Board-level employee representation in Europe
This comparative study provides a brief summary and overview of the legislation and other general regulations on board-level employee representation in the EU Member States and Norway, adding empirical evidence on practice where available. The study also provides an overview of the national debates among the social partners regarding the European Company Statute and its possible implications for national systems of board-level representation.
The representation of employees on the supervisory boards, boards of directors and similar bodies in companies remains an important form of employee participation in many EU countries. The revival of the European Company Statute following the 1997 Davignon report, with the possibility of further progress during 1998, gives the issue a new relevance at EU level - the "standard rules" in the most recent proposal would give employees seats on the European Company's board in some circumstances.
The aim of this comparative supplement is to provide an overview of national provisions governing board-level employee representation, whether laid down by legislation or collective agreement. It briefly examines the social partners' perceptions and the experience of board-level representation. It also summarises the current position on the draft European Company Statute and examines the social partners' views on this proposal at European and national level.
The study draws on the contributions of the national centres of the European Industrial Relations Observatory (EIRO) describing the situation and developments in the 15 EU Member States, plus Norway.
The concept of board-level employee representation.
Board-level employee representation involves employees representatives who sit on the supervisory board, board of directors, or similar structures, in companies (this section draws on "Workers directors - a comparative study of five countries (Finland, Germany, Greece, Ireland and the Netherlands)", Mark Carley, Hans Böckler Stiftung/Worker Directors' Group (Ireland), Düsseldorf (1998)). These employee representatives are directly elected by the workforce, or appointed in some other way, and may be employees of the companies, officials of organisations representing those employees, or individuals considered to represent the employees' interests in some way. The presence of employee representatives in the board-level structures of a company is an indirect, or representational, form of participation. It involves the expression of employees' collective interest through the intermediary of representatives and differs from direct participation in a number of ways:
- it focuses on the workforce as a whole rather than individual employees or workgroups;
- its fundamental aim is the achievement of democratic input into company decision-making rather than fostering employee motivation and commitment;
- it is in general regulated by legislation or collective agreements, rather than being a unilateral management initiative.
Board-level representation also differs from other types of indirect participation such as works councils in that it attempts to provide employee input into overall company strategic decision-making rather than focusing on information and consultation on day-to-day operational matters at the workplace.
Although one may distinguish board-level representation from other forms of employee representation in the enterprise and from collective bargaining by trade unions, there are links to works councils and unions which in many cases are involved in board-level participation by having nomination or appointment rights, or in terms of board-level employee representatives' membership in trade unions.
Finally, the content, meaning and impact of board-level representation differ with the degree of employee representation. In most cases in western Europe, employee representatives are in the minority, and board-level participation is associated with the obtaining of information and understanding and the expression and exchange of opinions, views and arguments about an enterprise's strategy and direction. In a few cases, however, when employee representatives are equal in number to those of shareholders or other parties, issues of control, veto and real influence over company strategy - sometimes known as "co-determination" - come into play.
Systems of board-level employee representation
Board-level representation is a widespread form of employee participation across Europe. Systems of board-level employee representation in different national industrial relations systems vary widely. Table 1 below sketches out briefly the key characteristics of the systems of board-level employee representation in the countries covered by EIRO.
|Austria||Austrian companies have supervisory boards which oversee the action of the executive board, which runs the business on a day-to-day basis. The works council has the right to choose one-third of the representatives of the supervisory board in companies with at least 40 employees.|
|Belgium||In Belgium, there is no system for the representation of employees on the management, supervisory or administrative bodies of private companies, whatever their structure, in the strict sense of the term. Employee representation to management is provided by works councils and workplace health and safety committees. However, in some public service companies such as railways, public transport and universities, employees have seats on the boards.|
|Denmark||Employees in Danish companies employing at least 50 employees are entitled (though not obliged) to elect at least two representatives on the board of directors and up to one-third of the total number of members.|
|Finland||In companies with 150 and more staff, employees have the right to board-level representation. Much of the detail, however, is left to local negotiation between the employer and the trade unions. There must be between one and four employee representatives, who should make up one-fifth of the body in which they sit.|
|France||In private sector companies, the law provides for two or four representatives of the works council (depending on the number of managers and engineers employed and thus the number of electoral colleges for the works council) to attend meetings of the board of directors or supervisory board in a consultative capacity. In public sector organisations, elected employee representatives constitute up to one-third of the board and act as full members. Furthermore, in all limited companies, the shareholders may voluntarily decide to include elected employee representatives on the board.|
|Germany||Employees in companies with 500 employees or more have representation on the supervisory board. The proportion of worker representatives varies from one-third, in companies with between 500 and 2,000 employees, to one-half, in companies with more than 2,000 workers. In these larger companies, the chair in effect represents the shareholders and has the casting vote. The one exception is the larger coal or iron and steel companies where the chair is independent. In the coal, iron and steel industries, the employee representatives can also appoint the "labour director", who is part of the management board.|
|Greece||Employee representation on the board exists only in the "socialised sector", such as public utilities and transport, where there are two levels of worker participation. The highest level in each company is the "representative assembly of social control", which sets broad policy objectives. Employee representatives constitute up to one-third of this group, with another third from consumer groups and local authorities and one third one-third from the government. Below this there is the board of directors, where again one-third of the members are elected by the workforce.|
|Ireland||There is no statutory requirement for board-level representation in the private sector in Ireland. In a number of state-owned companies, employee representatives have one-third of the seats on the main boards.|
|Italy||Although the Italian Constitution recognises "the rights of workers to participate in management, in the manner and within the limits prescribed by law", this has never led to legislation which provides for board-level representation in Italy, which is largely absent. However, some company-level agreements provide for the participation of employee representatives in management boards or supervisory boards, usually through forms of employee share-ownership programmes.|
|Luxembourg||Employees have representation on the boards of companies which are more than 25% state-owned or which receive state aid for their main business, and of all companies with more than 1,000 employees. In the latter case, the employee representatives make up one-third of the board, while in the former there is one employee representative for every 100 employees with a minimum of three employee representatives and a maximum of one-third of the total board.|
|Netherlands||Companies with more than 100 employees, a works council and a set amount of capital must set up a supervisory board. The supervisory board elects its own members and the shareholders, the works council and the executive board have the right to recommend new members. There is no fixed proportion of employee representatives on the board: a works council may uses its right of recommendation, but employees do not necessarily have a real representative on the board. According to the Civil Code, members of the supervisory board must take the interest of the company and the undertaking as a whole into account in the fulfilment of their duties; they are not employee representatives as such.|
|Norway||A significant proportion of private sector enterprises are regulated by legislation that safeguards employee representation on company boards - usually one-third of the total. In some, but far from all, state and municipal institutions, political authorities have decided that employees should be entitled to be represented on the boards. Similar voluntary arrangements may be found in companies that are not covered by the traditional legal framework.|
|Portugal||The appointment of employees' representatives to the governing bodies of state corporations or other public entities is provided for expressly by the Constitution and by the Law on Workers' Committees. The legislation on public corporations also provides for the appointment of an employees' representative to each of the governing bodies: board of directors and supervisory board. However, this legislation is not complied with in practice. There are, in fact, no known cases in which employees' representatives have been appointed to a corporation's governing bodies. In the private sector, the law expressly states that recognition of this right depends exclusively on the wishes of the parties involved. In practice, there are no known cases of any significance in which this right has been recognised.|
|Spain||There is no statutory right for employees to have any representation at board level. However, as a result of tripartite agreements, there is some union representation on the boards of the largest public sector companies. There is also regulation of board-level employee representation in institutions with a special legal status. This is the case for savings banks, which are subject to specific regulations because they are foundations of a private nature with "charitable" aims that act according to market criteria.|
|Sweden||Board-level representation is widespread in Sweden. In almost all companies with more than 25 employees, employees have the right to two board members. In companies with more than 1,000 employees engaged in at least two types of businesses, this rises to three board members. The employee representatives can never be in a majority.|
|United Kingdom||There is no legal right for workers to have any representation at board level. There are very few examples of the existence of "worker directors" except in the area of management buy-outs of particular companies, mostly in the recently privatised or deregulated areas of the economy, eg the transport industry.|
Sources: European Industrial Relations Observatory; and"Worker representation in Europe", Labour Research Department, LRD booklets, March 1998.
