Works Councils: Towards Stakeholding
| Author | Sally Wheeler |
| Published date | 01 March 1997 |
| DOI | http://doi.org/10.1111/1467-6478.00036 |
| Date | 01 March 1997 |
INTRODUCTION
The purpose of this paper is to examine the potential of employees as
stakeholders within the corporation. What is meant by stakeholding in this
descriptive sense is a broad conception of the employee as a citizen of
the corporation with the duality of concerns that is implicit in citizenship;
namely, the acknowledgment of the authority of the corporation’s governance
structure but also the right to participate within the corporation in a way
commensurate with an interest derived from employment. The paper focuses
on the European Works Councils Directive1and the steps taken by under-
takings towards employee consultation and participation as a result of the
Directive. It is suggested that what marks works councils out as worthy of
particular discussion in the context of stakeholding is that their innovation
on a pan-European basis is the first attempt to confer
active2participation
as a right for employees created by the state, or more accurately in this case,
the European Union, rather than simply creating the right for employees to
be passive recipients of information.3‘Active’ is defined here as the possibility
of direct interface with management to establish concerns. It is a two-tier
process; the first tier refers to the possibility of direct interface, the second
tier refers to whether that opportunity is capable of being taken or has been
taken. The purpose of the Directive is to improve employee rights to
information and consultation with consultation being expressly defined as
a two-way communication process; the exchange of views and establishment
of dialogue between employees and management.4The whole area of employee
© Blackwell Publishers Ltd 1997, 108 Cowley Road, Oxford OX4 1JF, UK and 238 Main Street, Cambridge, MA 02142, USA
* Faculty of Law, Leeds University, Leeds LS2 9JT, England
I would like to thank Jo Hunt and Darren Boulding for their invaluable research assistance
and the Faculty of Law at Leeds who provided the necessary financial support for this. Many
of the ideas for this piece were formulated while I held a visiting appointment at Griffith
University Law Faculty in the summer of 1996. I am very grateful to colleagues there for their
invaluable constructive comments, particularly Shaun McVeigh who, as always, was an
inspiration. Jo Shaw commented on earlier drafts and checked the ‘Europe stuff’. However,
as is usually the case, the fact that it reads as it does is my fault.
44
JOURNAL OF LAW AND SOCIETY
VOLUME 24, NUMBER 1, MARCH 1997
ISSN: 0263–323X, pp. 44–64
Works Councils: Towards Stakeholding?
SALLY WHEELER*
45
© Blackwell Publishers Ltd 1997
participation is one which has been well traversed by industrial relations
and labour law scholars.5Works councils have received considerable attention
within the field of European law and European Studies.6The orientation
here is towards the impact of works councils on the legal institutions of the
company.
Worker participation in governance mechanisms such as supervisory
boards has been mandatory in some individual European states for some
time, including Germany where worker involvement was negotiated as part
of the 1922 post-war settlement. The European Works Councils Directive is
the first time that a common model of participation has been created which
recognizes that enterprise is multinational and affords like rights to employees
regardless of the identity of the host country. Within the United Kingdom,
with its much publicized opt out of the Agreement on Social Policy, the
number of employees that will be directly affected by the Directive in terms
of having enforceable rights for participation against their employers is
relatively small.7The Directive is structured so that works councils have become
mandatory from 22 September 1996 in respect of multinational companies
with at least 1,000 employees across the European Union including at least
150 in two member states.8Multinational companies which have this employ-
ment profile do not have to include United Kingdom based employees but
experience to date indicates that those who have introduced works councils
are doing so. If in the future the United Kingdom were to accede to the
Social Policy Agreement, then the Directive in some form would become
binding as part of United Kingdom national law. It seems that in the United
Kingdom one in three companies affected by the Directive have introduced
works councils, a faster uptake that of other EU member states.9This paper
hopes to offer some possible explanations for why, despite government oppo-
sition, there has been this desire by business to comply with the terms of
the Directive. In order to do this it is necessary to situate the issue of employee
participation within a broader discussion of some of the approaches to
corporations and corporate behaviour which take a focus wider than simply
the rights of and duties owed to shareholders. Stakeholding as a theory rather
than as a descriptive noun in the sense that it is used above, is one such theory.
This discussion will form the first part of the paper.
In addition to being the first attempt at pan-European recognition of
the multinational nature of business from the standpoint of employees,10 the
European Works Councils Directive also offers an opportunity for employees
to be participative in business while retaining their identity as employees.
This is a significant change of position. The German position on partic-
ipation which does not adopt this approach has already been outlined above.
Previous interest in employee involvement in the United Kingdom was based
upon the idea of participation through board membership. The Bullock
Report11 recommended that there should be three constituencies represented
in unitary company boards: employees and shareholders who together made
up two-thirds of the board with the remainder of members being drawn
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