Worker representation on corporate boards of directors

Worker representation on corporate boards of directors refers to the right of workers to vote for representatives on a board of directors in corporate law. In 2018, a majority of Organization for Economic Cooperation and Development, and a majority of countries in the European Union, had some form of law guaranteeing the right of workers to vote for board representation. Together with a right to elect work councils, this is often called "codetermination".

Overview

The following is a list of 35 countries in the Organization for Economic Cooperation and Development and their practices of worker representation on corporate boards of directors.^[1]

Country	Law	Description
Austria	Labour Constitution Act 1975	A third of supervisory board from 300 employees in private companies. No employee threshold for public limited companies.
Belgium		No general law, but some public companies have employee representatives.^[2]
Bulgaria		No general law, but employees have rights to speak at shareholder general meetings.
Croatia	LL 2009 art 166	Employee representative on the supervisory board if the company has over 300 employees
Cyprus		No general law
Czech Republic		State owned companies (and private companies over 50 employees before 2014) have one third employee representation
Denmark	Companies Act 2010 s 140	Companies over 35 employees have between two and one third board membership
Estonia		No general law
Finland	1990 Act on Personnel Representation in the Administration of Undertakings	From 150 employees, there must be an agreement on employee representation. If there is none, one fifth of board members.
France	Commercial Code Art. L. 225-79	Private companies over 1000 employees in France or 5000 worldwide must have at least one or two board members. State-owned companies have one third.
Germany	Drittelbeteiligungsgesetz 2003 (One-third Participation Act 2003), Mitbestimmungsgesetz 1976 (Codetermination Act 1976), Montanmitbestimmungsgesetz 1951 (Coal and Steel Codetermination Act 1951)	Enterprises with over 500 employees must have one third representation on a supervisory board. Over 2000 employees, half representation, but the chair of the supervisory board is a shareholder representative and has a casting vote. In coal and steel companies shareholder representatives do not have a deciding vote.
Greece		State owned companies have one employee board member.
Hungary		From 200 employees, one third of supervisory board members are employees.
Ireland	Workers Participation (State Enterprises) Act 1977	State owned companies have one third employee representation.
Italy		No general law
Japan		No general law
Korea		No general law
Latvia		No general law
Lithuania		No general law
Luxembourg		One third employee representation in companies over 1000 employees or state owned.
Malta		No general law, except for companies owned by unions or the Labour Party.
Netherlands	Works Constitution Act 1971, amended in 2004	Over 100 employees, one third employee representation
Norway	Limited Liability Companies Act 1973	From 30 to 50 employees, one employee director. Over 50, one third of seats. Over 200, an extra employee seat. One director in companies with 30 to 50 employees; one third of the seats in companies with more than 50, with the possibility of an extra seat in companies with more than 200
Poland	Law on Workers’ Self Management of 1981	In state-owned companies employees have a third of supervisory board seats, and a seat on the management board.
Portugal	1976 Constitution, Arts. 30 and 33 and Law 46/79	In state owned companies, workers have a right to be consulted. In private companies work councils may elect representatives, but the number is determined by the employer.
Romania		No general law, but unions can be heard at meetings.
Slovakia		In companies over 50 employees, one third employee representation. In state owned companies, half the supervisory board.
Slovenia	1991 Constitution art 75, and 1993 law.	Companies over 50 employees, or with supervisory board, have one third to one half representation.
Spain	Law 41/1962, repealed 1980	Some state-owned companies retain two board members though it has not been compulsory since 1980 to have employee representation in private companies.
Sweden		Over 25 employees, around one third representation on boards.
United Kingdom	Cambridge University Act 1856, etc	No general law, except in universities, although Financial Reporting Council is introducing comply or explain rules for employee representation in the UK Corporate Governance Code
United States		No general law, although in Massachusetts manufacturing firm may voluntarily have employees on boards. Any collective agreement can achieve the same result.
Australia		No general law
Canada		No general law
Chile		No general law
Israel	1977 Law and a 1985 High Court decision, Dapey Shituf (Tel-Aviv 1985)	Worker representation in government companies
Switzerland		No general law, but there was employee representation in railways, and there is representation in postal services.
Turkey		No general law