Legislation plays the key role in regulating BLER, where it exists to any significant extent, in all cases apart from Spain, where agreements are the basis of some public sector arrangements. Collective bargaining generally seems to play a very limited role in this field. In Germany, a number of collectively agreed provisions exist in the private sector (at companies such as the newly-merged Thyssen Krupp AG). A notable agreement was concluded during the privatisation of Aceralia in Spain, while there are also a number of company agreement in Italy. In Norway, collective agreements provide employees with the right to board representation in a few areas not covered by the law.
The regulation of board-level employee representation
Arrangements for board-level employee representation vary widely. Some EU Member States provide a statutory right to such board-level representation, some do not. Table 2 gives a flavour of the diversity that exists.
Of the 16 countries covered by EIRO, only three (Belgium, Italy and the UK) have no general legislation or widely applicable collective agreements providing for board-level representation in at least some types or company. However, even in Belgium and Italy, there may be specific provisions for board-level employee representatives in some public companies - for example, the state railway in Belgium and a number of state holding companies in Italy. As in some other areas of industrial relations, the UK stands alone in having no statutory form of board-level representation, or significant collectively agreed provisions.
Of the 13 countries with board-level representation, this applies only to some or all wholly or partially publicly-owned enterprises in Greece, Ireland, Portugal (though here the legal provisions are not implemented in practice) and Spain. Relatively comprehensive legislation on board-level representation can be found in Austria, Denmark, Finland, France, Germany, Luxembourg, the Netherlands, Norway and Sweden.
|Country||Statutory provisions/collective agreements||Public sector board-level representation only||Type of regulation: legislation, collective agreement or other|
|Austria||Yes||No||1965 Stock Act; 1974 Labour Constitution Act; 1974 Directive on Employee Representation on Supervisory Boards.|
|Belgium||No||-||No regulation by law or collective agreements.|
|Denmark||Yes||No||Two separate laws, one concerning joint stock companies (A/S) and one concerning companies with limited liabilities (Aps).|
|Finland||Yes||No||1990 Act on Personnel Representation in the Administration of Undertakings.|
|France||Yes||No||A 1946 decree provides for the consultative participation of members of the works council in the board of directors or the supervisory board. A 1983 law on the democratisation of the public sector provided for elected employees on the boards of all government-run companies. A 1986 decree allows for companies to opt for board-level employee representation. Additional collectively agreed provisions exist, but do not improve upon statutory measures.|
|Germany||Yes||No||1951 Coal, Iron and Steel Industry Co-Determination Act; 1952 Works Constitution Act; 1976 Co-Determination Act. A number of collectively agreed provisions exist in the private sector.|
|Greece||Yes||Yes||Law 1365/1983 on "socialisation of state-run undertakings and utilities" of 1983.|
|Ireland||Yes||Yes||Worker Participation (State Enterprise) Acts of 1977 and 1988.|
|Italy||No||-||Neither legislation nor comprehensive collective agreements. Some company-level agreements.|
|Luxembourg||Yes||No||1915 Companies Act; Law of 6 May 1974 introduced workers' representation at board and auditors' level.|
|Netherlands||Yes||No||1971 "Structure Law"; Civil Code (Dutch company law).|
|Norway||Yes||No||1976 Companies Act; 1980 Foundations Act; and 1985 Act on general and limited partnerships. No uniform set of rules regulating employees' rights to board-level representation in the public sector. Only in a few cases is the right to board representation regulated by national collective agreements - eg that for cooperatives. Improvements by collective agreement are rare.|
|Portugal||Yes||Yes||Portuguese Constitution; 1979 Law on Workers' Committees; 1976 and 1984 legislation on public corporations. NB - legislation not implemented in practice.|
|Spain||Yes||Yes||No legislation. Some tripartite agreements and specific regulations on board representation in certain types of public companies and in organisations with a special legal status.|
|Sweden||Yes||No||1987 Act on Board Representation for Private Sector Employees (original legislation dates from 1973).|
|United Kingdom||No||-||No legal right for workers to have any representation at board level.|
Sources: European Industrial Relations Observatory;"Workers directors - a comparative study of five countries (Finland, Germany, Greece, Ireland and the Netherlands)", Mark Carley, Hans Böckler Stiftung/Worker Directors' Group (Ireland), Düsseldorf (1998).
Systems of corporate governance
Across Europe, one may distinguish between three broadly defined systems of corporate governance for the types of company in which there is board-level representation of employees.
- Dual systems. The performance of the management board is monitored and controlled by an additional institution, the supervisory board (for example, in Germany, the supervisory board can normally appoint and dismiss the management board and review its performance and is provided with financial and other information). The supervisory board is normally composed of representatives of the shareholders (and often of employees), while the management board is made up of managers employed by the company. Countries with board-level representation which fall into this broad category are Austria, Denmark, Germany, Greece, the Netherlands, and Portugal.
- Monistic or single-tier systems. In many countries there is a single institution at board level which is responsible for the management of the company, usually the "board of directors". This body is usually responsible for the control of the company, though there is no formal distinction between supervisory and management functions. The board may contain members of the enterprise's management alongside members from outside, representing shareholders and sometimes other parties. Countries with board-level representation which may be characterised as having monistic systems of corporate governance are Ireland, Luxembourg, Spain and Sweden (Italy and the UK also fall into this category). As well as board of directors, such single-tier institutions may be called the "administrative board" ("conseil d'administration"). It is noteworthy that the regulations governing monistic systems are quite diverse.
- Mixed systems. Of the countries with board-level representation, Finland, France and (to a lesser extent) Norway have a combination of dual and monistic systems.
