Board-level Employee Representation Research Articles

The European Company: Milestone or small step towards transnational employment relations in the European Union?

The paper deals with the European Company (SE), the first supranational company form. The focal question is its impact on the development of transnational employment relations. We show that only a minority of SEs has set up SE Works Councils and we discuss the reasons for this non-compliance. Board-level employee representation (BLER), the other form of voice, is even less common. We compare both concepts and reveal that the SE’s contribution to the development of transnational employment relations remains limited. By placing the SE in a broader perspective, we conclude that it fits the general pattern of limited progress towards ‘Europeanization’.

The impact of BLER on the corporate activity in the UE

Motivation: Since the 1970s, there has been recorded a significant scope of the employee representation in corporate governance bodies, as the earlier German solutions have been popularized in many European countries. Since then, there has been a discussion about the impact of this representation on the activities of companies, their economic results, their value, etc. The research conducted on this subject does not provide a clear answer on this topic.Aim: The article aims to determine the impact of board level employee representation (BLER) on the activities of companies. The latest findings in this area, based on the results of empirical research shall be considered. New types of BLER impact on the value of companies in various phases of the business cycle and on preventing tax avoidance shall be presented. The objective of the article is also to provide the governments of particular countries with additional arguments in favour of introducing or expanding the institution of employee representation. In the longer term, these arguments should encourage the EU authorities to try to develop and adopt a directive on this subject, obliging member states to introduce or extend BLER.Results: The controversy over the influence of BLER on the company’s operations has not diminished. However, taking into account the entirety of such an impact (ideological, economic and social results), there has been an increasing number of arguments in favour of a positive assessment of such an impact. They are provided by the latest, extensive empirical research conducted on this subject, covering several dozen countries. They indicate that BLER has a positive effect on the stabilization of the company in times of economic downturn (recession), that it affects the adoption of a long-term development strategy by companies, etc. The research also shows that representation of the employees in boards prevents companies from tax avoidance. Its effectiveness correlates with the scope of such representation.

공공기관 노동이사제의 법적 쟁점과 개선 방향

Recently, the “Board-Level Employee Representation System” has been actively introduced and expanded, focusing on public institutions. The board-level employee representation system overcomes the limitations of employee management participation system and encourages employees to participate in managerial decision-making more directly and actively in order to convert the labor-management relations paradigm to a participative or a cooperative form. It is also highlighted as the most suitable system for rational renovation of public institutions’ internal and external governance structure, enhancement of transparency and responsibility, and enforcement of recently emerging ESG management in public institutions.BR In response, this paper reviewed the rules of the central board-level employee representation system based on the legislative discussion process and local board-level employee representation system, focusing on the Act on The Management of Public Institutions. Then, this paper also examined the main issues derived from each rule to suggest rational improvement directions.BR For the central-local board-level employee representation system’s rules, this paper suggests as follows : Finding unified rules, amending formal and systematic disagreement between the Act on The Management of Public Institutions and management guidelines, legislating the rules of local board-level employee representation system, raising a need for systematic discussion on the board-level employee representation system, expanding the board-level employee representation system in other public institutions, reforming a legal status of board-level employee, securing representativeness in institutions, disqualifying board-level employee from a labor union member, establishing the number of board-level employee in consideration of each institution’s characteristics, and granting authorities and responsibilities in consideration of board-level employee’s duties.BR The board-level employee representation system is a type of employee participation system and it reflects the interests of all employees to the authorities that have been exercised unilaterally by the employer. As a result, it inevitably involves fierce labor-management-government controversies over introduction and expansion of the board-level employee representation system.BR Thus, it is necessary to continue the discussions in order to change the labor-management paradigm and renovate the governance structure and labor-management relation stably through the Korean-style board-level employee representation system.

