Social partners divided on issue of employee rights in listed companies

In February 2008, the Social and Economic Council (SER) issued a recommendation on the position of employees in listed companies, redefining the rights and responsibilities of company boards, and employer and employee representatives. The Minister of Finance rejected the recommendation, arguing that the SER is not authorised to advise on company policy. Earlier, the minister had issued a draft bill on the advisory powers of works councils regarding managers’ remuneration in listed companies.

On 15 February 2008, the Social and Economic Council (Sociaal Economische Raad, SER) issued a recommendation on the position of employees in listed companies in the Netherlands. The SER consists of representatives of employer organisations, trade union federations and independent members. Traditionally, responses to recommendations on co-determination have been divided and thus this latest case was no exception. A remarkable feature of the most recent recommendation is that representatives of shareholders – who are not members of the SER – took part in the discussions.

Power balance redefined

The main elements of the recommendation applicable to industrial relations relate to several aspects. Firstly, it should be noted that the major listed companies in the Netherlands are currently exempt from the obligation to establish a supervisory board. Trade union representatives and the independent members of the SER now call for such an obligation, while employer representatives do not want to see any changes made in this regard. Secondly, internationalisation has altered the position of employee representatives. Therefore, trade unions and a majority of the independent members involved in the SER demand that measures should be adopted to counterbalance this change. Employers and a minority of the SER’s independent members do not believe that this is necessary. Thirdly, the works council should be able to participate at the general shareholders’ meeting. The SER requests that works councils have the right to be heard at the shareholders’ meeting on a number of issues. Nonetheless, no such right should be granted in cases where the majority of the employees of the group work outside the Netherlands. Fourthly, trade unions and a majority of the SER’s independent members are of the opinion that European Works Councils do not have enough power with regard to cross-border mergers and acquisitions. These members consider that the Dutch government should urge the EU to adopt suitable measures in this area. Employers and a minority of the SER’s independent members do not believe that such measures are necessary. Finally, the recommendation asserts that under the current circumstances it is too easy for shareholders to confront management based on the right of inquiry and that this should be changed. Shareholder interest organisations are highly critical of this part of the recommendation.

Finance minister rejects recommendation

The Minister of Finance, Wouter Bos, rejected the SER’s recommendation on formal grounds. He believes that the SER acted beyond the scope of its authority in issuing such a recommendation. The minister argues that the council does not have the authority to issue recommendations on company policy or to advise on the division of power in relation to employee participation within companies. While Minister Bos will provide a more detailed response at a later stage, it is already clear that he wishes to make changes in relation to the current model of corporate governance. This issue has already been addressed in a draft bill on the advisory powers enjoyed by works councils with regard to the remuneration of the management board of listed companies (NL0802049I).

Works council advisory powers on company remuneration policy

In December 2007, the government issued an initial draft bill which aimed to generate a response from the parties involved. The bill covers listed companies as well as all public limited companies. The works council is awarded advisory powers with regard to changes in the company’s remuneration policy, the establishment of which is entrusted to the general shareholders’ meeting. This means that the works council must have sufficient time to discuss policy changes and must be informed of the company’s decision to make changes before a notice is sent to the shareholders. After the works council has formulated an opinion on the issue, both the proposal to change the remuneration policy and the opinion of the works council must be forwarded to the general shareholders’ meeting before the registration date. Moreover, the works council has the right to explain and express its opinion at the general shareholders’ meeting. Many of the larger companies do not have a works council in place at the highest level. The works council is generally established at a ‘sub-holding level’ which has been created to cluster the Dutch subsidiaries. In such a case, the rights are awarded to this works council provided that most of the employees of the group as a whole work in the Netherlands.

However, the proposals of the first draft bill have been rejected by employers and the representatives of shareholder interest organisations. The extent to which the final bill will resemble the draft version remains to be seen.

Robbert van het Kaar and Marianne Grünell, Hugo Sinzheimer Institute (HSI)

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