EWC newsletter 2010 nr

Officials further elaborate the EWC Directive

In Brussels an Expert Group made up of officials from different Member States is currently harmonising the transposition of the recast EWC Directive into the different national legislations.  This is necessary to prevent the national EWC laws from differing too much.

Reports from the Group show in what direction solutions are being sought to clear up the points in the Directive that are ambiguous.

It was agreed among other things that all new EWC laws will come into force simultaneously on 06 June 2010, irrespective of the fact whether that law has been passed or not.  It was also agreed that the Member States would maintain their old EWC law for those cases where the old Directive, but not the recast Directive, are valid (thus in the case of agreements that are concluded or renewed in the 2009/2011).

The Expert Group has ascertained that the Directive talks interchangeably about the ‘revising’, ‘adjusting’ and ‘renewing’ of agreements.  For the sake of clarity it has stated that the term ‘renewing’ applies upon expiry of an agreement.  According to the Expert Group, the difference between ‘adjusting’ and ‘revising’ is the difference between minor and major amendments to agreements in force.

The recast Directive states that the European social partners must be informed when negotiation about an EWC begin, but not who must provide that information.  According to the Expert Group, it is only logical that central management be the one to do it.

The Group also gives further indication in terms of the system of link between the European and national level of information and consultation.  An agreement cannot provide for a system of link between these levels, in other words the aim is not for it to contain an explicit procedure for the linkages between these levels.  An EWC agreement has to leave the rights of the local worker representatives fully intact, more particularly when it comes to anticipating change, and therefore not hamper the early involvement of local bodies.

In conclusion the Expert Group has also usefully said that agreements concluded between 2009 and 2011 can already refer to the new Directive.

The UK and Portugal produce new EWC legislation

The new EWC Directive, which came into force on 06 May 2009, stipulates that all EU Member States must adjust their national EWC legislation by 05 June 2011.  This means 30 new laws, with the 27 Member States and the 3 countries from the European Economic Area.  Portugal has already prepared its new EWC legislation.  The United Kingdom is also ready.

The UK legislation is significant, because 265 multinationals falling under the recast Directive are headquartered in the UK.  Fewer than 40% of these have an EWC so we can expect a great many new European Works Councils based on UK law.  Furthermore companies that are not headquartered in Europe often choose to have UK law govern their EWC.

The draft law was submitted to the British Parliament on 06 April last, after an extensive consultation procedure.  This procedure gives individual Members of Parliament some more time to request a debate, but if they do not, and it is not expected that they will, the law will come into force in June 2011.  Some aspects are an improvement on the EWC Directive.  Others are not.

- Information and consultation now have their own article in the UK law including both definitions and conditions.  The text follows the EU Directive on this point.  Upon the insistence of the employers a phrase was added that states that managers must be able to actually make decisions.  
- The European Directive lays down that SNB and EWC members are entitled to training with no loss of salary. The British text explicitly states that the company is not obliged to make the time needed for training available or to compensate for it.  It would appear that the matter is not closed.
- In the European Parliament there were lengthy discussions about the concept of ‘transnational’.  This led to recitals that broaden the old description: in principle the EWC is only competent in matters affecting at least two Member States, but there are circumstances under which this can be derogated from.  The British text does not include this broadened definition, much to the workers’ disappointment.

- In the recast Directive there is the obligation to precisely lay down the link between local and European worker participation in the EWC agreement. The Directive also stipulates what rules apply when this is not provided for (information and consultation have to take place at both levels). The UK legislator has actually made this system more stringent: both the central management as well as the levels of local management are responsible for information and consultation. The UK legislator also sets out that multi-level procedures have to aligned with each other in a reasonable manner.

- The UK legislator chose to include some of the provisions from the EU Directive on Temporary Agency Work in the EWC law.  When answering the question whether a company ahs to have an EWC, temporary agency workers do not count in the tally.  But they do count when it comes to providing information about headcount.

- UK law traditionally makes it difficult for worker representatives to take a case to court.  The worker representatives have to bear their legal costs, and if the court rules against them they even have to pay the opposing party’s legal costs.  Moreover the deadlines are tight and the sanctions that can be imposed on the management not very dissuasive.

Up to now central management received a fine of GBP 75,000 if it did not abide to the EWC agreement.  This amount has been increased to GBP 100,000. It would have been much better to give the judge the possibility to suspend the implementation of decisions. This appears to be far more effective than a fine in other European countries.  Multinationals can easily pay fines.

- The fact that an EWC gets 6 months to bring a case before the courts is an improvement.  The UK legislator recognizes that it is time-consuming for an EWC to exchange information and to come to a decision. Another improvement is that an EWC can go to a ‘Central Arbitration Committee’ at first instance. This is not costly.  However fines can only be imposed by a higher court, the ‘Employment Appeal Tribunal’, and proceedings there can be considerably more expensive.

