(03a) Introduction to the Three-Power system (as we all know but have forgotten to use it properly) plus an external force

In my Introduction to these series of publications that said I would talk about a Three-Power system (and an external force). Many people know this system but equally many have forgotten how to use it properly. This system should be used at all levels: politics, economics, education, ... . However, recently I noticed one of the reasons why we are in the current mess is because we neglected this system of the Three-Powers (most importantly, respect for each power is essential), while many things start to become a One-Power system (or dictatorship)
Here I will explain why I fear everything will evolve into this One-Power system until an external force will bring a correction upon this One-Force system so we can re-introduce the Three-Power system, restoring the balans, and the external force can rethreat until it is needed ones again.

Recently, the French-Belgium bank Dexia almost went bankrupt if the French and Belgium governments would not have interfered (such as they did during the 2008 crisis. I was against this: bad banks should have been allowed the fail in 2008 while governments should have paid the people to prevent loss of there savings (one knows shares can go down so bad luck for the investors). People would have been able to re-invest that money in good banks who would become stronger. People working for bad banks would have known they could fail and loose lots of money. But by saving the bad banks, unequal competition developed making it harder for the good banks. No there is no other way then to try to save as much as possible of what is left from the banks as there is no money left anymore to pay people's savings back when the banks go down. Free market is free market; if one bends the rules, one mostly ends up worse than before.

However, as a consequence of Dexia's almost bankruptcy, many other companies and organisations are struggling: first the group ARCO is going into redemption, and now Ethias is asking money from the Belgium governments to prevent failure.

The group ARCO has a plan to save many people's money but big players will receive nothing and want to fight against this plan. Therefore, I think in the end no-one gets anything as it will become too expensive. ARCO explained that one problem was the lack of information they received from Dexia although they were one of the biggest shareholders of Dexia. Therefore, Dexia's shareholders were not able to make the correct decisions in relation to Dexia after Dexia's first failure. However, now ARCO sets up a website explaining there plans to save the coorporative capital. But at the same times they are hidding other information for the general public, thus they themselves do not inform everyone and as a result people will mistrust them. (Also, a commission to investigate the wrongdoings with Dexia is partly behind closed doors, hidding more things to the public).

In this and other cases I see a clear absence of the Three-Power system that should work as follows:
  • Normally, a company is run by a CEO, the highest ranking executive (the Head) in charge of total management, thus of the company. He runs the day-to-day business, together with other managers supporting the CEO in this duties (the executive board) but the CEO is responsible for the final decision. He also has to report to the...
  • ... Supervisory Board (or simply Board), the second power for control purposes and representing the Shareholders. Positions in the First and Second Power are held by different people, preventing a conflict of interest. The CEO reports to the Board about decisions made by the company and then the Board will be able to make a correct judgement about the policies of the company, and whenever necessary, should be able to redirect the decision made by the CEO (if necessary remove the CEO).
  • The Third Power are the employees (e.g. unions but also independent employees). They work for the company and need a healthy company in order to keep their job, therefore, in general they will try to do hard for the company.
And here is the problem: the CEO's (and other managers) didn't thrust their employees and Board (thus Shareholders) anymore. This resulted in a refusal to provide all necessary information to those who control the managers of the companies, often claiming the information was confidential. Therefore, wrongly made decisions were not communicated to the other powers who might have interfered and even remove the CEO if necessary. Nowadays we hear companies made loses in the past no-one know of. I think the executive board hoped that wrongdoings could be corrected so no-one would notice the mistakes made (but lies mostly hunts the lier and return as a boomerang).

I also blame the Boards (Shareholders) for not demanding better information, especially the big organisations (ordinary people mostly can't make it to those meetings). But they were blinded by greed: as long as the system made money and large dividends were paid, few questions were asked. And those who did ask an explanation where concidered by the others as troublemakers as the others feared asking questions might result in a punishment from the company because the company might pay a smaller dividend.

Finally, the third power, the employees, can be divided into two groups: the biggest group are in general those who earn less, the lower employees who are concidered by some as the uneducated ones. These people sometimes raised their voices and striked (especially during reorganisations whereby people feared to loose their job). But these strikes often disturbed other people in unrelated companies therefore gaining no sympathy from other people. The second group of employees are the higher ranking employees who earn more. Often they didn't support the lower paid employees during strikes, although they would challenge the Executive Board during meetings when their interests were threatened. (In Belgium, the problem is even worse because unions are partly responsible for a big division between these two groups: employees who intend to join a union have to join different parts of the union according to their ranking in the company ("arbeider" or "bediende"), therefore weakening the strength of the demands of employees within a certain company). And unions often fight against each other as they want more members than the other to be more dominant when they talk with the other powers. Thus, the Third Power reduces its strength because many represents only their own interests.

And indeed, I have to admit that I often don't like people interrupting me going to work if they have a problem with their employer. Because strikes often cause major disruptions for people not involved, the others start to accept that politicians (who don't like interruptions themselves) are introducing strikter laws against strikes. (In the UK, Margaret Thatcher was celebrated for breaking the unions, and even Tony Blair, leader of New Labour, tried to reduce the power of the unions even more). Often I don't agree with the unions: e.g. they slowdown the changes in the pension system while they should have explained their members that, as we live longer, this system needs to change if we want to prevent it from collapsing.

I think this evolution from evolving from a Three-Power system to a One-Power system will continue. People will demand a strong Leader in a company (increased strength of the First Power) who will be able to provide work. Many people will support limitations on the possibility to strike (decrease in the strength of the Third Power) (indeed, a strike should be a last resort and one should always try to limit the damage to other companies). Finally, many people will not like it when the Board will interfere (many people will think this will weaken the power of the CEO to make decisions) although others would like to see a stronger Board but more important: as long as the CEO is considered a strong Leader who "delivers" the shareholders a good dividend the Board will not want to interfere (therefore the strength of the Second Power will decrease and the strength of the First Power will increase further).

This will have consequences politically as people will vote conservative (as they did in Spain) because these politicians are concidered to support companies and reduce the power of unions. Of course, we need strong Leaders at companies, but also strong people in the other powers who dare to tell the Leader he is making the wrong decisions. But nowaday, a Leader who listens to others and changes his ideas is considered a weak leader. Many people in the other powers know we have to make unpopular decisions and they will talk about changes, but only on one condition: the big guys (First Power) also have to realise good times have become less good and they too have to lower expectations. And this is the main problem because these leaders who can make difficult decisions concerning other people can't make difficult decisions concerning regarding themselves (in fact they are real pussies). So, why should ordinary people accept unjust decisions? Result? A standstill.

Solution? Unions, leaders and shareholders should sit together and talk about solutions and hard choises for everyone. Together we can do it. E.g.
  • no increases in wages (except automatic indexation) and abolishment of bonuses;
  • all people will have to work longer (we need a system that allows breaks during our career to recharge ourselves as well as differences in retirement age because some jobs are much harder to do than other jobs);
  • no dividend is paid out as long as these bad times last so companies are not stretched to the limits;
  • ..... (more ideas?).
In some companies this will happen, in others ... dream on. And certainly not in banks as they are too big to fail. Until maybe that one day when a decision of a bank will result in the loss of lots of money form a powerful person.


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