In January 2003, the international management consultancy Organization Resources Counselors Inc published a survey of 24 major multinational companies’ experience of European Works Councils. Among its key findings, the survey identifies some 'unexpected benefits' for management from the operation of EWCs.
In January 2003, Organization Resources Counselors Inc (ORC), the US-based international management consultancy, published the findings of a survey it conducted between April and July 2002 of 24 major multinational companies’ experience of European Works Councils (EWCs). This feature reviews its key findings.
The ORC European Works Councils Survey 2002 'explored issues that, in ORC’s view, have the potential to affect management’s ability to manage an EWC in the medium to long terms'. The participating companies, listed in the table below, are almost all headquartered in the USA, the UK and Japan, and operate in a variety of industrial sectors. The EWCs are all based on either 'Article 13 agreements' (ie concluded before 22 September 1996 when the EU EWCs Directive [94/45/EC] came into force) or 'Article 6 agreements' (ie concluded after 22 September 1996) and have 'accumulated significant experience'.
| AstraZeneca | General Motors Europe |
| British American Tobacco | GlaxoSmithKline |
| BT | Honda Motor Europe Ltd |
| Citigroup | Kraft Foods International |
| Coca Cola Enterprises | Matsushita Electric Europe Limited |
| Corning Incorporated | Otis Elevators |
| Deere & Company | Philip Morris International Management SA |
| Diageo plc | Procter & Gamble |
| Du Pont de Nemours | Sony Europe |
| ExxonMobil | Syngenta |
| Ford Europe | TRW |
| GE Plastics | Unilever NV |
A majority of the companies (16) have renewed their EWC agreements since their initial establishment. Though this resulted in some changes to the formal wording of the agreement, in most cases management considered that this did little to affect the operation of the EWC. A significant number of companies had renegotiated their EWC agreements following a merger or acquisition. The renegotiated agreement 'strongly reflected the provisions of the EWC agreement in force at the time in the dominant company'. More generally, a majority of companies (13) indicated that the formal provisions of their EWC agreements had been exceeded in practice.
Most companies (20) said they had informed and consulted their EWCs over company restructuring. In two companies, framework agreements addressing specific aspects of restructuring had been negotiated. However, in the majority of cases, while consultation on restructuring was generally viewed as positive, its impact on the 'content of the decision' had been 'low to non-existent'. In only a few cases had management accepted suggestions from the EWC and subsequently incorporated them into the company’s final decision.
One significant 'unexpected business benefit' deriving from the EWC process, noted by several companies, is that the discipline required of management in engaging with the EWC has exerted a 'positive influence' on management preparation and coordination. ORC comments that 'engagement in transnational information and consultation through their EWC has highlighted the need to have a clear, well thought-out and articulated explanation of corporate strategy. This need to explain strategic transnational issues to their EWC has forced organisations to improve cross-business and country coordination among their management teams before they embark on consultation with their employee representatives.'
Few EWC agreements are reported to provide for the submission of formal, written opinions by employee representatives as part of the consultation process, despite the inclusion of such a procedure in the EWCs Directive’s subsidiary requirements. All companies reportedly indicated that employee representatives seemed to have little interest extending the role of EWCs to include negotiating rights. In the light of this, ORC suggests that 'although trade union organisations are lobbying for tougher legal consultation/negotiation requirements in EWCs, it is possible that this is out of kilter with employee representatives’ ambitions, which remain more modest.'
Whether a particular issue is seen as 'transnational' or 'national', and therefore whether it an falls within the EWCs’ remit or not, is reported to have been contentious, with employee representatives challenging management’s exclusion of an issue from the EWC’s agenda in half the companies in the survey. Companies reported that they tended to 'hold the line' against pressure from employee representatives to bring national or local issues to the EWC. Most companies indicated that their management was now more adept at examining issues for their transnational dimension than in the early days of their EWC.
The overwhelming majority of EWC agreements provide for some sort of role for outside experts - usually trade union officials - though arrangements vary significantly between companies. Where union officials act as experts, their contribution was in most cases reported to be generally helpful, eg in helping employee representatives to reach a consensus where this would otherwise have been difficult to achieve.
Confidentiality remained a 'priority issue' for the companies surveyed but in practice few problems occurred. In only one case was it reported that an employee representative breached confidentiality requirements following receipt of information via the EWC, prompting a warning to the person concerned. Employee representatives in one company were reportedly concerned that their role had been compromised where they had been given confidential information but were prevented from passing this on to representatives and employees at the local level.
In the majority of companies, communicating the outcome of EWC meetings to employees is a shared responsibility between management and employee representatives, although the communication process tends to vary by location depending on the industrial relations environment and the existence of employee representative bodies.
Management’s overall view of EWCs varied. A minority of companies indicated that management’s engagement with the EWC was limited to compliance, and no more. Some respondents mentioned a lack of commitment to the EWC process on the part of either group-level or local management. In the majority of cases, management perceptions were reported to be more positive. Three-quarters of respondents agreed that the EWC had added value to the company. However, companies also generally reported a lack of interest in the EWC among employees, particularly in decentralised companies and those with large, widely-dispersed workforces.
The companies covered by this survey are virtually all headquartered in the USA, UK and Japan. At the time the Directive was adopted, multinational companies based in these countries tended to be particularly concerned at the implications of having to inform and consult through EWCs. The ORC survey suggests that such apprehensions have generally proved unfounded in practice, even if the EWC process requires considerable management time and resources.
The finding that consultation with EWCs can promote enhanced management coordination reinforces earlier pieces of research. The finding that EWCs in the ORC survey had influenced company decision-making outcomes in only a few cases is consistent with recent case study research at Warwick University on EWCs in UK- and US-based companies (reported in European Works Councils Bulletin 36, November/December 2001). The Warwick research explains variations in the impact of EWCs on management-decision-making primarily in terms of the focus, spread and cross-border integration of companies’ European business activities, the existence of a European-level management structure, and management policy towards the EWCs. The modest impact of EWCs on company decisions in US- and UK-based companies can to some extent be seen as a reflection of patterns of corporate governance and industrial relations in the Anglo-Saxon economies. EWCs in companies headquartered in continental European countries, with stronger traditions of employee participation, may be able to exert greater influence on management decisions, though such a conjecture remains to be confirmed by systematic research evidence.
ORC argues that employee representatives rarely submit formal written opinions and, in practice, do not want to be 'too closely associated with the management decision-making process or the decision itself'. Nevertheless, in policy terms, the finding that EWCs in the ORC survey have had only a very low impact on company decision-making may fuel trade union demands for stronger statutory consultation requirements in a revised EWCs Directive (EU0212208F). (Mark Hall, IRRU)