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Board-level Representation

Employees are represented on the boards of companies with more than 25 employees. There are two or three employee members and they typically account for a quarter to a third of board members. They are chosen by the union and are generally important figures in a whole range of employer-union relations.

Employee representation at board level is extensive in Sweden, which has a single-tier board system.

 

Under the 1987 Act on Board Representation for Private Sector Employees (Lag om styrelserepresentation för de privatanställda), employees in almost all companies with more than 25 employees have the right to elect board members. The legislation applies to limited companies, banks, mortgage institutions, insurance companies, economic associations and some European cooperatives, and the calculation of employee numbers is based on the average number of employees in Sweden in the most recent financial year. Bodies outside the private sector, for example non-profit organisations, are not covered by this legislation, but in some cases these organisation's statutes, may provide for employee representation at board level.

 

However, the possibility of having employee representatives on the company boards is not used as widely as it could be. Figures from the PTK, the non-manual negotiating body which brings together private sector unions, indicate that in 2018 there were about 15,500 limited companies where employees had the right to appoint board-level representatives. However, only about 1,800 companies had registered employee members with the Swedish Companies Registration Office.[1]

 

In private sector companies with at least 25 employees the Act provides that there are two employee representatives on the board of directors plus the same number of substitutes. In companies which operate across different industries and have at least 1,000 employees there are three employee representatives on the board, again with three substitutes. The employee representatives, however, can never be in the majority. For parent companies, the employment threshold figures relate to the whole group (Section 4).

 

The 2020 edition of the annual survey of non-employee board members carried out by the consultancy pwc found that, on average, the number of board members chosen by the shareholders ranged from 5.4 in smaller stock exchange companies to 7.8 in larger ones[2]. With either two or three board members chosen by the unions this suggests that employee representatives make up between a quarter and a third of board members, at least in companies quoted on the Swedish stock exchange.

 

The decision to appoint employee representatives to the board is made by the local union, with which the employer has a collective agreement. If there is no union with a collective agreement with the company or the union does not choose to appoint representatives, there is no board-level employee representation (Section 6).

 

Once a decision has been made to appoint employee representatives to the board, they are chosen by the local unions (Section 7). They normally agree on how this should be done, with one employee representative and deputy coming from the manual confederation LO and the other coming from one of the two non-manual confederations, TCO and Saco, which, in the private sector work together in the PTK bargaining grouping. The PKT advises that where there are several non-manual unions in the company, they should cooperate to try to find a joint candidate, with mediation available, if they cannot agree.[3]

 

If an agreement cannot be reached between LO and the PTK, the law provides that if one union has 80% of the employees in the company, then it is entitled to both the employee seats on the board, otherwise each of the two unions with the largest membership in the company has a seat. (The substitutes are divided in the same way.) If the employees are entitled to three members the larger union appoints two (and two substitutes), while the smaller union appoints one (and one substitute) (Section 8).

 

Substitute members are important as they may attend and speak at meetings of the board even though full members are also present (Section 13).

 

The individual members, whether full members or substitutes, must be employees of the company, or of a company in the group in the case of a parent company (Section 9). They can be chosen in a number of ways including election at a union meeting in the company, appointment by the board of the local union group (the club) or a membership ballot. The PTK advises that its is an advantage if the person appointed is a member of the club board, but that they should not be the club president, the most senior figure or the person who negotiates with the company.[4]

 

Once the employees' members have been appointed, the local unions must submit a report to the company. This must contain the names of all members and substitutes, and the minutes of the meeting when they were appointed. The company then registers the new members with the Swedish Companies Registration Office.

 

Their term of office is fixed by the union making the appointment, but may not exceed four years (Section 10).

 

In general, board members representing employees have the same rights as those representing the shareholders of the company (Section 11). These are set out in Chapter 8 of the Swedish Companies Act (Aktiebolagslag 2005). However, board members representing employees cannot be involved in dealing with issues linked to collective bargaining or industrial action, or other issues where there is a clear conflict of interest between the company and the union (Section 14).

 

Overall, employee representatives have no power of veto and so cannot stop majority decisions taken against their wishes.

 

There is also a difference in approach between the legislation on board representatives and involvement according to the MBL Co-determination Act (see section on workplace representation).  Employee members on the board, like other board members, are required to act in the best interests of the company, while the negotiating rights provided through the MBL legislation are based on the differences between the parties’ interests. In addition, information rights under the Co-determination Act cannot be replaced by information an employee representative receives as a member of the board.

 

Board-level employee representatives and substitutes are covered by the 1974 Act on Trade Union Representatives, the FML. As such, they receive their normal pay for the work as a board member, and additional remuneration is exceptional. However, this also means that means that time for board work (preparation time, travel time, meeting time, induction and any training required) must be within paid working time (Sections 6A and 7 FML).

 

They also benefit from the protections against dismissal and detriment because of their duties as employee representatives (Sections 4A FML), the requirement for the union to be consulted before any changes in their working conditions (Section 5) and preferential treatment in relation to redundancies, if the union considers that their continued employment is of particular importance (Section 8). As with other union representatives, where there are disputes as to whether the law on union representatives is being applied correctly, the union’s interpretation of the provisions continues to apply until the issue is resolved, either at a higher level between the unions and employers or in the Labour Court.

 

[1] PTK website https://www.ptk.se/sakfragor/bolagsstyrelser/representation-i-bolagsstyrelser/ (Accessed 17.12.2020)

[2] Svenska styrelsers ersättningar och arbetssätt, Juni 2020 pwc https://www.pwc.se/sv/pdf-reports/skatt/svenska-styrelsers-ersattningar-och-arbetssatt-2020-ny.pdf (Accessed 17.12.2020)

[3] PTK website https://www.ptk.se/sakfragor/bolagsstyrelser/hur-utses-representanten/ (Accessed 17.12.2020)

[4] ibid

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.