being somewhat disingenuous since a VW spokesman said that the figure represented a worst-case scenario).
The union responded with a request for a 4 per cent salary hike and job guarantees. VW's proposal was for a two-year wage freeze and greater flexibility from the employees in relation to working conditions.
Of course, German employers have been trying desperately to obtain greater flexibility from their employees for years. When I first started working in financial markets I had to ring a German counterpart to check a deal. It was a minute past five, European time. There was no-one to talk to, the German back-office staff had gone home.
Anyway, all of the posturing on wages and conditions at VW sounds like flim-flam in the face of the recent announcement that state prosecutors have opened an investigation into possible fraud at the car manufacturer, citing allegations of kickbacks being received from suppliers and government officials.
More lurid, perhaps, are the allegations that VW's labour representatives have been taking all-expenses paid jaunts to Brazil and that prostitutes have been flown from Brazil to Germany in an effort to "buy off" the union negotiators. For those happily married men who wanted something for their spouses, according to an internal inquiry, 10 wives were given sums up to €2,000 for shopping trips. There have been resignations from the company and union representatives, although everyone denies wrongdoing.
The tragedy is that talks of investigations and fraud and collusion within publicly quoted companies hardly raises an eyebrow any more.
People are reading about VW and IG Metall on the front pages of newspapers because of the gossipy nature of the cost of junkets and shopping trips, but not because they are shocked that, once again, some members of management appear to think that a public company is a private plaything.
I know that many of us complain about the fact that company directors place far too high a value on their sometimes limited abilities but that doesn't stop them believing that they're worth it. In the tight-knit world of global business, everyone wants to find their place on the gravy train and those who should represent shareholders and those who should represent the workers seem to be jostling for prime position more and more.
The concept of bringing people together to discuss the future of the company in which they all work must surely be the right one. And yet, as I read through the reports of VW's problems, I can't help visualising that final scene in George Orwell's Animal Farm where the animals peer in the window to watch the meeting between their erstwhile representatives, the pigs, and the humans, and are unable to tell the difference.
The markets are taking a sanguine view. The talk is that the eruption of the scandal is a good thing since it will strengthen the company's hand in cost-cutting measures while forcing it to look at its management and labour relations in a different light. And more importantly for the moribund German economy as a whole, it will force legislators to do the same.
The government is looking at the rules regarding worker participation on supervisory boards. VW's share price is still close to its 52-week highs, which will obviously be a relief to the state of Lower Saxony and the other shareholders. It's an ill wind.
