Position of works councils examined

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The year 2000 marks the 50th anniversary of the introduction of works councils in the Netherlands. A recent extensive survey among works councils and managers finds that the works council has since become a widely accepted institution. At the same time, however, the position of the works council is threatened by a number of developments.

On 6 June 2000, the Dutch Work Councils Act (Wet op de ondernemingsraden, WOR) marked its 50th anniversary. Since 1950, the operation of the Act has been the subject of numerous studies, most recently a large-scale survey conducted in 1998. In this research, two questionnaires - one with 104 questions to the works council (ondernemingsraad) and one with 60 questions to managers - were sent to a randomly selected group of more than 3,500 organisations that have a works council. More than 400 managers and 400 works councils responded. The overlap between the two categories amounted to 151 - ie information was received from both a manager and the works council in 151 organisations. The report based on this survey - "De Volwassen OR" [The mature works council], RH van het Kaar and JC Looise (with contributions from J Popma, AGM Bijlsma, M Drucker and U Veersma), Samsom Bedrijfs Informatie (1999)- covers a very wide area, but below we summarise its findings on the exercise of their rights by works councils and their position in the organisation. The results of the 1998 survey are compared at many points with a similar survey conducted in 1985.

Exercise of works council rights

In order to provide for worker participation, the works council is given a number of rights by the law. Traditionally the four core rights are: the right of access to information; advisory powers; the right of consent; and the right to propose initiatives.

Right of access to information

According to the works councils responding to the survey, their evaluation of the provision of information by management depends very much on the moment at which the works council is asked to participate in the decision-making process. If they have been involved in every stage of this process, only 5% of the works councils are dissatisfied with the information provided about the employer's policy. When, on the other hand, the works council becomes involved only in the final stages of the decision-making process, this figure increases to 12%. If decision-making is completely dominated by the management, the proportion of dissatisfied works councils increases to 32%.

Advisory powers

The works council has advisory powers on a number of important strategic decisions. These include investments, mergers and takeovers (NL0004188F), relocations, reorganisations, applying for significant credit facilities, recruiting groups of temporary employees and, since 1998 (NL9709130F), the introduction of new technologies and providing financial security or important credit facilities. Furthermore, the works council has advisory powers in the appointment or dismissal of managers. In the event that the employer's decision in these various areas is not in accordance with its recommendation, the works council may appeal against this decision (NL9810102F).

The study finds that in several respects the situation of the works council has improved in comparison with the previous (1985) survey. The percentage of works councils that are consulted only after a decision has been reached in principle has declined, as has the number of works councils that are asked for their recommendations only after the decision has in fact been reached. It would appear that works councils now exert greater influence on the final decision than was the case in 1985. The 1998 survey found that more than 20% of decisions had been amended in accordance with the works council's recommendations, as opposed to 15% in 1985. Furthermore, the proportion of decisions where the works council's (negative) advice was ignored has decreased. The percentage of management decisions that are approved by works councils remains high.

Differences of opinion about whether the works council's advisory powers are applicable to a particular subject arise regularly. This is one of the reasons that employers do not always ask for recommendations. The problem seems to have been exacerbated since 1985.

To summarise: in general the position of works councils seems to have improved somewhat as far as strategic decisions are concerned. The percentage of councils that are consulted over decisions from a reasonably early stage has increased (even though they still constitute a minority) and the proportion of works councils that succeed in influencing a decision has also increased. This should not be regarded as a fundamental shift, but rather as a strengthening of the position of the average works council.

The right of consent

The works council has a right of consent (ie the management must obtain the works council's agreement) concerning the introduction, cancellation or amendment of regulations pertaining to labour matters. Here too, the new survey finds that the situation has improved as compared with 1985. In more than half of all cases, the works council receives information in this area as soon as it becomes available. The situation with regard to formal applications for consent has also improved. In 1998, applications for formal consent were submitted in almost two-thirds (64%) of cases before the company's board had reached a decision in principle and in more than one-third of cases after the decision in principle. In 1985, these proportions were 52% and 48% respectively.

