Close trade union cooperation behind Statoil–Hydro merger

In early October 2007, the two largest Norwegian oil companies, Statoil and Norsk Hydro, formally merged. The two companies have emphasised the importance of including employee organisations in the process, and the trade unions seem satisfied with the way the merger process has been carried out. The various trade unions represented in both companies have placed great emphasis on coordinating their demands and participation in the merger process.

The merger between Statoil and parts of Norsk Hydro was completed on 1 October 2007. The merger took the form of a takeover by Statoil of Hydro’s oil-related business activities (NO0701019I). The new company, StatoilHydro ASA, will employ more than 31,000 workers worldwide.

Trade unions agree to cooperate closely

In connection with the merger, and the large-scale process towards integration of the two oil companies, the trade unions involved aspired to coordinate their efforts and activities. Several trade unions are represented in both companies, partly in competition with each other. From the outset, the unions agreed to cooperate closely during the merger process. This also involved cooperation on participating in the various committees set up in connection with the merger. To this end, the trade unions established a ‘Trade union forum’ – a body in which all the relevant trade unions participate. The forum consists of representatives from 11 company-level trade unions which are part of seven different nationwide trade union federations and four representatives from the health and safety at work administration, in addition to legal advisors from the trade unions. The work carried out by the unions has been coordinated by an externally appointed secretary.

A sweeping process

The integration process leading up to the official merger on 1 October focused on the onshore office environment. In 2008, a similar process will take place involving the offshore organisations and onshore oil installations.

A number of outcomes have resulted from the merger. For instance:

• no job losses have occurred as a result of the merger. However, about 500 employees have had to adapt to a new workplace location;

• employees approaching the age of 58 years by the end of 2008 have been offered an early-retirement redundancy package, which provides for 70% pay until they reach the regular pension age. The number of employees choosing to accept such packages will not be known until the beginning of 2008, which is the deadline for accepting redundancy packages. At the time of the merger, 600 of the 1,600 employees entitled to such early-retirement packages had submitted an application;

• workplace relocation is voluntary. For a transitional period, employees who chose to move location or commute because of the merger are offered relatively lucrative financial compensation arrangements;

• 10,000 persons are covered by the process according to which employees are subject to being transferred to new positions within StatoilHydro – in other words, a majority of the Norwegian employees are covered by this process. The trade unions were active in influencing the direction of this process. Employees were invited to express their interest in positions created as part of the new company, and work responsibilities were important in determining individual placements to new positions;

• the pay systems in the two companies were harmonised. In effect, the new system is a continuation of the old pay system within Statoil. No pay reductions were to be introduced as a result of the restructuring.

Commentary

The merger between Statoil and Hydro seems to have run relatively smoothly. Most of the trade unions involved welcomed the proposed merger from the start of the negotiations. At the outset, the companies set up a project organisation with responsibility for integrating the two companies. Moreover, the integration process was carried out according to a strict time schedule, and close cooperation with employees has been maintained throughout the entire process. The general impression is that the new company has offered generous retirement arrangements for older employees choosing to leave the company and for those employees deciding to move house or commute to a new job location. It also seems that the merger process has taken place without significant conflict between the trade unions from various divisions of the merged companies. Issues that have been the subject of some disagreement – such as board representation – have been solved by the trade unions. Statoil’s employee representatives will keep their seats on the company board until 2009, while two employee representatives from Hydro have been given observatory status.

However, the merger has not taken place without any controversy. During the summer of 2007, it became public knowledge that the management group at Hydro had been awarded substantial compensatory payments because of the abolishment of Hydro’s rather comprehensive stock option scheme. This was one of the reasons why the employee representatives at Statoil voted against the election of Eivind Reiten, Hydro’s former Chief Executive Officer, as Chair of the board of the new company. Mr Reiten was nevertheless elected. On the same day as the new company came into being, it was also brought to public attention that a consultancy fee paid by Hydro in connection with its activities in Libya in North Africa may have been underhand. This incidence led to Mr Reiten’s decision to withdraw from his new position as Chair of the board only a few days after entering office.

Kristine Nergaard, Fafo Institute for Applied Social Science