Codetermination

A choir of many soloists

How can cross-border workers’ participation in Europe be strengthened without impinging on national law? The Workers’ Voice project has found a solution. The basic idea is that functions are more important than form. By Joachim F. Tornau


A ‘kamikaze mission’. That is how Anke Hassel saw it when she took over the leadership of the international expert group Workers’ Voice in October 2015. ‘When I started, I was very sceptical about this project’, the sociologist said candidly. 

Was it really possible to get more out of the topic of workers’ participation in Europe than merely establishing that there are many different national systems and points of view? Surely, a fairly futile comparison of the various institutions was the most likely outcome. The expert group’s findings overturned Hassel’s initial scepticism. ‘We came up with an approach that enabled us to avoid running aground on the rock of sheer diversity’, she says. ‘That was an achievement.’ 

The solution is to be found in the rather cumbersome formulation of ‘functional equivalents’. Instead of laying out the structural and legal differences the committee focused on the goals and outcomes of workers’ participation. That enabled them to come up with a common denominator, despite all the different ways and means: workers’ voice means representation of employees’ concerns, protection and implementation of workers’ rights, communication of workers’ interests to central management and the monitoring of management decision-making. 

Not the form counts, but the function

One approach, as in the case of German company codetermination, involves workers’ representatives in the supervisory board. But workers can also exercise their rights to information, consultation and participation, in the absence of works councils or employee representatives, with mandatory dialogue between company and trade unions. It is not the form that really counts, but the function. 
A broad approach was also taken to what counts as workers’ voice in this framework. Besides employee representatives in the supervisory or management board – on which there are legal provisions in 18 of the 28 EU member states and not just in Germany, whatever critics might claim to the contrary – one might also mention national and European works councils, collective agreements, European company agreements or global framework agreements concluded with international trade union confederations, in which multinational groups commit to complying with fundamental workers’ rights, along with their affiliates, suppliers, authorised distributors and subcontractors. 

Effectiveness thanks to different elements of workers’ participation

‘Workers’ voice gains its effectiveness and organisational force from the interaction between different elements of workers’ participation, as well as its embedding in collective agreements, social partnership and trade union support’, explains Norbert Kluge, director of the Hans-Böckler-Stiftung’s Institute for Codetermination and Corporate Governance (I.M.U.) and initiator of the expert group. 

A survey carried out by the committee’s research section found that in multinational companies with employee representatives in the supervisory or management board interest representation more often takes place through other channels. While in these instances collective bargaining took place almost everywhere, it was present in only half of companies with other arrangements. The presence of European works councils, at 57 per cent, was three times as high. Consequently, workers’ voice operates cumulatively. And analysis clearly confirmed that it works. If a group of companies was covered by a collective agreement or there was board-level codetermination executive pay was less likely to be grossly disproportionate, employment rose more robustly and companies more often adopted a sustainability index. 

Three areas of activity

The expert group identified three areas of activity in which the positive influence of workers’ participation can be brought to bear most effectively. Such influence is beneficial not only to the company and its employees, but also to other stakeholders, including the regions in which the company is located, the customers and society in general. At a meeting in Paris, the committee examined the significance of workers’ voice for sustainability and social corporate responsibility. In Rome, the experts discussed the need for a paradigm change in corporate governance, away from a short-term orientation towards shareholders’ interests in the direction of a broader and longer-term stakeholder approach. And right at the beginning, in Prague, the experts looked at how workers’ voice can contribute to shaping firm restructuring in a socially responsible way. 

The venue was carefully considered. ‘Czech trade unions’, says IMU director and committee member Norbert Kluge, ‘have reported to us that there is much less danger of becoming no more than an “extended workbench” if there is a European works council’. Almost a quarter-century after it was launched there are now EWCs in 1,100 of the 3,000 or so transnational companies covered by the relevant EU directive. Although many of them remain, as the Workers’ Voice Project research report put it, ‘symbolic institutions’, in numerous other companies they have developed into effective instruments of cross-border employee representation.
 
Codetermination is a learning process

‘Everyday practice shows that codetermination is not static, but is a learning process’, says Kluge. This ‘institutional learning’ should be recognised at the political level, for example, by expanding the rights of European works councils beyond information and consultation. The expert group is convinced that that would not be enough to give workers’ voice the extra heft it needs. So what is to be done? Deeper harmonisation of workers’ participation in the EU would be neither realistic nor advisable, given the plethora of national systems and traditions. It could only result in downward integration, which in many countries would be tantamount to dismantling existing rights. 

The alternative derives from the ‘functional equivalents’ approach. The committee argues that general minimum standards should be defined for workers’ voice in the EU, leaving organisation on the ground to the member states. According to the expert group, four elements are essential here. First, workers’ participation at company level must be mandatory and second, it should be an offence to try to evade or hinder it. Third, there must be statutory protection for both individual and collective workers’ rights. And fourth, workers’ voice must encompass all levels in multinational companies, from local firms to cross-border groups, while facilitating cooperation between employee representatives inside and outside the company. 

Common understanding needed

The expert group agrees that a European framework directive is needed in which these regulations are enshrined. But achieving that will not be easy. The aim is to reach a common understanding on what constitutes workers’ voice beyond the diversity of institutions and what codetermination can achieve. 
Issues of workers’ participation have played only a very subordinate role, if at all, in the more than ten company law directives on transnational company activity adopted by the EU since 1968. The interests of management and shareholders stand front and centre. Even the positive exception of the Directive on the European company (SE), which guarantees retention of the existing level of participation in the event of founding an SE, can be abused to nullify codetermination rights. All a company need do to achieve this is to make sure that it transforms into an SE before reaching the threshold requiring the establishment of a supervisory board with codetermination. If this happens, employee representatives will be locked out permanently. 

The EU is now propagating reinforcement of its ‘social pillar’. Even the Directive on cross-border transfer of seat and online company registration, due to be voted on in the European Parliament, largely follows the old logic. Even though the Parliament was able to bring about a number of improvements, the so-called Company Mobility Package will not effectively prevent the establishment of letterbox companies or avoidance of codetermination and tax laws. Companies will still be able to transfer easily, on paper, to the EU member state with the most permissive regulations. On the other hand, in its draft the European Commission included the grandfathering of codetermination rights for three years in the case of a transfer of seat, which the Parliament was able to extend to four. The trade unions do not consider that to be sufficient, but it does indicate that something of a rethink is under way. 

The findings and arguments of the Workers’ Voice project will carry this process forward. For example, the Hans-Böckler-Stiftung is organising a series of events in Brussels at which workers’ participation practitioners will meet EU functionaries and report on their everyday experiences. ‘Looking at how workers’ voice functions in practice opens up new scope for thinking and action’, says Norbert Kluge. The next major steps include hearings involving the new EU commissioner designates and the newly elected European Parliament. At these hearings the aim is to get the strengthening of workers’ voice on the agenda, also with a view to the EU Council presidency of codetermination-friendly Germany (2020) and France (2021), says Kluge. He warns, however, that no one should count on short-term successes. ‘This is a task for more than one generation.’

Translation: James Patterson

Zusatzinfos

The expert group ‘Workers’ Voice and Good Corporate Governance in Transnational Firms in Europe’ set up by the Hans-Böckler-Stiftung was active from 2015 to 2018. It included 19 academics, trade unionists, company practitioners, EU functionaries and civil society actors. The concluding research report is now available

Information on global framework agreements can be found in I.M.U. Policy Brief No. 2, ‘Transnational companies – a concern for strong workers’ voice’, which appeared in February 2019


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