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_______________________________

Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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CHEERS AND BOOS FOR EMPLOYEE INVOLVEMENT: CO-DETERMINATION AS CORPORATE GOVERNANCE CONUNDRUM [2005 but still relevant]

by Christine Windbichler, Humboldt University of Berlin; Faculty of Law

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=963287

or in

European Business Organization Law Review / Volume 6 / Issue 04 / December 2005, pp 507-537

http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=377843

or

http://journals.cambridge.org/action/displayFulltext?type=1&pdftype=1&fid=377844&jid=EBR&volumeId=6&issueId=04&aid=377843

[full-text, 31 pages]

Abstract:    

Employee involvement in a very general sense is by and large an accepted policy goal in the European Union. Its forms nonetheless vary considerably among Member States and sometimes include boardroom representation. Board composition, performance and incentive structures are core areas of the ongoing corporate governance debate in Europe and most other parts of the world. These two discourses are rather disparate. Recent EC legislation and jurisprudence do not proactively pursue an integrated approach. The following paper maps out overlapping areas of employee participation and corporate structure, explores some theoretical underpinnings for employee involvement from a contract-theory perspective and analyses issues specific to internationally engaged corporate groups. Finally, a transaction-based approach for modernisation of employee involvement is suggested. Preference is given to default rules that do not require employees to be represented at board level yet leave room for agreements to that effect. The plasticity of private law, the resilience of the corporate form and the governance-assisted employment relationship can defy petrification. Transaction-based employee involvement promotes a productive conjunction of corporate governance components consonant with the specific character of the employment relationship. An evolutionary approach to reform requires flexible legislation instead of deference to existing models. However, consensual model building needs proper enabling tools. Academic groundwork in private international law, contract, labour and corporate law is called for.

CONTENTS

1. Introduction..............................................................................................508

2. Some common starting points.................................................................. 513

2.1 Corporate citizenship ............................................................................... 513

2.2 Valuation of human resources ................................................................. 515

2.3 The corporate group as the normal form of organisation......................... 517

3. The corporate governance conundrum..................................................... 519

3.1 Boardroom co-determination and the agenda for improving board performance ................519

3.2 The national co-determination regime and the international group ......... 521

3.3 Competition of legal systems................................................................... 525

4. Internal and external governance ............................................................. 526

4.1 Employees’ internal involvement in the structure of the corporation ...... 526

4.2 Employees’ contractual relations with the corporation............................ 528

5. Transaction-based solutions: an agenda for modernisation ..................... 531

5.1 Boos for convoluted corporate boards ..................................................... 531

5.2 Cheers for contract governance ............................................................... 533

5.3 Transaction-based evolution: plasticity v. petrification ........................... 534

5.4 Conclusion: an agenda for legal groundwork .......................................... 535

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