When it came to decisions subject to consent, one-third of the respondent works councils reported having been ignored on at least one occasion in the past two years. Works councils are ignored notably often in cases concerning working conditions.

The proportion of works councils that invariably consent to the employer's proposed decisions has increased slightly from 60% in 1985 to 66%. Refusing consent quite often goes hand-in-hand with the use of "instruments of power" by the works council, such as suspending consultations and delaying decision-making. When matters for consent are classified according to topic, it transpires that working hours are the most controversial issue and responsible for 30% of the total number of consent refusals.

In the event of disputes between the employer and the works council, it would appear that councils now wield instruments of power slightly more often than was the case in 1985. Forceful action on the part of works councils seems to have the greatest effect, as employers tend to request consent or withdraw their decision in such circumstances.

The right to propose initiatives

Works councils have the right to submit proposals to the employer. Previous studies showed that works councils submitted proposals only in a minority of companies and sectors. In 1998, according to the new survey, the number of works councils that had submitted one or more proposals during the previous two years had increased to 55%. As a rule, these proposals concerned matters of a labour nature. In general, works councils are reasonably successful in the submission of proposals. In more than 75% of cases, these proposals are adopted in full or in part by the employer. The success rate is generally in line with that of 1985.

Role of the works council in the organisation

Meetings between managers and works councils are found to be more open than was previously the case. An important shift also appears to have taken place in the attitude of managers and works councils towards one another. Whereas the 1985 study noted a tendency for the parties to adopt a formal position or to emphasise differences in power, the emphasis now is said to be on mutual willingness to seek new ways to reach a solution.

The works council's involvement is often no longer confined to the final stages of decision-making. Works councils also seem to be making less use of delaying tactics and power instruments. However, there are differences in these areas between individual works councils, and these mainly depend on the size of the organisation and the sector. Works councils in small organisations, for example, have more difficulty in becoming involved in all phases of the decision-making process than their counterparts in larger organisations. Delaying tactics are used least by works councils in small organisations, while works councils in the government and non-profit sectors are more inclined to suspend proceedings.

One of the striking findings of the study is that the influence of works councils on business policy has not become any greater. As was the case in the previous study, the works council exerts very little influence on commercial, financial/economic and technology policies. Works council influence on general and organisational policies has remained more or less unchanged, while it seems to have declined somewhat with regard to personnel policy. The latter development is notable, given the fact that works councils seem to give personnel policy more attention than in 1985.

A considerable rise has been noted in managers' appreciation of works council contributions towards: more substantive and meticulous decision-making; gaining the personnel's support for decisions; and improving the handling of the personnel's interests and reducing differences in hierarchy. From the side of the works councils, there already was appreciation of their contribution to these matters and this has also increased. The polarisation that used to exist with regard to these aspects thus seems to have disappeared.

One "bottleneck" that was identified in the previous study cropped up again in this study: the lack of expertise among members of the works council. New bottlenecks are also identified, such as a lack of time for members of the works council, a lack of interest in works council membership and a growing distance between works council members and the workforce. With the exception of increased training for works council members and greater cooperation with trade unions, no real solutions to these problems are proposed.

Commentary

Based on the findings of this study, it can be stated that the Dutch works council has developed into a mature corporate organisation. Its position as an institution is no longer disputed and in general this is taken into account explicitly. In this respect, the Dutch "polder model" of consensus and consultation has also made its appearance in the business world.

In contrast to these positive findings from the survey, there are also a few that are less positive. Since the previous study, the influence actually exerted by the works council on corporate policy has not increased; in fact it appears to have declined somewhat. When viewed in terms of the various areas of policy, the works council is granted a "reasonable to high" degree of influence only with regard to personnel policy, followed by a "reasonable" influence on general and organisational policy. The works council exerts very little influence on the remaining policy areas (commercial, financial and technological). This finding seems to indicate that the works council has now reached the limit of its potential. A second restriction on an improvement in the position of the works council arises from a number of developments that could affect its current position in due course. These are matters such as decentralised working conditions, deregulation of labour law, the development of new forms of organisation and consultancy, internationalisation of business (NL0001178F) and a shift in corporate governance relationships. (RH van het Kaar, HSI)