From Radical Left to Shareholder Value: A Longitudinal Comparison of Employee- and Owner-Elected Representatives' Perceptions

In Sweden, in 1972, the Board Representation Act was ratified (made permanent in 1976 and extended in 1987). The act made employee representatives on corporate boards mandatory for larger corporations (more than 100 employees, lowered to 25 in 1976), albeit voluntary on behalf of the unions. This reform was only one of many, all aimed at economic democracy, that followed a radicalization of the Swedish society, in general, and the labor movement, in specific, during the 1960s. The earlier triparty negotiation model between the state, the industry and the unions was questioned, as demands for further labor influence in corporate decision-making as well as a different division of the corporate valued added, were voiced (Viktorov 2006).

The opponents of the reform, who actually were quite few (prop. 1972:116), claimed that the participation of employee representatives on the board could be problematic, due to double loyalties and problems associated with corporate secrecy (in the representative - union relation) as well as potentially excessive board size (prop. 1972: 116). However, research indicates that – at least in the early stage of board participation – conflicts were foremost experienced within the labor movement and related to the consideration of national workers’ interest in relation to workers’ interest in foreign subsidiaries (Sjölander 2005). Later on, Swedish research in the 1990s shows findings that both CEOs and board chairs are positive to employee board representation (Levinson, 2000). Thus, fears of a negative impact of employee representatives on board work seem not to have come true. However, times have also changed since the 1970s; Swedish society has been affected by financialization as most other European countries (Belfrage, 2008) and the international diffusion of shareholder value (Lazonick and O’sullivan, 2001) can perhaps also be expected to also affect the relationship between employee representatives and other directors.   

In this paper, we empirically investigate perceptions of board directors and whether owner representatives differ from employee representatives or not. The paper contains a longitudinal investigation of the perception of board responsibility and board function between 1994-2014 in the largest listed Swedish corporations. The investigation is built upon surveys sent out every five years. Tentative results in line with previous research indicate that employee representatives prefer relying on collective decision-making, but that they still find it difficult to affect the corporation. In contrast to previous research, however, they do not feel it to be more difficult to stay informed or rely on their own competence when compared to owner representatives. Furthermore, as to issues of responsibility, employee representatives used to find responsibility towards owners significantly less important and responsibility for union relations as well as work environment significantly more important than owner representatives; differences, which were apparent 1994-2004, but which are not to be found since then. One reason for this may be that although employee representatives approach board work somewhat differently in action, they have in later years also been affected by the aforementioned diffusion of the new shareholder value ideology having reached even unto Swedish shores.