The consequences of corporate restructuring for employees and unions

Recent research explores the implications of corporate restructuring for employees and trade unions in Europe, based on accounts of mergers and acquisitions from 10 trade unions (from seven countries) affiliated to Eurocadres, the European body representing professional and managerial staff. The study, conducted in 2000, finds both similarities and differences in the effects of restructuring, reflecting the existence of both common pressures across countries and distinctive national systems of industrial relations.

One of main elements of contemporary corporate restructuring is the boom in mergers and acquisitions. The run-up to the completion of the single European market in 1992 witnessed a wave of mergers within the EU. While this was followed by a dip in merger activity in the early to mid-1990s, in the past few years the value of mergers and acquisitions have reached unprecedented levels, influenced in part by the process of European Economic and Monetary Union (EMU) (TN0102401S). The current merger wave can be distinguished from previous waves by the international nature of many of the deals; cross-border mergers increased 10-fold between 1991 and 1999.

Recent research by Tony Edwards of the UK's Kingston University examines the consequences of corporate restructuring, based on the accounts of mergers and acquisitions provided in a survey by 10 trade unions affiliated to the Council of European Professional and Managerial Staff (Eurocadres), which groups the managerial and professional staff within the member unions of the European Trade Union Confederation (ETUC). These affiliates came from seven countries – Belgium, Finland, Italy, the Netherlands, Norway, Sweden and the UK. The survey, commissioned by Eurocadres, was conducted in summer 2000, and formed the basis for a background report for the organisation's annual symposium held in Brussels in November 2000. Questions in the survey were deliberately made open-ended to allow respondents the scope to elaborate on the processes in which they had been involved. The survey provided information on a number of areas of industrial relations, and these are considered below in turn.

Consultation

Decisions to merge with or acquire other firms are generally taken by a very small number of senior executives. However, this is an area in which the obligations on management to inform staff vary significantly from country to country. While the EU Directive (77/187/EEC) on the transfers of undertakings, revised in 1998 by Directive 98/50/EC, sets out a common basic legal platform for consultation, this is supplemented in some countries by further legal or institutional obligations at national level (TN0102401S), while a country's industrial relations traditions also shape the extent and nature of consultation. In the light of this, it is not surprising that unions from different countries reported quite different experiences of consultation in mergers and acquisitions. Many of the respondents expressed concern with the way the consultation process had been conducted. For instance, in relation to the June 1999 merger between British Steel and the Dutch-based Hoogovens which created Corus (UK9908125F), the respondent from a British union involved said that professional workers "in the UK have never been given any prior announcement consultation" while, in contrast, their Dutch counterparts "were given extensive consultation prior to announcements".

In contrast, the Scandinavian unions responding to the survey expressed some satisfaction with the process of consultation. For instance, in describing the system of co-determination in the Nordic countries, the representative of a Swedish finance union said that "the fundamental logic of the system provides for the right to be informed of management's planned actions and to state opinions before such plans are executed".

Redundancies

Mergers and acquisitions are often associated with significant numbers of job losses. Senior management teams commonly justify merger proposals to shareholders on the basis that cost savings will be achieved through getting rid of duplicate functions. This tends to affect professional workers disproportionately; many of the overlaps in a merged firm relate to management teams, administration and research and development. Thus, mergers and acquisitions potentially threaten the security of employment of professional and managerial workers. The data from the survey throw up numerous instances of mergers and acquisitions resulting in redundancies. For example, the representative of an Italian union in the finance sector responded that redundancies have been a common consequence of mergers and acquisitions, particularly for older workers. Similarly, a Finnish finance union pointed out that it had experienced significant job cuts in merged firms, though in some cases "proactive cooperation" between the social partners had reduced the negative employment effects. This demonstrates that while structures promoting co-determination do not close off the scope for job cuts, they do promote negotiated responses to this prospect.

Terms and conditions

Mergers and acquisitions are often associated with changes in pay levels and in the nature of the systems used to determine pay, as well as changes in job descriptions, responsibilities and in individuals' positions within the hierarchy. The ability of management to change the terms and conditions of its workforce following a merger or acquisition is constrained by legislation but, while this limits the ability of senior executives to make unilateral changes to pay levels, it leaves some scope for changes to other aspects of workers' jobs. The survey revealed a varied picture of how such post-merger changes had affected employees. Some negative consequences were identified, such as those provided by the representative of a Belgian union reporting that mergers and acquisitions had led to professional workers facing "demotion" or being moved to "less interesting functions".

Not all of the changes to terms and conditions following mergers and acquisitions are necessarily negative, however. Many respondents identified changes in job descriptions, new responsibilities and adapting to new organisational structures as other consequences facing professional and managerial staff after mergers and acquisitions. For instance, the respondent from a Swedish union stated that when two organisations look to integrate their operations employees become subject to "new organisation structures, new responsibilities and new reporting lines".

Role of the unions

The wave of mergers and acquisitions is a phenomenon which is clearly being driven by senior executives and their advisers; trade unions are at best involved in negotiating the consequences of mergers and acquisitions, but rarely in the initial decision about whether to merge and whom to merge with. This appears to be a common picture across Europe. However, there is some variation across European countries concerning the extent to which unions are able to shape the key decisions affecting the workforce. In some countries, unions have little institutional or legal basis on which to influence such decisions, and are dependent on their bargaining power and the approach of management. This is certainly true for the UK, where unions have expressed considerable concern about the employment effects of mergers and acquisitions but have been able to exert relatively little influence over numbers of job losses and only in exceptional cases have they been able to alter the merger and acquisition plans significantly.

In other countries, by contrast, the position of unions appears to be stronger. The representative of an Italian union said that the union had generally been able "to negotiate the social consequences of mergers and acquisitions" while one from Belgium stated that the union had been involved in the "social dimension of the takeover". However, even where unions have strong bargaining positions, these may be weakened by a merger or acquisition; a representative of a Swedish union described how the acquisition by a foreign banking group of smaller banking networks in Norway and Sweden had weakened union influence "since Norwegian and Swedish employees are no longer represented at the top level in the corporation".

Commentary

The material presented above demonstrates that there are some consequences of mergers and acquisitions which are common across different European countries. The most notable example of this is the tendency for mergers and acquisitions to lead to redundancies, while another common feature is the reactive position in which unions found themselves in dealing with mergers and acquisitions. However, there are also numerous differences across the countries concerned. For instance, the consultation and disclosure of information with employee representatives concerning the consequences of mergers and acquisitions varied considerably, with some unions saying that they had received little information and that it came after the key decisions had already been taken, while others indicated that they had been informed about developments at an early stage and had been able to exert some influence on decisions.

These similarities and differences reflect a tension which is central to developments in industrial relations in Europe: the internationalisation of markets on the one hand leads to common pressures across countries, but the distinctiveness of national systems of industrial relations means these have different effects from one country to another. The industrial relations impact of corporate restructuring, as we have seen, varies from country to country, but given the increasingly international nature of much of this restructuring, it also has the potential to shape the evolution of these systems. (Tony Edwards, Kingston University)

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