The position in each country with board-level representation provisions is summarised in table 3.
|Country||System||Board where employee representatives sit (and proportion)|
|Austria||Dual||Employee representatives have one-third of seats on the supervisory board.|
|Denmark||Dual||Employee representatives have one-third of seats on the supervisory board.|
|Finland||Mixed||Employee representatives may sit in any body nominated by the management; in the management board, supervisory board or in the management group. The number of personnel representatives may total one quarter of the number of the rest of the members in the body in question (ie one-fifth of the total membership), with a minimum of one and a maximum of four.|
|France||Mixed||In the private sector, two or four works council members may attend meetings of the board. In limited companies which have voluntarily reserved seats on their boards for elected staff members, these may number no more than four (or five, in limited companies quoted on the stock exchange) or make up more than one-third of the total of other board members. Representation is on the board of directors though, in the very rare cases where the board of directors has been replaced by a supervisory board, the staff are represented in the latter. In government-run companies, employees have two seats on the board of directors where there are 200 to 1,000 staff, and one-third of the seats where there are over 1,000 staff.|
|Germany||Dual||In companies with 500 employees or more, employees have representation on the supervisory board. The only exception is the labour director in the coal, iron and steel industries, who is part of the management board. The proportion of workers representatives varies from a third in companies with 500-2,000 employees, to a half in companies with more than 2,000 workers.|
|Greece||Dual (in "socialised" sector)||In state-run "socialised" companies, employee representatives have up to one-third of the seats of the seats on the "representative assembly of social control" The administrative council is made up of six to eight government representatives and two to three employee representatives.|
|Ireland||Monistic||In some public sector companies, employee representatives have one-third of the seats on the board of directors.|
|Luxembourg||Monistic||In the relevant private sector companies, employee representatives have one-third of the seats on the board of directors, and no fewer than three members. In companies with state involvement, there is one employee representative for every 100 employees with a minimum of three employee representatives and a maximum of one-third of the total board.|
|Netherlands||Dual||Nominees of the works council sit on the supervisory board.|
|Norway||Mixed||Employee representatives have up to one-third of the seats on the board of directors. In the relatively few cases where companies have "corporate assemblies" or a similar body in addition to the board, employees are usually represented in both bodies.|
|Portugal||Dual||Although the law provides for one representative in both boards of directors and supervisory boards of public corporations, in practice there is no board-level employee representation.|
|Spain||Monistic||In some public sector companies, employee representatives sit on the board of directors.|
|Sweden||Monistic||Workers are entitled to up to three representatives on the board of directors of relevant private and public companies (though they may never be in the majority).|
Source: European Industrial Relations Observatory.
Selection of employee representatives
Legal regulation and practice is quite diverse regarding the selection of employee representatives to sit on the board - see table 4 below. Elections among the workforce concerned is a basic method of selecting representatives, applying in Denmark, Finland, Germany (except for the parity co-determination [Montanmitbestimmung] system), Greece, Ireland, Norway, and Portugal. In Austria, it is the works council and in Luxembourg the employee representatives that appoint the board representatives (though in the latter case, trade unions also appoint representatives in the iron and steel industry). In France, works councils appoint (non-voting) board representatives in the private sector, while trade unions play a decisive role in the selection of board representatives in the public sector. In Sweden, it is the local branches of the trade unions which appoint the board representatives. In the Netherlands it is the supervisory board which co-opts its own members, with the works council being one of the bodies with nomination rights.
|Austria||Appointment by the (central) works council from amongst its ranks. Appointees must be elected works council members - ie trade union appointees on the works council cannot be delegated.|
|Denmark||Elected directly by workforce from among employees.|
|Finland||The workforce elects board representatives - who must be employed by the undertaking - from among candidates nominated by trade unions.|
|France||In private sector companies, representatives attending board meetings in a consultative capacity are appointed by the works councils from among their members (all company employees), with proportional representation among occupational groups. In government-run companies where full board representation is obligatory - and in private sector companies which have opted for such representation - board members are company employees elected on the basis of slates run by the five nationally-recognised unions: CFDT, CFE-CGC, CFTC, CGT and CGT-FO.|
|Germany||(1) In companies covered by the Coal, Iron and Steel Co-Determination Act, trade unions and works councils propose nominated candidates to the shareholders' meeting for election; this is purely a formality and the meeting must confirm their nominations. The "additional" board member, who provides a casting vote where necessary, must be elected by the shareholders' meeting on the proposal of the majority of both groups on the supervisory board. The company's management board must include one member who is responsible for personnel matters, the so-called labour director, who may not be elected against the majority vote of the employees' side on the supervisory board. Four of the employee supervisory board representatives must be employed in establishments belonging to the group, and must comprise three blue-collar workers and one white-collar worker. The employee representatives are elected by a secondary election procedure, and a labour director must be appointed in this case also. (2) In companies covered by the Works Constitution Act, employee representatives are elected by the entire workforce in a secret ballot. (3) In companies covered by the Co-Determination Act, the seats allocated to workers' representatives are divided between company employees and candidates proposed by trade unions represented in the company. In principle, representatives in companies employing fewer than 8,000 employees are directly elected by the workforce, while those in larger companies are elected through a delegate-based electoral college system. In both cases, employees may opt to switch to the other election method. Candidates for election as white-collar or blue-collar workers must be nominated by one-fifth of all their category of staff, or 100 such employees. Managerial staff representatives must be nominated by 5% of their category, or 20 such staff. Candidates for election as trade union representatives on the board must be nominated by unions represented in the company.|
|Greece||Board-level employee representatives are elected by direct, universal vote, by a system of proportional representation, and may be recalled in the same way. Nomination is by trade unions and representatives may be company employees or external parties.|
|Ireland||Representatives are direct elected by the workforce under a proportional representation system. Candidates may be nominated only by a trade union or other organisation (such as a staff association), which is recognised for collective bargaining purposes by the company concerned. Representatives must be company employees.|
|Luxembourg||Employee representatives on the works council appoint board representatives from among the company's workforce, with proportional representation of both blue- and white-collar workers, whose electoral colleges conduct separate ballots. In the iron and steel industry, the most representative national trade unions directly appoint three of the board representatives, who need not be company employees - the distribution of these seats between the unions is to be agreed in advance.|
|Netherlands||In companies that fall under the "structure" regime, the supervisory board elects its own members. The general meeting of shareholders, the works council and the executive board are entitled to recommend new members for the board when there is a vacancy, while the shareholders and the works council have the right to object to a nomination. Employees of the company (or dependent companies) may not be members of the supervisory board, and the same applies to union officials who are involved in collective bargaining with the company.|
|Norway||Employee representatives are chosen by and from the employees. They are elected by all employees, with the exception of the chief executive officer (managing director), and employees owning more than 10% of the share capital. The elections may take various forms - majority voting, proportional representation or dividing the company into constituencies. The demand for proportional representation or constituency voting may be put forward by trade unions representing a certain number of employees, or alternatively by a certain number of employees. In companies with trade union branches, it is common for the unions to nominate candidates for the board.|
|Portugal||The employees' representative on a public corporation's board should be elected by and from among the employees themselves. NB - legislation not implemented in practice.|
|Spain||In the case of the public sector metalworking agreement, trade unions that have obtained at least 25% of the number of workers' delegates or works council members in workforce elections are entitled to board-level representation. There is one representative per union with a right to participate, and if only one union has this right it has two representatives. The unions may appoint and dismiss their representatives according to the criteria they see fit. There is no provision that the representatives must be company employees, although in fact this is usually the case.|
|Sweden||Board representatives are appointed by the local branches of the trade unions bound by collective agreements with the employer. The unions should agree with each other on the distribution of the seats in the board. The board representatives should as a rule be persons employed in the company (or the group), though this is merely a recommendation of the law. It is possible to appoint an outsider, for example a trade union official. This possibility is utilised above all in small companies were the local union feels that it does not have enough resources to take on this task as well.|
Source: European Industrial Relations Observatory.
