Strengthening workers’ voice, legal certainty for future Social Europe

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Norbert Kluge addresses the public at the "Social Europe: Strengthening workers' voice" in Brussels on 27 April. [Katrin Distler/Twitter]

A vital social democracy will play a decisive role in shaping the future of the European Union. The goal of a united Europe, contractually agreed by all EU member states, is to promote participatory democracy, writes Norbert Kluge.

Norbert Kluge is the director of the Institute for co-determination and corporate governance of the Hans Boeckler Foundation.

The fundamental right to information and consultation makes workers in Europe also citizens in the workplace (Article 27 of the EU Charter of Fundamental Rights as part of the EU Treaties).

In places where nobody knows the future of work and business in the digital age, the external framework conditions have to create an eye-to-eye-level between those involved in the economy.

The right to participate in the fair design of the social market economy will shape the future of Europe. Otherwise, employers will be tailoring flexibility in their own interests, while European workers will be required to give their last shirt off their back for it.

Social Europe is a long way off because the dynamic of growing social inequality remains unbroken. Large transnational companies are regarded as accelerators of the dynamics of injustice.

They “optimise” nation-state laws and obligations of all kinds (taxation, consumer protection, environmental protection, liability, co-determination, “money laundering”) via so-called company engineering. And no new binding frameworks imposed on them are in sight at international level.

On the contrary, experience shows that companies skilfully and regularly avoid the binding representation of employees’ interests. Such practices must be put on a socio-political leash.

Co-determination, as practised successfully in large companies based in Germany until today, is a good reference for how it can be done the other way. But not only in Germany, the participation of employees at the top of companies works.

In 18 out of 28 EU member states, employees have a statutory right to say and can vote on boards or supervisory boards, our research shows. This kind of “worker’s voice” creates better working conditions – and it is also one of the few hurdles left today that prevents companies from being wholly exposed to the return of financial investors interests.

Sustainable companies need well-qualified workers. This is their international competitive advantage, as shown by their economic success worldwide. But workers want future-proof jobs and locations in Europe; this integrates companies in Europe in social terms as well.

“Worker’s Voice” at the top of companies makes them internationally unique and competitive. Social cohesion (as measured by the so-called GINI coefficient) is the highest in those EU member states where various elements of worker participation such as union loyalty, high coverage through collective agreements, strong employee rights at company level and employee participation have a positive impact on each other.

This has been demonstrated for years by the Worker’s Participation Index, which is prepared annually by the ETUI for the “Benchmarking Working Europe Report.”

There are therefore good and realistic reasons to include co-determination as a standard in European company law. This standard needs to be part of every electoral programme of all democratic and pro-European parties that are to compete in the European parliamentary elections in spring 2019.

We must succeed in bringing the topic into the work programme of the next European Commission after the spring 2019 European elections. If we do not succeed, it will hardly play a role in the next five years. Another step backwards for Social Europe is looming!

The European Dialogue 2018, organised by the Hans-Böckler-Foundation and the European Trade Union Institute (ETUI), marks the beginning of a new debate on European participation. The task of national and European policy must therefore be to enrich the rules of the internal market with workers’ rights to information, consultation and participation in company decisions.

It is the unanimous objective of the unions in the European Trade Union Confederation (ETUC) to introduce minimum standards in European company law. National differences can be described as “functional equivalents” and thus become comparable in their effects. Thus, management decisions can be related to a social discourse.

National differences in industrial relations can be accepted without being institutionally adapted at cross-border level. The Böckler Foundation’s expert group “Worker’s Voice in European Corporate Governance” introduced this new approach to the discussion on the occasion of the European Discussion 2018.

There are increasing signs that this approach is heard in European politics.

With its Company Mobility Package, the European Commission wants to make the potential of digitalisation for cross-border corporate mobility in the EU internal market easier to exploit. Today’s unregulated relocation of companies‘ headquarters across European borders should thus be given a legal framework.

The European Commission wants companies to account for the economic reasons that motivated them to change under company law. In particular, the company will report on how this decision will affect employment and co-determination.

We will measure the suitability of the proposals primarily by whether it is possible to put a stop to the dreadful situation of transforming operating companies into pure letterbox companies in inner-European tax havens.

Unfortunately, the Commission has with its legislative proposal failed to introduce a European minimum standard for co-determination into European company law.

Nonetheless, the proposal shows that it is concerned about the protection of workers’ rights. For example, there are several regulations to safeguard previously existing employee rights for a limited period of time. According to initial trade union assessments, this attempt is not sufficient, though.

However, this is no reason for rejection because in the subsequent legislative procedure, especially in the EU Parliament, there is room and opportunity for improvement.

The EU Company Mobility Package will definitely not provide special protection for German co-determination. Instead of applying legal regulations, the involvement of employees at the top of the company would have to be renegotiated on a case-by-case basis, as is already the case for European Companies (Societas Europea, SE).

However, it can be seen today how companies are evading German co-determination and the application of European law. Therefore, in order to maintain co-determination in Germany, German politicians must first of all do their own homework.

Even though the proposal from Brussels includes a range of measures, Europe now must show that it wants to be more than a mere single market. “Worker’s Voice for Good Corporate Governance” works socio-politically as driver of active social inclusion and welfare statehood.

The EU internal market does not just belong to capital owners, institutional investors and entrepreneurs. We need a paradigm shift in European company law:

Companies and their investors must be legally bound to build long-term and sustainable prospects, with a future for jobs, locations and the environment – in order to be internationally competitive. That is the point!

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