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In focus: the Europeanisation of board-level employee representation

What do we know about board-level employee representatives in SEs? The EWPCC has identified at least 156 worker representatives on the supervisory and administrative boards of SEs. Their share ranges from a single member to up to half of the board seats. The most fundamental innovation brought about by the SE legislation was the possibility to internationalise the composition of the employee representation on company boards. In many cases, the SE has indeed led to an internationalisation of the boardroom; experience with board-level employee representation has in this way been indirectly spread to countries in which such representation does not exist in the domestic corporate governance system.

The majority of the SE employee board level representatives sit on a supervisory board, but there are a few SEs which have a single board structure. Here, the employees are represented on the SE’s administrative board.

Depending on the legal construction prior to the establishment of the SE, the share of board-level employee representatives ranges from a single member to up to half of the board seats. However, in no SE can the worker side ultimately prevent a board decision from being taken as long as the representatives of the shareholders act in unison. Where half of the board consists of employee representatives, the chairman has a casting vote in the event of a tie (SE Regulation, Art. 50 (2)).

The selection procedure of the board members differs from one SE to another. In most cases, the SE agreements on worker involvement provide the SE Works Council with the decisive role in determining the employee representatives to the board.1

The most fundamental innovation brought about by the SE legislation was the possibility to internationalise the composition of employee representation on company boards. In general, employee mandates on the board are allocated in proportion to the geographical distribution of the workforce across countries. The employee board-level representatives come from 16 different countries. A total of 77 per cent of them come from Germany, which can be explained by the high number of SEs with board-level employee representation rights headquartered in Germany, and the commonly found concentration of the workforce in the home country. In many cases, the SE has thus led to an internationalisation of the boardroom; experience with board-level employee representation has in this way been indirectly spread to countries in which such representation does not exist in the domestic corporate governance system.

The European trade union movement has insisted from the beginning that board-level employee representatives must be understood to hold and act upon a genuinely European mandate to represent the interests of the entire European workforce.

This Europeanisation of board-level employee representation entails both opportunities and challenges. On one hand, for workers outside the home country, an additional channel for interest representation is opened up, and a new arena emerges for international cooperation and articulation between workers’ representatives and trade unions across Europe.

On the other hand, it brings a number of new challenges, chiefly the increased need for coordination among the workers’ representatives and their unions, in order to ensure a joint understanding and a common approach. As a rule, there are only one or two representatives from countries other than the country in which the company has its headquarters. Furthermore, if these come from a country where board-level employee representation is unknown or practised differently, there is even more need to align the employee side. Different approaches to confidentiality can, in particular, be problematic, especially against the background of the individual liability of board members.

Furthermore, it should be borne in mind that the internationalisation of boards is no longer limited to the SE alone: the application of the Cross-Border Merger Directive (CBMD), for example, can also result in a board which includes employee representatives from different countries.

ETUI and ETUC (2014) Benchmarking Working Europe report 2014 (chapter 7)

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