With few variations and exceptions, employee representatives enjoy the same rights, responsibilities and obligations as other board members. In France, works council-appointed representatives have only a consultative role. However, they receive the same information as the other members of this authority. Since 1982, they now have the right to present lists of requests for information and must receive a documented response. Elected board representatives in France have the same rights and obligations (confidentiality) as shareholders' representatives and representatives appointed "due to their expertise". In the Netherlands, all members of the supervisory board have equal rights but according to the law, members of the supervisory board are not allowed to act as representatives of particular interests. In Portugal, the law says nothing about the status of the employees' representatives and seems to leave it for the statutes of each public corporation to define. However, in practice, no employees' representatives have been appointed.
Empirical evidence on board-level representation
With few exceptions, there is little empirical information available on the extent and importance of the board-level representation of employees across Europe. The limited data available are set out below:
- Austria. There are about 1,800 to 2,000 employee representatives on supervisory boards in approximately 1,000 enterprises. These numbers include trade union officials elected by companies' general assemblies, either because the Austrian Trade Union Federation (ÖGB) is a direct or indirect shareholder in the enterprise or because relations with the ÖGB are of special importance.
- Denmark: Employees in 1,400 out of some 4,500 companies eligible for employee representation, have made use of the right to board-level employee representation. Roughly 30% of all eligible companies and 36% of companies in the industry sector have board-level employee representation. Of the 24,000 shop stewards in trade unions affiliated to LO, some 6% are also board-level employee representatives.
- Germany: According to a recent empirical analysis conducted by the "Commission on co-determination" (DE9806267F), the number of companies subject to the specific form of co-determination in the coal and steel industries currently stands at 45, covering around 400,000 employees. Furthermore, 728 companies with about 5 million employees were covered by the 1976 Co-determination Act in 1996.
- Ireland. As a proportion of the total Irish workforce, the Worker Participation (State Enterprise) Acts cover under 10% of employees. There are approximately 60 worker directors in total.
- Netherlands. Some 580 companies were covered by "structure law" in 1992. A 1994 survey of 103 of the largest companies found that in 46% of cases, one or more members of the supervisory board had been nominated by the works council. In 42%, one or more members of the board had some kind of special relation with the works council (exchanging information, more or less regular contacts etc). Some 10% of works councils received information on a new supervisory board appointment less than a month in advance, 38% more than three months in advance and the rest in between. Some 20% of works councils were not consulted at all on appointments and 15% only in some cases. In the 10 years before 1994, 35% of works councils had never used their right to nominate a member of the supervisory board, 21% only once, another 21% twice and only 12% three times or more (11% unknown). Nominations by the works council are not always successful: almost one-third of works council had never succeeded in having their candidate appointed. Only a small minority (some 15%) of the works councils had used their right to object to a proposed appointment.
Perceptions of board-level representation
In those countries where board-level employee representation is a long-standing feature of the industrial relations system, covering much of the economy, it appears today to be relatively accepted and uncontroversial on all sides - this seems generally the case in Austria, Denmark, Finland, Germany, Luxembourg, Norway and Sweden.
This is not to say that in some of these countries, trade unions do not seek a further extension or improvement of existing provisions. Germany's DGB confederation, for example, still wants to expand and develop co-determination, with the advanced coal, iron and steel sector model as the yardstick. The BDA employers' organisation, for its part, notes that Germany has the world's most far-reaching and differentiated co-determination rights and, while not against co-determination in principle, believes that it is indispensable that shareholders and employers should have the "ultimate right to decide" in order to secure the functioning of the company. BDA thus opposes parity co-determination in line with the coal, iron and steel model.
The Netherlands, as we have seen, has a long-standing and widespread form of board-level representation, but an indirect one. Since its establishment in 1971, the trade unions have criticised the system and - along with a majority of works councils - called for a "German-style" system, with direct appointment of some supervisory board members by the works council and/or unions. Most members of executive and supervisory boards favour retaining the present system, while representatives of shareholder interests are the most outspoken critics of the present system, seeking more rights for the shareholders in the appointment (and dismissal) of members of the supervisory board.
Among those countries with a limited form of board-level representation, often restricted to all or part of the public sector - such as France, Greece, Ireland, Spain - debate tends to focus on the system's retention in the public sector or extension into the private sector, and the positions of the parties differ. In Spain, employers are very reluctant to introduce this type of representation more widely, claiming that it falls outside the normal culture of labour relations in Spanish private companies. Trade unions, for their part, seem more concerned to maintain their representation on the boards of public companies that are being privatised (privatisation can be a major challenge in those countries where board-level representation is restricted to the public sector, or where specific forms apply in this sector) than to seek the extension of the system to the private sector. In Greece, there are reportedly signs that the Government has lost enthusiasm for public sector board participation, while trade unions, with some exceptions, do not appear to have particularly well thought-out positions on this and other participation issues, with many still preferring a more confrontational approach. Employers remain adamant in their opposition to representation of workers on company boards, because they believe that this threatens and weakens their management prerogatives. In France, trade unions seem divided on the issue and employers opposed.
In Ireland, although unions have historically been somewhat reticent about statutory board-level representation, preferring collective bargaining, and were in favour of stronger provisions prior to the 1977 legislation, they are now officially in favour of the current provisions. Unions and their representatives have had a strong influence on the shaping of initiatives, while the majority of board representatives are also trade unionists and all the companies covered by the legislation are highly unionised. Private sector employers - whose reaction to the initial legislation was largely muted - generally oppose any legislation enforcing the introduction of employee participation. They favour a voluntarist approach, arguing that statutory provisions would have a negative impact on foreign direct inward investment - see below under "European Company Statute"..
In countries with non-existent or extremely limited board-level representation - Belgium, Italy and the UK - the subject does not generally seem to be particularly high on the social partners' agendas. In the UK, for example, after a surge of interest in the 1970s, the issue has not had a high profile. The TUC union confederation still supports the idea of worker directors but has not made any notable efforts to promote their introduction, while the CBI employers' organisation believes that it is a matter for individual companies to decide whether they want employee directors and does not actively promote such practices. In Italy, however, after years of antagonism to the idea, unions now seem more interested. In April 1998, the Cisl union confederation circulated a proposal for the institution of "participation committees", in order to start a discussion with the Cgil and Uil confederations to reach a unitary position on the European Company Statute (see below). The proposed participation committee would be an ad hoc body for the representation of non-shareholder interests, added on to existing company structures. It would be a joint body with half the members made up of workers' representatives and half of representatives appointed by the management board. Portugal is in a slightly unusual position, having legislation for board-level representation which had not been implemented in practice. While trade unions have made periodic calls for the legislation's implementation, the issue does not seem to be particularly "live".
