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WHY CO-DETERMINATION? (Board-level employee participation)

The SE directive on employee involvement through board-level employee representation (BLER) opens the door for labour to be able to have an organised and influential voice at the central corporate decision-making level. The rationale for a substantial voice in the running of a company and its businesses is the shareholder approach:social interests have to be considered in management decisions, not only the interests of shareholders and investors.

Squaring a circle?

In many countries of the European  Economic  Area  (EEA), democracy at work involves mandatory employee representation in company boards, with a right for worker representatives to vote about top-level strategic matters. The democratic potential of board-level employee representation (BLER) depends not only on the institutional arrangements underlying it, but also on a strong coordination with other institutions of workers’ voice, such as works councils or trade unions (Waddington 2018:204).

 

However, not only do workers in many countries still lack access to this form of democracy at work, but even among those countries which do have such regulations, the institutional design and implementation vary widely. Thus, the extent of influence and power that board-level employee representatives can exercise depends on their specific soci- etal context (Waddington 2018).

Balancing social and economic aims in genuine European Companies

After more than 30 years of protracted discussions, the SE legislation finally came into force in 2004 (after its adop- tion in October 2001), triggering a new momentum for the ‘Europeanization’ of corporations as well as the interest representation of employees. The SE legislation

– consisting of the European Company Statute (Council Regulation 2157/2001/ EC) and its supplementing Directive on employee involvement (Council Directive 2001/86/EC) – represents a milestone not only in the field of EU company law but also in that of the European regulation of employee involvement.

The compulsory link between the new European corporate structure and the existence of a European interest rep- resentation body (SE Works Council), plus, where applicable, the agreement- based presence of employee representatives in company boardrooms (participation), is the feature which allows the SE to  be  regarded  as  a  potential driver of Europeanisation. Historically, this has been the first time at European level that the development of cross-border business entities goes hand in hand with a social dimension through employee involvement on an equal footing with executive managers and shareholders.

Introduction of the SE is thus clearly in line with the aims of the Europe 2020 strategy, contributing to the competitiveness of  the  European   economy and  making  employees  into  citizens  in their workplaces. More than a decade ago the so-called Davignon report already provided arguments for  understanding employee involvement as not only a ‘social add-on’ but, more importantly, an important feature for achieving economic goals:

‘The type of labour needed by European companies – skilled, mobile, committed, responsible, and capable of using technical innovations and of identifying with the objective of increasing competitiveness and quality – cannot be expected simply to obey the employers’ instructions. Workers must be closely and permanently involved in decision-making  at all levels of the company.’ (European Commission 1997: 5 (paragraph 19)).

Surprisingly, however, an EU-commissioned study on the SE Regulation (Ernst & Young 2009) focused on the argument that employee involvement represents a key negative driver with regard to establishing SEs in many countries – a statement based on weak empirical foun- dations (Cremers et al. 2010). In November 2010, the EU Commission published its final report on the application of the SE Regulation which so far contains no clear recommendations for adaptation of the two legal acts (European Commission 2010q). However, any revision of the SE legislation must take into account the factthat the current rules represent a balanced compromise, reached after more than 30 years of intensive discussions including the difficult issue of how to organise the work- ers’ voice within the SE. Further flexibilisation and simplification cannot therefore be an aim or a value in itself. Employee involvement in the SE is certainly not just an unnecessary burden on companies, but a fundamental part of the SE. If a companydecides to go for the SE Regulation, it ‘buys’ the SE directive at the same time.

Further resources:

A collection of good facts and arguments making a case for strong workers‘ voice, by Hans-Böckler Foundation (2017).

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