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Board-level Representation

Employee representatives make up one third of the members of the supervisory board in companies with more than 200 employees. But new legislation, passed in 2006, allowed single tier boards for the first time, and here employee rights are much weaker.

In companies with a two tier board system – both a supervisory and a management board – the works council has the right to nominate one third of the members of the supervisory board where the company has more than 200 employees. The one exception, introduced through legislation passed in 2006,[1] is where there is an agreement between the works council and management to the contrary. Before making the nomination the works council must consult with the unions in the company.

 

The supervisory board is responsible for the general direction of the company, while the day-to-day business is in the hands of the management board. (In practice, most supervisory boards only meet rarely.) However, the 2006 legislation (and the 2013 legislation which has replaced it) leaves the procedures of both the supervisory and management board to companies themselves to regulate. Previously there was more detailed legislative regulation.

 

In companies with a single tier board system – just a board of directors – employee participation at board level must be regulated by an agreement between the works council and the company. This marked a change – before the 2006 legislation only two tier board structures were possible – and it represents a potential weakening of employee representation at board level, as there are no minimum requirements. 

 

Employee representatives must be company employees have the same rights and obligations as other members of the supervisory board. However, under legislation passed in 2013 they have lost their right to protection against dismissal. All supervisory board members are elected for a period of five years.

[1] The 2006 legislation has been replaced by new legislation passed in 2013 (Civil Code: Act V of 2013 Section 3:119 to 128), but this has not altered the basic principles of employee representation at board level.

L. Fulton (2021) National Industrial Relations, an update (2019-2021). Labour Research Department and ETUI (online publication). Online publication available at http://www.worker-participation.eu/National-Industrial-Relations.