The practice of board-level representation
The practice of board participation and its impact are very hard to gauge, given a general lack of research and evidence. However some evidence and impressions are available on the experience of board-level representation in a number of countries - notably those with well-developed systems - and the benefits and problems which arise.
Germany is arguably the country with the greatest experience of board-level representation and the most advanced system, and is thus likely to furnish the most evidence on practice. In spring 1998 a "Commission on co-determination" (Kommission Mitbestimmung) made up of 35 high-level experts - including representatives from trade unions and employers' associations, managers and works councillors, state representatives, labour lawyers and industrial relations experts - presented a comprehensive report on the co-determination situation in Germany (DE9806267F). The Commission sees co-determination - of which board-level representation forms a major part - as a major supporting factor for the German economic model, which is traditionally based on export-led, high-quality and high-productivity production. Against the view of some recent neoliberal critics, who see co-determination as a bureaucratic obstacle to efficient management decisions and structural change, the Commission maintained that co-determination has not prevented German companies from carrying out successful globalisation strategies. On the contrary, co-determination might help German companies successfully to adapt to recent structural economic changes by following a "cooperative modernisation strategy". The Commission sees co-determination as a factor which mainly strengthens rather than weakens German competitiveness.
In practice, it is reported that Germany is witnessing a growing diversity in the way co-determination is implemented and the growing importance of informal additions to and modifications of formal co-determination legislation. This is occurring in the context of cooperative corporate cultures, in which the joint search for appropriate solutions to problems takes the place of formalistic claims to legal entitlements. Among the consequences of co-determination at company level, its proponents emphasise the productive effects of consensus and cooperation, the support for "social peace" and the contribution made by co-determination to a corporate culture based on trust, and to the greater understanding of the workforce for the needs and interests of the company. On the other hand, fears have been voiced that the presence and influence of employee representatives on the supervisory board could result in a preference for structurally conservative corporate strategies, shielding management from control by shareholders and the capital market and leading to technological immobility, excessive emphasis on personnel and employment-related aspects in German firms, and excessively consensus-oriented management. This would negatively affect economic efficiency, flexibility and adaptability. In response it is claimed, among other items, that the long-term orientation of corporate strategies associated with creates advantages and that the problems of implementation are taken into account at an early stage of firms' decision-making processes.
General, though perhaps hard to pin down, advantages for the industrial relations system are reported from some countries - helping maintain industrial peace in Austria or affecting positively the cooperation between management and employees in Finland. In Ireland, board-level representation is said to bring improvements in communications between the board and its employees, while worker directors bring significant industrial relations experience to company boards. More concretely, for employees and their representatives, a key benefit of board participation frequently referred to is access to information. For example, from Austria it is reported that board-level representation provides early information to works councils on strategic moves planned by the company. It also opens an avenue for employees to discuss alternatives and, if necessary, to offer concessions in a bid to forestall developments deemed undesirable. A high level of information provision is also seen as a positive factor by trade unions in Spain. In Sweden, union representatives on boards can inform their colleagues at an early stage of the company?s strategic plans and help them to prepare for coming changes. They can also ensure that the information given by the employer to the unions as the basis for negotiations is correct and relevant. Indeed, it appears that unions have always seen board participation as primarily a means of obtaining information of the companies? plans, rather than greatly increasing the influence of workers.
Beyond information, the exercise of real influence by board-level employee representatives is rarely reported. Such influence is described in France or Greece, for example, as very limited. However, this is not universally the case: an increased employee influence is cited as a benefit in Finland, while the Dutch model has at least, it is reported, probably resulted in the supervisory paying some attention to the interests of the employees, and more than it did before the introduction of the relevant legislation in 1971.
Specific problems that seem to have emerged in the practice of board-level representation include the following
- in Austria, it is reported that supervisory boards, in practice, cannot rely on management to voluntarily inform them on all issues and need to be active in obtaining information, especially concerning detrimental developments. Similarly, in Spain, trade unions consider that their representation on the boards of directors does not mean that they participate in decision-making, as this is usually carried out by management bodies of a more executive nature on which the unions are not represented;
- in Denmark, it seems hard - despite trade union awareness campaigns - to raise interest and to persuade more employees to use their right to board-level employee representation. Factors in "scaring off" employees may include the duty of confidentiality covering representatives and the fact that they have liabilities in line with the other board members. Furthermore, the fact that employee representatives are always in a minority on the board, may reduce employees' interest. In order to achieve a greater use of board representation unions have debated various strategies. One approach is to persuade more shop stewards to be elected, thereby providing more professional and experienced representatives (of the 24,000 shop stewards in the unions affiliated to the LO confederation, some 6% are also board-level employee representatives). Critics of this strategy argue that it will only increase the gap between employee representatives and the ordinary employee, as a shop steward who also sits on the board will almost become a full-time representative. The critics instead state that appointing employees without other representative functions to the board extends the protection against dismissal accorded to all employee representatives to a wider circle of employees;
- problems experienced by trade unions in France include conforming to the statutory obligation of drawing up a platform including "management proposals" in order to be able to submit a list of candidates for board seats. Furthermore, elected board members are often relatively marginalised in local union life, as a consequence of the law which prohibits them from holding more than one representative function simultaneously;
- the Greek system is deemed by some researchers to have been a relative failure for reasons such as the "non-integration" of employee management board members, who receive only the same pay as they would have done in the jobs they held before they were elected to that body, and who must return to their former jobs if they resign or withdraw for any reason before their term has ended. Furthermore, worker representatives' minority position means that they cannot ultimately influence or prevent decisions concerning labour issues. Other factors cited include Greece?s lack of tradition in participation structures, failure to introduce them in harmony with pre-existing practices and customs, lack of a parallel modernisation policy, and the coexistence of many participation bodies whose competencies conflict with those of management bodies;
- in Ireland, there is reportedly a degree of sensitivity in the relationship between worker directors, on the one hand, and established industrial relations machinery and trade unions on the other. A degree of scepticism is reported among unions. In some cases, there has been a perception that the board-level representatives can sometimes interfere with this machinery, and that some have too readily and easily complied with and collaborated with management. It has also been suggested that unions have not provided worker directors with adequate training and resources to facilitate their role.
The European Company Statute
The concept of a European Company (Societas Europea, or SE), incorporated in Community law has been mooted since the 1950s. The essential idea is that the obstacles to the development of European-scale companies - such as problems with cross-border mergers, differing tax and company law and other administrative difficulties - can be overcome by giving companies the option of escaping national company law and incorporating at EU level. Since the first draft of a European Company Statute (ECS) was issued by the European Commission in 1970, there had been various initiatives and proposals for the introduction of a SE, but none of them has been able to find sufficient support in the EU Council of Ministers (see Carley, op cit).