독일의 노동이사제 약화 동향

독일의 사용자들은 경제 자유를 고양하고 기업의 자유와 주도성 제고를 위하여 노동이사제의 완화 및 유연화를 위한 활동을 거시적 수준인 국가차원 및 미시적 수준인 개별 기업차원에서 꾸준히 전개해 왔다. 지난 20년간 독일의 노동이사제 도입 기업의 수는 지속적으로 감소했다. 그 결과 2018년 현재 독일에서 노사동수 노동이사제는 대상 기업의 약 3분의 2에서만 운영되고 있다. 이러한 노동이사제의 약화는 특히 주식회사 법인형태에서 두드러지게 나타나고 있다. 다수의 독일 기업은 노동이사제 운영의 법적 의무가 있음에도 불구하고 다양한 방법으로 노동이사제 운영을 회피하고 있다. 그 방법은 크게 두 유형으로 분류될 수 있다. 하나는 합법적으로 관련 법의 테두리 내에서 빈틈을 찾아 우회 회피하는 것이다. 이러한 방법으로는 주로 노동이사제 적용 대상에서 제외되는 법인형태의 활용, 기업합병, 콘체른 형성, 기업규모 조정 등이 활용되고 있다. 다른 하나는 불법적으로 관련 법률을 준수하지 않고 노동이사제를 미운영하는 것이다. 독일외 다수의 유럽국가에서도 노동이사제의 약화 현상이 뚜렷하게 나타나고 있다. 이들 국가에서는 민영화 확대, 노동이사제 도입을 의무사항에서 선택사항으로 하는 법률 개정, 노동이사제 도입기준의 완화 등으로 노동이사제의 심각한 약화가 초래되었다. 이러한 독일과 유럽의 노동이사제의 약화 동향은 우리나라에서 2022년 8월 시행된 공공부문 노동이사제의 향후 전개에 의미있는 시사점을 줄 수 있을 것이다.

Can access to company boards improve transnational employee representation? Insights from employee representation in European Companies

Ways of strengthening workers’ voice within multinational companies, especially with regard to cross-border restructuring, have been much discussed in recent years. Research shows that European Works Councils (EWCs) are not always informed and consulted in a timely or comprehensive manner, limiting and sometimes entirely preventing employee representatives from exercising early and coordinated influence at transnational level. Against this backdrop, one might ask whether access to bodies such as supervisory and administrative boards, in which economic and strategic decisions are taken, can make a difference to transnational employee representation. Little is known, however, about how institutions for transnational information and consultation are linked to board-level employee representation. This article aims to fill this research gap by analysing the different modes of horizontal articulation between SE Works Councils and board-level employee representation within European Companies (Societas Europaea). Building on evidence from case studies, we identify a number of different modes of articulation and highlight how articulation rests mainly on and is sustained by the overlapping roles of the individuals involved and the holding of multiple mandates.

Does board-level employee representation impact firms’ value? Evidence from the European countries

PurposeUsing, for the first time, a sample of European listed firms from 30 countries with different legal regimes of board-level employee representation (BLER), the purpose of this paper is to examine the impact of BLER on firms’ value of European public companies, where employee representation is voluntary or imposed by law depending on the country of origin.Design/methodology/approachUsing a difference-in-differences approach and a matching procedure, the authors analyze the impact of BLER on firms' value.FindingsThe results of this paper suggest that BLER adopted voluntarily affects positively firms’ value comparing to a group of firms where employee representation is in some way mandatory. Moreover, the findings of this paper show that firms from countries where BLER is not imposed by law tend to pay higher dividends. Nevertheless, the evidence presented in this paper only holds for low levels of employee representation on the board.Research limitations/implicationsThis research not only provides some evidence in favor of the codetermination on corporate governance but also offers new avenues for discussing the conditions necessary for codetermination to be effective, especially the level of employees' participation on board.Practical implicationsThis study provides to policymakers new insights for them to gain perspective, analyze and decide if codetermination is a useful tool to improve firms’ performance or at least in what conditions it should be applied.Social implicationsThis study incentives the discussion of the proper way to include workers in firms’ boards with expected benefits on firms’ performance, economies and societies.Originality/valueThis paper provides evidence of a positive (but limited) impact on firms’ value derived from voluntary codetermination.

The Europeanisation of Board-Level Employee Representation in France: An Emerging Role for European Works Councils?

The Europeanisation of Board-Level Employee Representation in France: An Emerging Role for European Works Councils?

Board Level Employee Representation and Tax Avoidance in Europe

AbstractIn part due to recent disclosures of large-scale tax evasion (e.g. Panama Papers), corporate tax avoidance has become a prominent public policy issue around the world. An increasing amount of research on this topic has focused on identifying the determinants of tax avoidance at the company and country level. Many newer studies examine differences in corporate governance as one of these determinants. However, this literature almost entirely neglects the role of board level employee representation (BLER), despite the fact that this form of ‘stakeholder governance’ is widespread in Europe. This paper addresses this gap in the literature by examining the relationship between BLER and tax avoidance at the company level. Two mechanisms are identified through which BLER might influence corporate tax behavior: 1) reduction in agency costs through monitoring and 2) the voting power of workers as board members to enter into coalitions with management and/or shareholders. Based on a sample of 2343 European listed companies between 2012 and 2017, this paper shows that companies with BLER have a higher effective tax rate (ETR) than companies without workers on the board. The analysis suggests that the ability to form coalitions through voting power is a more significant channel for influencing tax behavior than the monitoring mechanism. The policy implications are that governments should consider ‘stakeholder governance’ such as BLER as one measure supporting their efforts to combat tax avoidance.