History

Some of the first codetermination laws emerged in universities in the UK during the 19th century, such as the Oxford University Act 1854 and the Cambridge University Act 1856. Further Acts included the South Metropolitan Gas Act 1896 and the Port of London Act 1908.^[3] In Germany, there were experiments with worker representation through work councils over the late 19th century, after the first attempts to introduce worker voice by an ex-member of the Frankfurt Parliament named Carl Degenkolb.^[4] At the end of World War One, the German trade unions made an historic collective agreement with representatives of German business for full partnership in economic management throughout the country. This was put into the Weimar Constitution article 165, and resulted in a work council law in 1920,^[5] and a board representation law in 1922.^[6] The fascist government abolished codetermination in 1934, but after World War Two, German unions again made collective agreements to resurrect work councils and board representation. These agreements were codified in law in 1951 and 1952.^[7]

In most countries around Europe, different forms board representation law spread slowly, especially from the 1970s. In the UK there were repeated experiments from iron and steel to the post office, with worker directors.^[8] However, after the Bullock Report of 1977 failed to pass and Margaret Thatcher won the 1979 election, almost all worker participation was ended.^[9] Germany recast and extended its laws in 1972 and 1976.^[10] The European Commission did propose a Draft Fifth Company Law Directive, but it did not complete passage. In the United States, growing interest in worker "involvement" through Scanlon plans led to unions such as the United Steelworkers at Chrysler, or at United Airlines to negotiate board representation, although usually this was forcibly linked to employee share schemes. Notably, the share scheme at Enron failed spectacularly in 2003. Almost all modern worker representation laws enable votes without any requirement to invest money. In 2013, France became the largest country to create a modern board representation law to mandate workers with equal rights to all other directors to be on boards.

Notes

↑ See worker-participation.eu and Z Adams, L Bishop and S Deakin, CBR Labour Regulation Index (Dataset of 117 Countries) (Cambridge: Centre for Business Research 2016))
↑ See I Ferreras, Firms as Political Entities: Saving Democracy through Economic Bicameralism (2017)
↑ E McGaughey, 'Votes at Work in Britain: Shareholder Monopolisation and the ‘Single Channel’' (2017) 46(4) Industrial Law Journal 444. See also JS Mill, Principles of Political Economy (1870) discussing, albeit very different, Henry Briggs & Son Co, incorporated 1865, which had an employee share plan and a worker director. South Metropolitan Gas Act 1896 extract in the London Gazette, abolished by the Gas Act 1948.
↑ HJ Teuteberg, ‘Zur Entstehungsgeschichte der ersten betrieblichen Arbeitervertretungen in Deutschland’ (1960) 11 Soziale Welt 69. See the Arbeitsverordnung 1890, the first law enabling worker councils, but only on a voluntary basis. The Hilfsdienstgesetz 1916 was a war time requirement for worker councils in some industries.
↑ Betriebsrätegesetz 1920
↑ Aufsichtsratsgesetz 1922. E McGaughey, 'The Codetermination Bargains: The History of German Corporate and Labour Law' (2016) 23(1) Columbia Journal of European Law 135
↑ E McGaughey, 'The Codetermination Bargains: The History of German Corporate and Labour Law' (2016) 23(1) Columbia Journal of European Law 135. See the Montan-mitbestimmungsgesetz 1951, the Betriesbrätegesetz 1952 and the Mitbestimmungsergänzungsgesetz 1956.
↑ Iron and Steel Act 1967 Sch 4, Part V, created a negotiation process with trade unions in British Steel Corporation to introduce workers, put into effect from 1968. Post Office Act 1977 s 1(2) created worker directors for the Post Office by amending the Post Office Act 1969. The Transport Act 1968 allowed the secretary of state to appoint members of the British Railways Board. In 1997, John Prescott appointed a worker director overseeing some aspects of the now privatised industry.
↑ Transport Act 1985, privatised the bus networks. Employee share ownership plans were created by Labour councils as this happened, as a way to protect workers, though shares were quickly bought up by ordinary business owners.
↑ The Betriebsverfassungsgesetz 1972, standardised law for one third employees on company boards with over 500 staff. The Codetermination Act 1976 required one half in large companies, but with the upper hand for shareholders. Now, the Drittelbeteiligungsgesetz 2004, BGBl. I S. 974, in German codified again, one third worker directors in companies with over 500 staff.

