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Worker directors July 24, 2012

Posted by Tomboktu in Business, Ireland, Labour relations, Workers Rights.

One of the disdvantages of using Enlgish as our ‘lingua franca’ in Ireland is that we are not exposed often enough to ideas from outside the English-speaking world. A report published last week by TASC, Good for Business? Worker Participation on Boards (PDF here), is a case in point.

The existence of worker direstors in companies in Ireland — and the rest English-speaking world to which we so often look for policy examples — and the legislation on this issue are so poor that it can easily be forgotten that not only is it normal practice in many other European countries, but actually a legal requirement in some of our fellow EU member states. The poor situation in Ireland means that it is a difficult task to undertake a study of the role and effect of worker directors in Irish companies. The sample of companies is tiny and utterly unrepresentative: in the commercial sector, worker directors exist in only a handful of state-owned companies. (Worker directors also exist in a wider range of non-commerical public bodies, although that terminology is not always used to refer to them. Examples include the vocational education committees, the National Disability Authority, and the Legal Aid Board.)

It is worth setting out some of the legal requirements in those other EU countires. In Germany, depending on the size of the firm, either one-third or half the seats on the board must be worker representatives — worker directors or their nominees; in Sweden, a company with 25 employees must have worker directors; in Austrian PLCs regardless of the size of the firm, workers have a right to a third of the seats on the board. Across the EU 27 and Norway, 12 countries provide for worker directors of some form in private forms. The little-known directives on EU-level companies also provide for worker directors.

The TASC report presents a literature review and data drawn from a focus group with nine worker directors from six companies and thirteen interviews with other people: non-worker directors, company executives, and “independent experts”. We are not told what the basis of this last group’s expertise — or, importantly, the the view that they are independent — is.

In Ireland, we are a long way from the kind of values that are reflected in the 12 other EU countries. Two details from the TASC report show how much of a hill we have to climb.

The first detail is that the five recommendations in the report do not include anything would lead to an extension of the model to be extended outside the public sector. I would have thought that this is the kind of idea that a progressive think tank should be introducing into the debate in Ireland. And the report contains a reference that shows why ding that at this time would be opportune. In discussing the legal roles of comapny directors, TASC uses not the current legislation but propoals from a draft companies bill that is expected to be introduced next year. That bill will be a massive overhaul of the Companies Acts — the draft proposals come in at over 1000 pages. (The scale of what is comming doen the line for the TDs and Senators can be seen in the time the preparation of the bill has taken. The Company Law Reform Group has been working on this for over a decade.) TASC should be calling for that process to be used to strengthen industrial democracy in Ireland.

The second detail is that a majority of the the interviewees in the study — that is, the non-worker directors, the company executives and the “independent experts” — believe that worker directors should not sit on remuneration committees. That mind-set, which sees executives as being in a different market from others — so different that it often looks like they are on a different planet — is one of the key factors that has contributed to the obscene income inequalities we see in Ireland and the rest of the English-speaking world.


1. RosencrantzisDead - July 24, 2012

There has been some discussion of harmonising this aspect of company law across the EU. During the 70s, the British Government empanelled the Bullock Committee on Industrial Democracy to report on worker participation. The upshot was something quite short of worker participation on boards. The proposal was, naturally, vigourously opposed by groups within the City of London.

In an interesting twist, one of the upshots of the Bullock Report was transposed into Irish law by Des O’Malley of all people. O’Malley was the Minister for Industry in 1990 when he introduced the Companies Act 1990. Section 52 of said act provided for a duty that a director have regards to the best interests of the employees of a company when acting.

Section is here: http://www.irishstatutebook.ie/1990/en/act/pub/0033/sec0052.html#sec52

A look at the Dail debates reveal that O’Malley was cheered on by Pat Rabbitte and others for introducing this progressive piece of legislation.

Of course, the legislation was not progressive in the slightest. The second subsection is a classic example of a wrecking amendment. It states that the duty to employees will only be enforceable by the company. By and large, this means that only the directors – whose delinquency the legislation purports to curb – can enforce the duty against themselves. A ridiculous situation and one that will hopefully be rectified with the new bill. I would hope the ULA will keep their eye on this.

For a different view, Anthony Crosland wrote that worker-directors would turn out to be quislings to the socialist movement or hopelessly ineffective. There is a paper written by Lord Wedderburn on the subject in which he broadly agrees.


2. LeftAtTheCross - July 25, 2012

Very interesting subject all of this. There’s an overlap with co-operatives as a form of business organisation also. There’s a film coming out later this year “Shift Change: putting democracy to work” (http://shiftchange.org/) that might help raise some awareness of the possibilities.

Very interesting going back to the 70s to look at some of the discussion around it. There’s a series or articles on-line somewhere from B&ICO that critiques the approach of the British Labour government to workers control mentioned above by Rosencrantz.

It’s a subject which still captures imaginations. There was a piece the other day on the Havana Times website which was rather idealistic in proposing workers cooperatives as the future model for the Cuban economy. It wasn’t written by someone who is familiar with how markets really work in practice.

It’s an age old question really though isn’t it, whether workers self-management leads to capitulation or to more progressive outcomes.


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