The main reason for the deadlock of over 25 years on the issue of the ECS has been the Member States' inability to find a common agreement on the question of what worker involvement provisions, if any, there should be within the SE. All versions of the draft Statute have included provisions on worker involvement - information, consultation and, especially, board-level participation. The Council's dilemma arises from the different national perceptions of and institutional arrangements for worker involvement all over Europe: on the one hand, countries with comprehensive statutory systems of involvement and especially board-level participation (for example, Germany) have been very much afraid that EU legislation may give companies based in or operating on their territories the opportunity to escape the involvement legislation; on the other hand, countries with few or no statutory involvement provisions (for example, the UK) have not wanted to see legislation on involvement imposed on their territories from outside.
The deepening of European economic integration, which had been pushed forward by the completion of the European Single Market and may accelerate with the introduction of Economic and Monetary Union, has created even a stronger need for a ECS as a tool to allow European enterprises to unify their organisational structures and adapt to the increasingly transnational dimension of their activities. Therefore, in 1996 the European Commission again took the initiative and set up a "high-level expert group" on "European systems of worker involvement" chaired by Etienne Davignon, with the aim of developing an acceptable compromise on worker involvement in the SE to break the blockade on the introduction of the ECS.
The "Davignon group" presented its final report in May 1997 recommending that a ECS should not prescribe a certain model of worker involvement but should give priority to free negotiations between management and employee representatives as to which system of worker involvement should apply in each SE (EU9705128N). Only if negotiations failed should a set of "reference rules" apply, which includes information and consultation rights (differing somewhat from those of the European Works Council Directive) and a minimum employee representation of one-fifth of the members of the SE's relevant board.
In the second half of 1997, the Luxembourg EU Presidency presented a new draft version of the ECS which took up to a large extent the recommendations of the Davignon report. However, the discussions within the Council of Ministers once again ran into difficulties, in particular on the question of the "reference rules". Therefore, in the first half of 1998 the UK EU Presidency came forward with a further draft for a ECS which took over the basic "free negotiation" approach but which provides a significant modification to the content of the "standard rules" (EU9803193N). In the absence of an agreement, the British proposal suggests on the one hand information and consultation provisions very close to those of the European Works Council (EWC) Directive. On the other hand, the draft proposes not prescribing a certain minimum model of board-level participation but instead including a provision that the employee representation on the board of a SE should be equal to the highest level found in any of the participating companies.
The UK Government's proposals failed to gain sufficient Council support, and the dossier has now been passed on the the Austrian Presidency of the second half of 1998, which was committed to continuing discussions on the Statute (EU9812143N).
Social partners' views on worker involvement in the European Company
The key European social partners organisations - the Union of Industrial and Employers' Confederations of Europe (UNICE) and the European Trade Union Confederation (ETUC) - both welcomed the Davignon report as a useful contribution to overcoming the deadlock on the ECS (EU9801180N). Both organisations also expressed their support for the emphasis on free negotiations between the social partners at company level to find an acceptable from of worker involvement in each SE. However, when it comes to the question of potential minimum requirements or "standard rules" on participation in the event that negotiations fail, the EU-level social partners show a continuing divergence of views.
UNICE states that, given the fact that some Members States do not provide for worker participation in corporate bodies, employers' organisations from those countries strongly oppose the introduction of "standard rules" as proposed by the Davignon report. UNICE, therefore, demands that all proposals for worker involvement in the SE should be optional and introduced on a voluntary base. By contrast, ETUC has expressed its serious concerns that the Davignon proposals could lead to an undermining of national provisions on participation, finding the proposed minimum of 20% of the seats on company boards for employee representatives to be much too low. ETUC, therefore, welcomed the UK proposal as a better protection for existing national board-level participation rights (EU9805108N). However, ETUC also criticised the UK proposal for providing a possible "zero option" for board-level employee representation in the event that a SE is founded by companies coming from countries with no provisions on such participation.
The national debates among the social partners' organisations on the proposals for a ECS are mainly influenced by its potential implications for existing national systems on worker involvement. More detail on the proposals and demands which had been developed by national social partners organisations are provided below but, to summarise, at least four main - to a certain extent "stereotyped" - positions on the question of worker involvement can be identified.
- Trade unions from countries with strong statutory provisions on board-level employee representation are still afraid that the ECS could undermine their systems and, therefore, tend to support the UK proposal which might give the best protection for national participation rights.
- Employers' associations from countries with strong statutory provisions on board-level employee representation are afraid that their strong national participation rights might become a disadvantage in finding partners for the creation of SE and, therefore, tend to support the Davignon/Luxembourg proposals.
- Trade unions from countries with no provisions on board-level employee representation have mostly overcome their former political scepticism on such worker participation and, therefore, tend to support Davignon/Luxembourg proposals, which might create the opportunity to introduce new participation rights into the national system.
- Employers' associations from countries with no provisions on board-level employee representation are still strongly opposing any legally-binding form of board-level employee representation in the SE.
Below, we summarise the debate in the countries covered (no information is available for Finland and Luxembourg).
There is a general concern among the Austrian trade unions that the recent ECS proposal from the UK Presidency could lead to a comparatively weaker form of co-determination or even provide a zero option with no board-level worker participation at all. The unions fear that a number of companies, especially those publicly embracing the idea of "shareholder value", might reincorporate at the European level in a bid to escape from employee representation on the supervisory board. Employers say that this alone would be an insufficient reason for reincorporation. The trade unions want a ban on relocation, a Directive on co-determination, and a clarification of the role of EWCs. The employers see no necessity for any safeguards of this kind. It is felt that the ECS will be mostly a matter for mergers and holding companies, leaving workers largely unaffected.
The two main bipartite national bodies, the Central Economic Council and the National Labour Council issued a joint opinion on the problem of workers' representation in the ECS in December 1997, basically supporting the proposals of the Davignon group. They reject the idea of defining a single European model of worker involvement in the SE which would call into question national practices. Instead they want to give priority to free negotiations between employers and employee representatives. However, the Belgian social partners have rather divergent positions on the question whether or not the ECS should provide certain "standards rules" which to apply where no agreement on involvement could be reached. Taken into account that Belgium has no statutory system of board-level participation, the employers' organisations still do not want to have workers' representatives on the boards of a SE, which in their view would conflict with the Belgian tradition of industrial relations. Therefore, they reject the idea of "standard rules" which include a commitment to a system of board-level employee representation.
Trade union organisations argue for a system of minimum requirements similar to those of the EWC Directive but with improved information and consultation rights. On board-level participation in the SE, however, there are significant differences among the Belgian trade unions:
- the Confederation of Christian Trade Unions (CSC/ACV) is in favour of workers sitting on the supervisory board as long as they have the same powers as shareholders;
- the Belgian General Federation of Labour (FGTB/ABVV) is against worker participation if it would mean workers involvement in the decision-making process. It accepts the presence of workers on a supervisory board, but they would have to have at least 20% of the votes. The main aim would be to ensure the rights of expression, proposal, demand and opposition; and
- the Federation of Liberal Trade Unions of Belgium (CGSLB/ACLV) is in favour, in a monistic system, of involving employees in the management of their firms within the framework of worker participation in the SE's administrative body.