References

I Ferreras, Firms as Political Entities: Saving Democracy through Economic Bicameralism (2017)
TH Hammer, SC Currall and RN Stern, ‘Worker Representation on Boards of Directors: A Study of Competing Roles’ (1991) 44(4) Industrial and Labor Relations Review 661-680
LW Hunter, ‘Can Strategic Participation be Institutionalized? Union Representation on American Corporate Boards’ (1998) 51(4) Industrial and Labor Relations Review 557-578
E McGaughey, 'The Codetermination Bargains: The History of German Corporate and Labour Law' (2016) 23(1) Columbia Journal of European Law 135
E McGaughey, 'Votes at Work in Britain: Shareholder Monopolisation and the ‘Single Channel’' (2017) 46(4) Industrial Law Journal 444
RB McKersie, ‘Union-Nominated Directors: A New Voice in Corporate Governance’ (1 April 1999) MIT Working Paper
RB McKersie, ‘Labor's voice at the strategic level of the firm’ (2001) 7 Transfer: European Review of Labour and Research 480
HJ Teuteberg, ‘Zur Entstehungsgeschichte der ersten betrieblichen Arbeitervertretungen in Deutschland’ (1960) 11 Soziale Welt 69
HJ Teuteberg, Geschichte der Industriellen Mitbestimmung in Deutschland (1961)
S Webb and B Webb, Industrial Democracy (1920)
S Webb and B Webb, The History of Trade Unionism (1920) Appendix VIII

External links

worker-participation.eu
Z Adams, L Bishop and S Deakin, CBR Labour Regulation Index (Dataset of 117 Countries) (Cambridge: Centre for Business Research 2016))

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[1] See worker-participation.eu and Z Adams, L Bishop and S Deakin, CBR Labour Regulation Index (Dataset of 117 Countries) (Cambridge: Centre for Business Research 2016))

[2] See I Ferreras, Firms as Political Entities: Saving Democracy through Economic Bicameralism (2017)

[3] E McGaughey, 'Votes at Work in Britain: Shareholder Monopolisation and the ‘Single Channel’' (2017) 46(4) Industrial Law Journal 444. See also JS Mill, Principles of Political Economy (1870) discussing, albeit very different, Henry Briggs & Son Co, incorporated 1865, which had an employee share plan and a worker director. South Metropolitan Gas Act 1896 extract in the London Gazette, abolished by the Gas Act 1948.

[4] HJ Teuteberg, ‘Zur Entstehungsgeschichte der ersten betrieblichen Arbeitervertretungen in Deutschland’ (1960) 11 Soziale Welt 69. See the Arbeitsverordnung 1890, the first law enabling worker councils, but only on a voluntary basis. The Hilfsdienstgesetz 1916 was a war time requirement for worker councils in some industries.

[5] Betriebsrätegesetz 1920

[6] Aufsichtsratsgesetz 1922. E McGaughey, 'The Codetermination Bargains: The History of German Corporate and Labour Law' (2016) 23(1) Columbia Journal of European Law 135

[7] E McGaughey, 'The Codetermination Bargains: The History of German Corporate and Labour Law' (2016) 23(1) Columbia Journal of European Law 135. See the Montan-mitbestimmungsgesetz 1951, the Betriesbrätegesetz 1952 and the Mitbestimmungsergänzungsgesetz 1956.

[8] Iron and Steel Act 1967 Sch 4, Part V, created a negotiation process with trade unions in British Steel Corporation to introduce workers, put into effect from 1968. Post Office Act 1977 s 1(2) created worker directors for the Post Office by amending the Post Office Act 1969. The Transport Act 1968 allowed the secretary of state to appoint members of the British Railways Board. In 1997, John Prescott appointed a worker director overseeing some aspects of the now privatised industry.

[9] Transport Act 1985, privatised the bus networks. Employee share ownership plans were created by Labour councils as this happened, as a way to protect workers, though shares were quickly bought up by ordinary business owners.

[10] The Betriebsverfassungsgesetz 1972, standardised law for one third employees on company boards with over 500 staff. The Codetermination Act 1976 required one half in large companies, but with the upper hand for shareholders. Now, the Drittelbeteiligungsgesetz 2004, BGBl. I S. 974, in German codified again, one third worker directors in companies with over 500 staff.