Board Level Employee Representation and CEO Compensation: The Mediation and Interaction Effects of the Largest Shareholder

The goal of this paper is to study the effect of board employee representation on the CEO compensation in French publicly listed companies. The study shows the following results: First, we found that employee board representation affects negatively and significantly the CEO total compensation. Second, employee representation has no effect on firm financial performance. Third, we found that French State strengthens the control of BLER over CEOs and their compensation, rather than simply mediate it.

Partycypacja pracownicza w krajach UE – analiza porównawcza

Przedmiot badań: Partycypacja pracownicza obejmuje reprezentację pracowniczą na poziomie przedsiębiorstwa, reprezentację w organach nadzoru korporacyjnego oraz partycypację związ­kową, tj. poziom uzwiązkowienia i zasięg umów zbiorowych. Autorka prezentuje kraje Unii Eu­ropejskiej, które są liderami w poszczególnych obszarach partycypacji oraz definiuje czynniki, które determinują tę sytuację. W artykule podkreślono również zmiany w sile „pracowniczego głosu” spowodowane kryzysem ekonomicznym.
 Cel badawczy: Celem artykułu jest porównanie trzech komponentów Europejskiego Indeksu Par­tycypacji (EPI) w krajach UE i określenie zmian wartości tego wskaźnika w okresie 2009–2019 między poszczególnymi krajami.
 Metoda badawcza: Artykuł został oparty w znaczniej mierze na przeglądzie wybranych publika­cji, dostępnych danych statystycznych z bazy OECD i ICTWSS oraz wynikach badań przepro­wadzonych w 2019 r. przez Europejską Fundację na Rzecz Poprawy Warunków Życia i Pracy i agencję Cedefop oraz badań Europejskiej Agencji Bezpieczeństwa i Zdrowia Pracy. Podstawą analizy są wartości EPI oszacowane przez S. De Spiegelaere i S. Vitolsa z Europejskiego Instytutu Związków Zawodowych.
 Wyniki: W ramach przeprowadzonej analizy stwierdzono, że siła „pracowniczego głosu” w kra­jach UE w okresie 2009–2019 obniżyła się o 8%, przy czym największy spadek odnotowano w obszarze partycypacji związkowej. Największe wahania wartości EPI miały miejsce w Cze­chach, które w 2013 r. zajmowały 13 miejsce w rankingu i w następnym roku spadły na 20 pozy­cję, aby w 2017 r. awansować na pozycję 12.

Corporate Governance, Employee Voice and the Interests of Employees: The Broken Promise of a ‘World Leading Package of Corporate Reforms’

Abstract Following a series of corporate governance scandals which involved exploitative treatment of workers, reforms were introduced to the UK’s corporate governance system in 2018, presented both as an attempt to rebuild trust and to afford a stronger voice for workers in that system. This paper explores the new landscape from a workers’ voice and protection perspective. It highlights that, while corporate governance has a role in ensuring workers’ needs are met, there is a tension between the goals of any reforms in this territory: board-level employee representation could be seen as a way of democratising the economy and valuing the part played by labour in that process, but it could also be seen as a way of increasing corporate value, economic performance or employee motivation, and disregarding the implications for labour. It is argued in this paper that worker protection requires a more genuine workplace democracy with full involvement of trade union representation. This would also help to broaden the corporate governance framework’s horizon towards a more genuine stakeholder vision beyond the existing tokenistic legal and regulatory nods in that direction.

Does codetermination reduce shareholder value? Board-level employee representation, firms’ market value, and operational performance

We analyze the relationship between board-level codetermination and shareholder value. We use a unique dataset of listed German companies that enables us to identify heterogeneous aspects of codetermination and overcome otherwise common identification issues. We find that codetermination reduces firms’ market value. Though we do not find a consistent effect of codetermination on net operating performance, we find that employees of codetermination firms are able to extract rents from shareholders via increases in employee wages and count while negatively affecting dividends paid to shareholders. These results are mitigated by the presence of strong shareholder monitors. This study should be of interest for policy makers concerned about the potential economic consequences of codetermination.

When Do Employees Choose to Be Represented on the Board of Directors? Empirical Analysis of Board‐Level Employee Representation in Denmark

AbstractDrawing on transaction costs economics and longitudinal data on Danish corporations, we analyse the distribution of board‐level employee representation (BLER) and the characteristics of employee directors in a context where workers have the possibility (but not also an obligation) to nominate representatives to the board of directors. We show that BLER is less likely instituted in firms with CEO or family‐related members on the board, but more likely observed in larger, older firms and in those with high firm‐specific human capital and union density. Firm‐specific human capital, qualifications and union membership also determine individual worker's probability to become a board member.

