Multinational Corporations and Industrial Relations in the UK
| DOI | https://doi.org/10.1108/eb055039 |
| Pages | 12-16 |
| Published date | 01 May 1984 |
| Date | 01 May 1984 |
| Author | J. Hamill |
| Subject Matter | HR & organizational behaviour |
Multinational
Corporations
and Industrial
Relations in the
UK
by J. Hamill
Research Fellow in International Business,
Strathclyde University
Introduction
In 1980, foreign-owned manufacturing companies operating
in the UK employed just under one million people. This
represented approximately 16 per cent of all employment
in manufacturing industry in the UK in that year. The
presence of these firms raises a number of industrial rela-
tions issues which are not generally recognised in the ex-
isting literature on either foreign direct investment or in-
dustrial relations. For example, one issue of interest
con-
cerns the locus of decision making with respect to labour
relations and related matters within such companies. Does
decision-making power lie with the UK subsidiary itself, or
are industrial relations centrally controlled by the overseas
parent company? A related issue is whether centralised
con-
trol of industrial relations will lead the parent company to
introduce a wide range of home country personnel prac-
tices into their UK subsidiaries. The refusal of foreign-owned
firms to recognise and negotiate with trade unions in the
UK would be the most obvious example of this. However,
the transfer of home country practices may be equally im-
portant in other areas such as employer association
membership, collective bargaining procedures, wage pay-
ment systems and the level of wages and employee fringe
benefits.
The labour relations performance of foreign-owned firms
is also an issue of considerable interest given the impor-
tance attached to this in considerations of future in-
vestments in the UK. The introduction of home country per-
sonnel practices may cause industrial unrest at the UK sub-
sidiary if host country unions oppose the introduction of
such "alien" practices. The introduction of new and in-
novative home country practices, on the other hand, may
have quite the opposite effect. The ability of multinational
corporations (MNCs) to switch production out of the UK
during a strike may also affect the labour relations perfor-
mance of such companies. This international mobility may
strengthen the resolve of MNCs to incur a strike, rather than
give in to the demands of the striking union.
One final area of interest concerns the trade union response
to the perceived challenge of the MNC. The international
character of MNCs places host country unions in a weaker
bargaining position in their negotiations with such firms, as
compared with indigenous firms. Trade unions in the UK,
therefore, may be forced into seeking international links with
unions in other countries to counteract the collective
bargaining advantages of MNCs. This will have obvious im-
plications for indigenous as well as foreign-owned
companies.
The Locus of Decision Making
Industrial relations, by their very nature, are bound to be
amongst the most decentralised of all decision-making areas
within the MNC. Decisions regarding union recognition,
employer association membership, collective bargaining pro-
cedures, grievance handling and the settlement of strikes
may be dealt with more effectively at a local level rather than
being imposed by a distant parent company. A recent study
of 30 foreign-owned firms operating in the UK chemical,
electrical engineering and mechanical engineering industries
did indeed show that industrial relations were a very decen-
tralised decision-making area within the MNC[1]. As Table
I shows, in most of the companies studied, the UK sub-
sidiary had a considerable degree of autonomy and respon-
sibility for the handling of its own labour relations, with lit-
tle or no involvement by the parent company.
Despite this decentralisation, however, most parent com-
panies still exert a considerable influence on industrial rela-
tions at their various overseas subsidiaries. Table I also
shows that decision making regarding capital investment
and the determination of the UK subsidiary's operating
budget are generally a headquarters function. Such
deci-
sions tend to establish the parameters within which in-
dustrial relations operate because of their importance with
respect to numbers employed, the cost of wage increases
and total employment costs at the UK subsidiary. Similarly,
although actual decision-making power may reside at the
UK subsidiary, many MNCs have established worldwide
codes or guidelines to be followed by their overseas sub-
sidiaries in a number of important labour relations areas.
For example, companies such as IBM, Motorola, National
Semiconductor, Black and Decker and Hughes Microelec-
12 ER 6,5 • 1984
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