The Danish Government views the establishment of a ECS positively. It is however essential that a satisfactory solution is found to the question of information, consultation and employee representation (medbestemmelse), if the establishment of a SE is to be attractive to Danish companies. Since the point of reference in the proposed Directive is the EWC Directive, the Government finds it imperative that the proposal does not deviate from the principles of the EWC. It is equally of importance to the Government that the employees have an unconditional right to representation, equal to the Danish rules, and that employees will be granted an unconditional right to information and consultation, equal to the provisions in the EWC Directive. Furthermore the Government believes that the best way is to give the social partners a chance to negotiate the matter at the European level.
The social partners in Denmark also take a positive view of the ECS, which they see as a means to ensure the efficiency of the internal market and the competitiveness of the EU. However, the introduction of a ECS must not be at the expense of the Danish tradition of employee participation. The employers, however, reject the model of employee representation proposed by the Davignon group as being in conflict with the principles governing the Danish model of representation. It is especially the element of mandatory negotiations, the time limit and the definition of information and consultation, which employers more specifically are discontented with. Although employers recognise that it should be possible to find a solution by way of negotiation, they oppose the element of force as perceived in the provisions of the "reference rules". Employers prefer to have the proposal handed over to negotiations between the social partners at European level. If that is not possible, the employers' second preference is to use the EWC as the point of reference.
The trade unions favour uniform procedures in all SEs and oppose the possibility of choosing between an organ for representation and the introduction of information and consultation procedures. Furthermore the trade unions favour mandatory negotiations which cannot result in less favourable conditions than those set out in the reference rules.
There is only little information available on the French social partners' view of the ECS. The CFDT and the CGT-FO trade union confederations, both members of the ETUC, share the latter's stance to a significant degree.
Since Germany has a unique system of co-determination, the current discussions about the ECS and its impact on employee participation are of particular interest. The reaction of the German social partners' organisations to the recent UK proposal for a ECS, however, reveals significant differences in their positions on the further development of German co-determination within an even more Europeanised framework of industrial relations (DE9806268F).
After the Davignon report had published its recommendations for worker involvement in the ECS in May 1997, the Confederation of German Employers' Associations (BDA) described the Davignon proposals as "pragmatic" and a "reasonable base for a compromise". In a joint press release, the leading German employer and business organisations expressed their support in principle for the creation of a ECS as an important contribution to the completion of the European Single Market. However, the employers strongly criticise the latest ECS draft from the UK presidency because it might privilege the German co-determination system. Since the UK proposal provides, in the event of a failure of negotiations, for the introduction of the quantitatively-highest existing level of employee participation in the boards of participating companies, this would mean that, with the involvement of a German company, a newly created SE would usually have to take on the German co-determination system. According to German employers, foreign investors often see the relatively high standard of German co-determination as a significant competitive disadvantage which might prevent them from investing in Germany. The UK proposals might therefore lead to "discrimination" against German enterprises in comparison with their European competitors, because it would become more difficult for German companies to find foreign partners for the creation of a SE.
In response to the employers' statement, the German Federation of Trade Unions (DGB) has warned the employers' associations that the situation might arise whereby, "due to European regulations we shall be forced to say goodbye to the German model of participation." That would be "neither in the interests of the enterprises nor the employees". On the contrary, an undermining of the German co-determination system through the ECS would help to damage the idea of European unification among German employees. Furthermore the delegates at the most recent DGB congress (in June 1998) adopted a resolution on the ECS including the following demands:
- the creation of an SE should be exclusively restricted to a new transnational holding company or a new European subsidiary;
- in the event of a merger between a foreign and a German company, there must be a guarantee that the SE maintains German co-determination rights.
- there should be no SE without clear provisions for employee participation and co-determination;
- the form and scope of participation should be negotiated between the employer and the employee representatives, including the responsible trade unions at European level (eg ETUC);
- every SE should provide a minimum standard for board-level employee participation. There should be no "zero option" for participation in the SE; and
- in the event of negotiations regarding employee participation failing, there must be clear minimum standards for participation, including at least one-third of the seats on the supervisory board or two seats on the management board.
Regarding workers' participation on the board of the SE, both union and employers' organisations in Greece are taking part in the discussion being conducted on the European level with regard to the ECS. However, they state that, from a Greek perspective, the SE touches only superficially on the area of labour relations, and add that they have not yet made a commitment regarding their views on the final form.
Private sector employers have generally opposed the introduction of legislation enforcing the introduction of employee participation structures. They favour a voluntarist approach, arguing that statutory provisions would have a negative impact on foreign direct inward investment, especially with regard to investment from USA-based companies. This fear is also one shared by the Industrial Development Agency (IDA) and successive governments. The employee participation measures in the proposed ECS have been of some concern to private sector companies, although it would be confined to a small number of large "Euro-companies". Before the Worker Participation Act was enacted in 1977, the Irish Confederation of Trade Unions (ICTU) had generally supported the proposed legislation, but was also critical in a number of respects. For instance, it was critical of the power held by executive management in large state companies and therefore recommended a two-tier board system like that of the German system of co-determination, in preference to the Irish unitary system. In addition, ICTU also recommended that half of board members should be elected by employees rather than the proposed one-third. These and other recommendations were subsequently rejected by the Minister for Labour. With regard to the proposed ECS, the ICTU strongly supports the" EU line" on board-level participation, as long as there is a comparative element involved. This would help to ensure that the provisions of the Statute were not diluted.
At the end of April 1998, the Cisl trade union confederation circulated a proposal for the institution of "participation committees" (Comitati di Partecipazione, Cdp), in order to start a discussion with the Cgil and Uil confederation to reach a unitary position on the ECS. The participation committee would be an ad hoc body for the representation of interests beyond shareholders, added on to existing company structures. It would be a joint body with half the members made up of workers' representatives and half of representatives appointed by the management board. The minimum entitlements of the committees would be set by law, and could be increased by collective bargaining. The Cisl's proposal identifies a set of rights to be attributed to the participation committee, of which the most significant are as follows:
- the directors would be obliged to inform the participation committee of the company business decisions. The committee would have the right to access company documents and the power of "auditing" directors and general directors;
- the committee would express a mandatory prior opinion on extraordinary decisions - important decisions on issues such as resource allocation, relocation of plants, substantial modification in the capital structure - and on the approval of company balance sheets; and
- it would send informed opinions to the shareholders' general meeting and the management board and prepares periodic reports on company activity and recommendations on the management of the company.
Furthermore, at the beginning of 1997 Cisl issued a proposal for a draft law on employee share ownership schemes, including the creation of associations of employee-stockholders, which would also have board-level representation.
In 1992, a special commission made up of representatives of employers organisations, trade unions and independent members issued an opinion on the SE. There was agreement on many subjects but opinions differed on the following points:
- the unions considered participation by employee representatives to be a sine qua non for the SE, while the employers, though not opposed to participation, did not; and
- the unions were in favour of a system of direct appointment of members of the supervisory board, while the employers opposed direct appointment and favoured the Dutch system of co-option.