Board-level employee representation (BLER) and workers’ propensity to leave the organization

Drawing on the social exchange theory and the theories on employee voice behavior, we hypothesize a positive relationship between workers’ participation in the strategic decisions making, through t...

근로자 경영참여제도 수용성 영향요인에 관한 연구: 노동이사제에 대한 지방공기업 구성원의 인식을 중심으로

근로자 경영참여제도 수용성 영향요인에 관한 연구: 노동이사제에 대한 지방공기업 구성원의 인식을 중심으로

Board‐Level Employee Representation (BLER) and Firms’ Responses to Crisis

Short: We hypothesize that companies with board‐level employee representation (BLER) experience a lower probability of crisis‐induced dismissals than other firms. Theoretically, we link this effect to the employee directors’ ability to reduce the information asymmetry and moral hazard in employee–employer contracting, thereby facilitating the implementation of labor‐cost adjustments that are an alternative to workforce dismissals. We confirm our hypotheses by analyzing the behavior of Scandinavian public corporations with/without employee directors during the Great Recession.

Corporate Mobility – The Involvement of Employees

In April 2018, the European Commission presented a proposal for a Directive amending Directive 2017/1132 as regards cross-border conversions, mergers and divisions. This article discusses the proposed provisions to protect the interests of employees in a cross-border operation. Their position would be strengthened since employee representatives are granted information and consultation rights. As to the protection of existing board level employee representation rights, the Proposal follows the EU legal framework on the involvement of employees, consisting of a negotiation process between representatives of the employees and the management. As Standard Rules apply if no agreement can be reached, negotiations take place with the law as a sentinel. Practice has shown that this complicated legal framework is effective in protecting existing employee participation rights. The Proposal shows that in 2019, this carefully vetted political compromise leaves EU legislators little room to manoeuvre by simplifying the framework or strengthening the position of employees.

The Case for Employee Board Level Representation in Ethiopian Corporate Governance System

The participation of workers in the management of companies brings benefits. Many European jurisdictions have recognized workers’ involvement in the management of firms in diverse forms and to varying degrees. The board level representation is believed to be the strongest of all the mechanisms. In some jurisdictions the laws require a full and legally mandated representation of employees in supervisory boards of the largest firms. Several other countries also have corporate laws that allow the representation of workers in a board room. As a result, a recent discourse in corporate governance deals with a multi stakeholders including the labour. However, the mainstream corporate governance discourse in Ethiopia is restricted to discussions mainly from the perspective of shareholders. By disregarding employees as stakeholders in corporate governance of their firms, Ethiopian laws stand in a sharp contrast to the approach of corporate governance that allows a board level representation of firms’ workers. This article shall, by examining experiences of some European jurisdictions and analyzing the relevant Ethiopian legislations, questions whether Ethiopia's prohibition of board level employee representation in corporate governance of share companies is justified. It also inquires whether the European style of employee board level participation is feasible in Ethiopia or an alternative (practical) style of employees’ board level participation should be crafted. Keywords : Corporate governance, board structure, employee representation, Ethiopia DOI : 10.7176/JLPG/84-02 Publication date : April 30 th 2019

La gouvernance salariale : contribution de la représentation des salariés à la gouvernance d’entreprise

La participation des salaries a la gouvernance de l’entreprise fait l’objet d’un debat recurrent. Pour ses detracteurs, elle affaiblit la fonction de controle du conseil d’administration alors qu’elle diminue le niveau global d’asymetrie informationnelle pour ses defenseurs. Cet article propose une revue de litterature critique sur le role des salaries dans la gouvernance. Il discute egalement les conditions du deploiement d’une gouvernance salariale contribuant a ameliorer la gouvernance des entreprises. Nous suggerons que l’exercice des mandats d’administrateurs salaries depend de trois series de facteurs: des facteurs individuels, des facteurs « micro » propres a la gouvernance de l’entreprise, et des facteurs « macro », relatifs au systeme national de gouvernance. Nous formulons des propositions theoriques definissant les contributions de la representation des salaries au sein des conseils.

The perceived influence of employee board members on decisions in Denmark and Norway

Codetermination through board-level employee representation has a long tradition in Denmark and Norway. Since employee representatives are in a minority on the board, do they have a real say in decisions? Using survey data, we find a relatively large proportion of employee representatives who state that they have little or no influence on the decision-making process. A small minority claim to have significant influence on major strategic issues such as company restructuring. Neither gender nor length of board membership is related to perceived influence, which is also the case for board size. However, the more frequent the board meetings, the higher the level of perceived influence. The findings suggest that the present system does not empower board-level employee representatives.