Controversy over works council election at SAP

On 14 March 2006, employee representatives on the supervisory board of SAP decided to organise a works council election in order to prevent a court ruling. Two weeks before, the majority of employees had rejected a proposal to initiate a works council election. This rejection resulted in an appeal to the labour court by those backing the establishment of a works council.

On 2 March 2006, the employees of SAP, Germany’s leading business software solutions and services company, held a staff meeting at which a proposal to initiate a works council election was discussed. An overwhelming majority of over 90% of the 5,600 employees who attended the meeting rejected this proposal. Only 506 workers voted for the election procedure to take place. The ballot result triggered intense debate about whether the establishment of a works council at SAP should be enforced by a court ruling or, alternatively, whether the Works Constitution Act (Betriebsverfassungsgesetz) needs to be amended so that it can deal with cases such as this. On 14 March 2006, the employee representatives on the supervisory board of SAP eventually decided to organise a works council election themselves.

Forms of representation

Although a works council does not currently exist at SAP, other forms of company-level workers’ representation have been in existence since 1988. Employee representatives are – in compliance with the Co-determination Act (Mitbestimmungsgesetz) – members of the company’s supervisory board. These eight board members also act on behalf of the employees in relation to issues that are usually covered by works councils, such as dismissals. They are elected every five years by 100 delegates who are, in turn, elected by the staff. In this respect, workplace participation and consultation at SAP are organised in an alternative way to the works council system of employee representation. The company-specific co-determination rights are regulated by a contract that, in 2003, replaced a more informal arrangement.

The meeting on 2 March 2006 was called by three employees who are also members of the German metalworkers’ union (Industriegewerkschaft Metall, IG Metall). According to the Works Constitution Act, three staff members, or a union that represents some employees in the company in question, are permitted to call a meeting to discuss the creation of an election committee. This applies to every company with five or more workers, irrespective of the total number of employees. If such a committee cannot be constituted because, for example, the majority of those workers who attend the meeting vote against the candidates, three employees or the union can appeal to the labour court to have the members of the election committee appointed. As the proposal to establish an election committee was rejected by the majority of those at the SAP staff meeting, the three initiators launched a legal appeal to establish the committee. To prevent a court decision, which was expected to be reached in April, the employee representatives on the supervisory board decided to organise the works council election themselves at the end of March.

Reaction

At first, SAP’s management opposed any initiative to establish a works council. However, in a press release on 14 March 2006, Henning Kagermann, SAP’s Chief Executive Officer (CEO), welcomed the decision by SAP employee representatives on the supervisory board to organise the works council election themselves in order to prevent a court decision. He declared: ‘If a works council was to be established, it should be representative of the heart of the company and committed to the unique company culture and values.’

Dieter Hexel, a member of the presiding body of the Confederation of German Trade Unions (Deutscher Gewerkschaftsbund, DGB), stated that the election of a works council could develop a new participation culture that was already common in other companies (Press release, 16 March 2006 (in German)). IG Metall emphasised in their press release (in German) that, despite the rejection of the proposal to elect a works council, 10% of the attending workers had voted in favour of it.

However, the President of the Confederation of German Employers’ Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA), Dieter Hundt, criticised the Works Constitution Act for allowing a minority to enforce a specific form of representation, against the will of the vast majority of the workforce who preferred alternative forms of participation (BDA press release, 3 March 2006, (in German, 20Kb)).

Commentary

Although co-determination at plant level can lead to improvements in the flexibility and competitiveness of a firm, it can be difficult to gauge which kind of employee representation matches company requirements most appropriately. In cases like that of SAP’s, alternative forms of participation have proved to work well, rather than the work councils which are stipulated by law. The legally enforced implementation of a works council may jeopardise effective cooperation between management and employees.

Oliver Stettes, Cologne Institute for Economic Research (IW)

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