In September 1997, the four major trade union federations - FNV, CNV, MHP and AVC- issued a joint statement on the Luxembourg ECS proposal. The unions were positive about the following elements of the proposal:
- it includes subsidiaries;
- it applies to all SEs, not only the bigger ones;
- precedence is given for negotiated agreements (as with the EWC Directive); and
- there is option to choose between alternative systems when the negotiations do not result in an agreement, but instead one uniform standard model.
The unions' criticisms concern the following points:
- there is no special place for trade unions in the SNB;
- a perceived unnecessary overlap of the proposal and the EWC Directive as far as information and consultation rights are concerned;
- instead of one-fifth, one-third of the members of the supervisory board should consist of employee representatives;
- the proposal is silent on the rights of the supervisory board; and
- the ECS regulation as such and the rules for consultation and participation should be developed in a coordinated way, and not separately.
The uncertainty surrounding the adoption of the proposal for a ECS has prevented the social partners and the government from properly considering it. The government has yet to take a stance on the issue, and will not do so until the Statute has been adopted. In general the Norwegian authorities, as well as the social partners, do not want to see the present national regulations undermined in such a way as to endanger the current status and position of employees. The proposed ECS has not been formally considered by the Confederation of Norwegian Business and Industry (NHO), but NHO is not, in principle, opposed to employee co-determination at European level. The Norwegian Confederation of Trade Unions (LO) has argued that co-determination is best safeguarded in the bodies of companies with most authority, and stresses that employee representatives must be elected by and among employees.
Within the Economic and Social Council, the social partners have given their opinion on the proposed Directive regarding worker involvement in the SE. On the employers' side, the Confederation of Portuguese Industry (CIP), while recognising that the content of the Directive has undergone some positive modifications, still strongly disagrees with it on two points:
- the proposed Directive provides that in the event of stalled negotiations, standard rules on information, consultation and participation will apply. According to CIP. this would corrupt the whole idea of negotiation and tip the balance in favour of workers; and
- CIP believes that continuing to insist on the right of workers to be involved in management or in the governing bodies of companies favours those Member States whose culture and practices are in line with this type of involvement. It ignores the sometimes radical differences among Member States in these matters. CIP states that in Portugal board-level participation is completely unheard of and is unacceptable to companies. If the purpose of the ECS is to improve the transnational functioning of European companies within the EU, by this means it will only harm Portuguese companies, which, by not accepting the involvement provisions, cannot adopt the Statute. Thus, the subject is of great concern to CIP.
The unions have responded favourably to the ECS as long as it includes a place for worker involvement. The General Workers' Union (UGT), in its comments on a proposed compromise draft of the Directive, was pleased to see that "worker participation in decision-making processes would be guaranteed at all levels of the company". It added that, to complete the ECS, it will be important to establish a transnational legal framework for employee representatives. UGT sees the "right to information and consultation at the transnational level as imperative" and believes that, when establishing the mechanisms for creating a SE, negotiations and the role of the unions in such negotiation should be preserved.
The debate on the ECS has not met with great interest in Spain. The social partners have expressed their support for the opinions stated by the employers' associations and trade unions at European level, but the debate has not been taken up to any great extent, possibly because it is a question that is too far from the daily practice of labour relations in Spanish companies.
The Government has regular contacts with experts from the employers' organisations and trade unions before negotiations in the EU Council of Ministers on the involvement of employees in the SE. From a Swedish point of view, it is a given that workers should be entitled to some representation on the board of these companies. Both sides of the industry did, however, have objections to the UK presidency's draft Directive.
The overall criticism from the Swedish Employers' Confederation (SAF) is that the draft rules are so complicated and impenetrable that they would deter enterprises from forming SEs, thus jeopardising the whole idea. It also believes that the standard rules which would apply if no agreement is reached go too far in favour of the workers. Instead of giving priority to the system which affords the employees the highest proportion of board members, the Directive should lay down fixed minimum rules which in any case do not go further than the Swedish rules.
By contrast, the Swedish Trade Union Confederation (LO) and the Swedish Confederation of Professional Employees (TCO) find the standard rules to weak. First of all, the unions believe that a majority of three-quarters should be required for the special negotiating body (SNB) to decide not to open or to terminate negotiations. Secondly, they find it unacceptable that the standard rules on board representation would not be applicable if the SNB wants to reopen negotiations after such a decision. Further, their experiences of EWCs show that one meeting per year between the representative body and the management of the SE will not be sufficient.
The UK has no statutory system of board-level participation or employee involvement of any kind and British employers' associations remain opposed any legislative provision on worker involvement, instead preferring to deal with the matter on a voluntary basis. By contrast, the trade unions generally welcome the introduction of a ECS with worker involvement provisions.
The concepts, structures and procedures covered by "board-level employee representation in the various countries" differ widely with regard to their scope- ie, in terms of private or public sector coverage and restrictions on the sizes and types of companies involved. As a result, the coverage of companies and employees by this form of participation varies widely across Europe. There are also differences in the position and the role of the body where the employee representatives sit. The companies concerned have different management and supervisory structures, the basic distinction being between "single-tier" structures (monistic systems) and "two-tier" structures (dualistic systems). Furthermore, there are wide variations in: the extent of employee representation on boards; the selection and appointment procedures of employee representatives; and the representatives' identity (company employees, trade union officials or other) and role.
Considering the national diversity of worker participation in Europe, the "Davignon report" on "European systems of worker involvement" emphasised that "there is no ideal system for worker involvement, the most efficient one being that best suited to the parties concerned and the particular conditions in which it is required to operate." Furthermore, the "Davignon report" argued that active worker involvement is a crucial element of the European social model and indispensable in order to meet the coming social and economic challenges: "Globalisation of the economy and the special place of European industry raises fundamental questions regarding the power of social partners within the company. The type of labour needed by European companies - skilled, mobile, committed, responsible, and capable of using technical innovations ... cannot be expected simply to obey the employers' instructions. Workers must be closely and permanently involved in decision-making at all levels of the company."
However, there are contrasting lines of argument regarding the impact of board-level employee representation. The proponents of board-level employee representation emphasise the productive effects of consensus and cooperation, the support for "social peace" and the contribution made by co-determination to a corporate culture based on trust, and to the greater understanding among the workforce of the needs and interests of the company. On the other hand, fears have been voiced that the presence and influence of employee representatives on the supervisory board could result in a preference for structurally conservative corporate strategies, shielding management from control by shareholders and the capital market and leading to technological immobility, excessive emphasis on personnel and employment-related aspects, and excessively consensus-oriented management. This would negatively affect economic efficiency, flexibility and adaptability. In response, it is claimed that the long-term orientation of corporate strategies, associated with board-level representation, creates advantages and that problems of implementation are taken into account at an early stage of firms' decision-making processes.
As regards the European Company Statute, positions across Europe between and within the national social partners are as diverse as the national systems of board-level representation. In general, trade unions want to make sure that the ECS will be not weaken the existing national systems of employee participation. In contrast, the employers argue that all proposals for worker involvement in the SE should be optional and should be introduced on a voluntary base. For the foreseeable future at least, the differing positions of the social partners make any European harmonisation of employee board participation appear rather unlikely. (Thorsten Schulten, WSI, Stefan Zagelmeyer, IW, and Mark Carley, EIRO)