#469 1896 · Carl Zeiss Foundation (Ernst Abbe) · Precision optics manufacturing
Ernst Abbe wrote into Zeiss's founding charter that firing a longtime worker would cost the company money, not just the worker
the problem
Manufacturers could lay off workers in a downturn at essentially zero cost to themselves
background
In 1890s German manufacturing, as everywhere else, the standard response to a demand downturn was to lay off workers immediately — severance, when paid at all, was a one-time discretionary gratuity with no binding formula, and it stopped the moment a firm decided to stop offering it. Germany's own state unemployment insurance did not exist until 1927, so a laid-off worker had no institutional backstop at all; the entire cost of the firm's demand swing landed on the person who had no say in causing it.
The available answers were the same two options every era offers: trust employers to be decent, which any successor owner can quietly stop honoring since a goodwill gratuity binds nobody, or wait for the state to eventually mandate protection, which was decades away. Both left the layoff decision costless to the one actually making it — nothing internal to the firm pushed against treating a trained, tenured workforce as a disposable buffer for absorbing demand swings.
what everyone would do
The available answers in the 1890s were the same two options every era offers: trust employers to be decent, which is worthless once ownership changes hands since a goodwill gratuity binds no successor, or wait for the state to mandate protection, which for Germany was three decades away. Both leave the layoff decision entirely costless to the one making it.
what they saw
The problem was never that employers lacked sympathy for the people they laid off — it was that nothing made a layoff cost the employer anything, so nothing internal to the firm pushed back against treating a tenured workforce as a disposable buffer. Abbe didn't petition the state to protect workers or ask future owners to stay generous; he wrote a scaling, formulaic payment obligation directly into the one document a future owner could not simply revise away — the company's own founding constitution.
the move
As sole owner of Carl Zeiss and author of its 1896 Deed of Foundation — the company's own legally binding constitution, not a policy a future owner could revise away — Ernst Abbe wrote a "Compensation for Dismissal" clause (Art. 77) directly into it. Any employee dismissed for business or operational reasons, not misconduct, after six months' service became legally owed continuing pay scaling with tenure: one-sixth of total service time as continued wages for six months to three years' service, a full six months' wages for three to five years, and beyond five years — where a pension right had already vested — the compensation was recalculated to include a quarter of the value of the lost pension.
why it works
Because the compensation formula sat inside the legally binding Deed of Foundation rather than a revocable policy, dismissing a tenured worker carried a real, non-negotiable balance-sheet cost that scaled directly with the years the firm itself had chosen to keep that person employed — a quarter of a vested pension's value once tenure passed five years. That is what turned a sympathetic gesture into a structural deterrent: the company's own 1910 account notes the clause operated "indirectly... against dismissals as such," and real disbursements — over 28,000 Marks in the worst recorded year — show the obligation was genuinely binding, not symbolic.
the payoff
The company's own 1910 published account gives worked examples with exact Reichsmark figures: a 23-year-old with 66 weeks' service received 11 weeks' pay (231 Marks) on dismissal; a 34-year-old turner with roughly six and a half years' service and a vested pension received 1,098.50 Marks; a worker with 16 years' service received 2,439.84 Marks. Real annual exposure varied directly with layoff volume — in 1902/3, when 60 to 70 opticians had to be let go, Zeiss disbursed 28,675 Marks under this clause alone, against 2,150 to 13,900 Marks in other recorded years — audited, checkable money the firm had bound itself in advance to pay.
where it breaks
The mechanism only holds while the firm can actually afford the formula it wrote for itself — pushed too far during a genuine existential downturn, an uncapped scaling severance obligation could turn a survivable layoff round into a cash crisis for the company itself, which is exactly why Abbe capped it at six months' wages rather than leaving it open-ended. It also depends on the obligation living somewhere a future owner cannot casually amend: an ordinary company policy, or a founder's personal promise, does not survive a change of ownership the way a legally binding foundation charter does.
what came after
By the company's own account, the clause functioned "not only [as] considerable security against nonemployment but indirectly operate[d]... against dismissals as such," decades before Germany's 1927 unemployment insurance or any modern jurisdiction's statutory severance law existed. ZEISS's own corporate history today credits the 1896 foundation charter, of which this clause was one part, with making Zeiss and its sister company SCHOTT "forerunners of modern social legislation."
references
- [1]System of Employment at the Carl Zeiss Works at JenaCarl Zeiss Works (official English-language pamphlet by Friedrich Schomerus), 1910archive.org
- [2]Ernst Abbe — Physicist, inventor, entrepreneur & social reformerZEISS (corporate archives), 2024zeiss.com