EMPLOYEE REPRESENTATION ON COMPANY BOARDS AND PARTICIPATION IN CORPORATE PLANNING
| DOI | http://doi.org/10.1111/j.1468-2230.1975.tb01414.x |
| Author | P. L. Davies |
| Date | 01 May 1975 |
| Published date | 01 May 1975 |
EMPLOYEE REPRESENTATION ON COMPANY
BOARDS AND PARTICIPATION IN
CORPORATE PLANNING
I
IN
recent years the British economy has been subject to powerful and
continuing pressure
for
“
rationalisation
”
of
productive activities,
often preceded by the concentration
of
previously distinct enterprises
under common ownership and control, and this process has had a
dramatically adverse impact upon security
of
employment.’ One
lesson which workers and their organisations have learned from this
is that it is no longer sufficient to be able to respond
to
the employ-
ment consequences of decisions already taken
(e.g.
to close
a
particular works), but that it is necessary for unions and workers to
be in a position to exercise control over the primary decisions whether
to rationalise and by which methods. Even the most favourable
severance agreement, providing for employer supplements to the
statutory redundancy payments and unemployment benefit and help
in finding new jobs, is no substitute for ensuring that all the employ-
ment consequences of the initial decision to close a works are taken
into account at the point of time when the question of closure
is
still
an open one.’ Expressed more generally, the point has been made as
follows
:
“
Decisions about production, investment, employment, are
largely concentrated in the hands of
top
management; consequently
the influence of the workers affected by such decisions tends to be
negative
or
remote.” When the point is made more generally. it can
be seen that
the
demand for greater employee participation in closure
decisions may be viewed not only as a defensive reaction to adverse
economic trends but also as
a
part
of
a
more
positive programme
aimed at securing
for
employees greater control over their working
environment. In this way the debate easily shifts from the hardships
caused by particular closures
or
even by rationalisation in general
to a wider consideration of industrial democracy.
The purpose of this article is to explore the question of how far
proposals to place worker directors on the boards of companies in
the private sector of British industry can be expected to provide
1
See generally J. Hughes,
“The
Trade Union Response to Mergers,” in
Samuel5 (ed.)
Readings
on
Mergers and
Takeovers
(1972),
pp.
148-162.
2
In his sluily of people made redundant from
five
engineering works in Woolwich
during the period
1%8-70,
W. W. Daniel found that two-thirds
of
those aged
over
25
would have preferred to retain their old
jobs
as against their present jobs
and the various cash payments made to them
as
a result
of
the dismissal:
“
What-
ever Happened to the Workers
in
Woolwich?” P.EP. Broadsheet
537,
July
1972.
3
Report
of
the Labour Party Working Parly on Industrial Democracy, June
1967,
para.
6.
4
The sirongesl advocate of such proposals in fhis country
LO
date has been the
Trades Union Congress. See Industrial Democracy, Report by the T.U.C. General
Council
to
the
1974
Trades Union Congress, Supplementary Report
B,
hereafter
referred
to
as the
T.U.C.
Report. This Report contains proposals for worker
254
May
19751
EMPLOYEE
REPRESENTATION
ON
COBIPASY
BOARDS
255
employecs with
a
measure of control over the taking
of
strategic
decisions by companies and over the processes of corporate planni~ig.~
At present worker control over corporate decision-making
is
expressed
primarily through joint regulation by representatives
of
the employees
and of management as enshrined in the institutions of collective
bargaining. However, it is generally accepted that the reach of
collective bargaining is at present inadequate to embrace the process
of
corporate planning. Collective bargaining is by and large confined
ta the traditional wages and hours issues
of
industrial relations and
only exceptionally extends to cover issues such as investment and
pricing policy. Suggestions have been made as
to
how collective
bargaining could be extended to cover the process of corporate
planning,6 and it would seem clear that, as a minimal measure, greater
compulsory disclosure of information by companies would help to
extend the range
of
issues covered in the present forms
of
collective
bargaining.’
This
article is not, however, directly concerned with
the
extensions
of
collective bargaining, but rather with the various worker director
schemes that recently have been advocated in this country by the
T.U.C.,8
and in Europe by the
E.E.CB
and which have existed in the
representatives
on
the boards
of
nationalised industries and
on
governing bodies
in the public service and local government sectors, but these additional proposals
are not considered in this article.
5 Participation by employee representatives in the process of corporate planning
is.
of
course, only one example of the ideas that may be subsumed under the
heading
of
indurtrial democracy. See
K.
Coates and
T.
Topham,
The
New
Unionism
(Penguin Books ed.,
19:4),
Chap.
4.
The process
of
corporate planning has been
described as .follows: In the corporate planning process those responsible
for
valibus aspects
of
the business usually begin by studying recent trends in their
own areas
of
responsibility. From this analysis they develop potential
or
optimum
targets for future expansion
or
development over
R
prescribed period
of
time.
Corporate activity begins when these aims
or
objectives are placed side by side-
to
see how far they mesh in with each other. Thus production plans and future
factor inputs have to be squared with anticipated market trends and sales objectives.
These, in turn, have to be shown to be compatible with estimates
of
future financial
resources and cash flows. Room then has
to
be found for innovation, product
development and
for
a
competitive rate
of
return
on
capital. Finally, it has to be
agreed that the targets that emerge from all this are within the capacities
of
existing
management.”
W.
E.
J.
McCarthy and N. D. Ellis,
Management
by
Agreement
(1973),
p.
103.
See
also Gordon,
Business Leadership
in
the Large Corporation
(1966
ed.), pp.
53-55.
6
See
e.g.
W.
E.
J.
McCarthy and
N.
D.
Ellis,
op.
dt.,
pp.
102-109,
where the
notion
of
I‘
predictive bargaining
”
is
developed, though it is
not
entirely clear how
this would operate.
1
T.U.C.
Report,
supra,
note
4,
pp.
32-35,
and
M.
Barratt-Brown,
Operibtg
the
Books (Institute
for
Workers’ Control,
1968).
See
also Industry Bill, H.C. Bill
73,
introduced
on
January
31, 1975,
cl.
20-24
and Employment Protection Bill,
H.C.
Bill
119,
introduced on March
25, 1975,
cl.
17-21.
*
T.U.C. Report,
supra,
note
4.
The reception
of
this Report at the
1974
Trade
Union Congress was, however, somewhat ambiguous. The Industrial Democracy
Bill, H.C. Bill
60,
introduced
on
January
15, 1975,
came too late for detailed
consideration
in
this article.
*
Proposed Statute for the European Company,
Bulletin
of
the European
Com-
munities,
No.
8, 1970,
Supplement; and Proposal for
a
Fifth Directive on the
Structure
of
SociCtds Anonymes,
Bulletin
of
the European Communities.
Supple-
ment
10/72.
A
document purporting to contain the Commission’s most recent
thoughts
on
these two proposals was published
in
European Industrial Relations
Review,
No.
12,
December
1974,
p.
15.
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