Changing Industrial Relations? the Impact of Negotiated Employee Involvement in the European Company (SE)

Companies in the European Economic Area (EEA) have been able to set up a European Company (Societas Europaea or SE) for more than ten years now. The SE is a public limited-liability company based on EU law and its introduction is strongly related to the completion of the Internal Market. A key aspect has been the promotion of freedom of establishment. The SE plays also an important role for European labor regulation as management and employee representatives must decide on employee involvement before an SE is registered.

The SE Statute was adopted following a lengthy decision-making process that lasted for more than 30 years. A controversy arose over the question of board-level employee representation. Initially, it was planned to establish a unitary system of employee participation but no agreement was reached due to the great heterogeneity of national industrial relations among the member states. After various proposals had failed, a procedural mode of regulation was set up where the rules on employee involvement are set out in an agreement negotiated between management and employee representatives (board-level employee representation, transnational information and consultation). Thus, leaving the decision-making on how employees may exercise influence on company decisions to private actors at the company level. Overall, this is a paradigm shift for European countries with legally binding rules for board-level employee representation. Against this background, the SE’s impact on national industrial relations has been a much discussed issue. This concerns the question whether the SE may threaten and undermine co-determination rights as it provides a legal opportunity to circumvent binding national regulation and to avoid stricter forms of board-level employee representation.

In order to assess the SE’s impact on national industrial relations, it is decisive to analyze the negotiation processes and outcomes in European Companies. Based on a quantitative data analysis, this paper investigates, which employee involvement forms were negotiated between management and employee representatives in SEs and whether these significantly differ from those, which had existed before the SE was set up. The analysis focuses on normal SEs headquartered in Germany due to the fact that the vast majority of all SEs with negotiated employee involvement forms is located here and the SE’s impacts on German industrial relations have been discussed quite controversially. Furthermore, it is explored what motives and objectives trigger the creation of an SE by drawing on results of semi-structured interviews with management, employee, and union representatives from 18 SEs. A special focus will be placed on the question whether the company's management purposefully uses the SE to avoid national co-determination laws.

The results show that the existence or non-existence of board-level employee representation is mainly reproduced and that there is no clear evidence for a direct "escape from co-determination" in Germany. However, the analysis also demonstrates that some – mainly small and family-owned – companies use the SE to preventively avoid stricter forms of board-level employee representation, and reveals that there is a trend towards a changed composition of employee representatives on company boards.