The UK EWC law is available. Click here

This article is a summary of a more extensive article published on our website.  Please click here for the original article.

Dutch companies not thriving under Anglo-Saxon rules

In the past few years Dutch companies have embraced the Anglo-Saxon shareholder philosophy.  They are not performing any better as a result, but worse.  This transpired from a survey that Business Administration student Pieter-Jan Bezemer from the Erasmus University Rotterdam presented as part of his dissertation in March.  Bezemer entitled it: Diffusion of Corporate Governance Beliefs.  He does not use that last word coincidentally, because a Dutch company embracing Anglo-Saxon principles is a little irrational.

The Anglo-Saxon ‘shareholder philosophy’ is often placed in contrast with the ‘stakeholder philosophy’, that is characteristic of the mainland of north-western Europe.  This Rhineland model is not solely based on the shareholder and quick profits, but the long-term is also important, as are the interests of more parties.

Bezemer ascertains that the Anglo-Saxon philosophy was very popular among the top 100 Dutch companies quoted on the stock exchange between 1992 and 2006: subscription rose from 13 to 74 %.  Bezemer points out that these companies were characterised by the fact that the salary of managers was linked to developments in the value of company shares (and stock options).  What was also specific to these companies was the fact that companies, to drive the price up, earmark a lot of money to get their own shares from the market.

Bezemer states that companies having switched to this philosophy were far less profitable in terms of their assets than companies who kept to the Rhineland model.  His survey also showed that these companies invest less in research and development.  And they did not even get better results on the stock exchange, both categories scored equally, ‘whereas one expected a positive difference’, the researcher said.

Bezemer does not go as far as to say that the Rhineland model is economically superior to the Anglo-Saxon one.  He does think that the Dutch companies that adopt this model have shifted to something that suits them less and that they are really not good at.  It is difficult to tell whether this is going to change in the future.  Bezemer believes that there is a counter-current that is gaining ground, but there is also strong backing of the shareholder philosophy from the financial markets.  Their influence is so strong that even major Dutch pension funds have not changed tack.  Bezemer finds it remarkable however that family-based companies have not jumped on the shareholding bandwagon and continue to perform well.

Another important finding of Bezemers’ is that the traditional Dutch supervisor network has unravelled and this in itself has negatively impacted innovation.  ‘After all these networks do function as multipliers of knowledge’, he said.

Heineken EWC draws up profile during training days

At its yearly training session the Heineken EWC drew up a profile that the Committee among others is going to use for training in the future. The Committee came up with the idea during a discussion on the subject of The role of the European Works Council in Heinekens’  change processes.

Another particularity of the Heineken EWC training session was the fact that it was subsidised by the European Commisison.  The scheme in question, as part of which a total of 7 to 8 million Euros are available yearly, is mostly used by European trade unions, but each year around 5 European Works Councils apply to it successfully.  The scheme provides for a contribution of maximum 80 percent of all costs, including costs of transport, accommodation, interpreting and in-house or external experts.

The draft profile that the members of the Heineken EWC drew up sets the bar high, but it is to be an outline of an ideal situation, one that one can only strive towards.  It is of course not realistic to assume that everyone can communicate in English in many countries.  However that does not make the content less worthy of mention, which is why here is a short summary (there is a separate version for members of the Select Committee).

Knowledge

- General knowledge of the company (background; product portfolio; brands; global structure; regions and sites in Europe; company structure, etc.)
- General knowledge of market developments
- Knowledge of the decision-making process in the company, especially pertaining to Europe 
- Broad vision of the economic and strategic position of the company
- Basis knowledge in finances
- Knowledge of the EWC agreement, the Information and Consultation Protocol, the Information and Consultation at local level Protocol, and the standing orders
- Basic knowledge of local labour law and agreements

Skills

- Capable of communicating in English (written and spoken) 
- Capable of communicating at different levels: both with colleagues on the shop  floor back home and the Board of Directors, worker representatives and national HR managers, people inside and outside the company 
- Capable of thinking beyond borders: national borders, local site, region 
- Capable of empathising with others, more particularly when dealing with other cultures

Attitude

- Well-developed social consciousness 
- An open attitude to different cultural backgrounds 
- Interest in the company as a whole 
- Proactive 
- Willingness to remain in contact by email and telephone between meetings 
- Courageous  Dynamic 
- A team player 
- Eye for diversity

Flextronics leads the way with new European Works Council 

Flextronics is a globally operating company that specialises in the assembly of electronic components. Since March 2009 the company has a European Works Council in anticipation of the new European directive.  Chairman Ingo Pink above all notices this with regard to the consultations about the HR policy. 

Flextronics is an American company, with its head office in Singapore. It is active in a large number of EU member states. The initiative to set up a European Works Council dates back to 2005 and came from the Polish, German and French employees.

Initially the negotiations went smoothly, but temporarily became bogged down when the question arose under which country’s law the new European Works Council would function. Even if the management felt it was quite important to reach an agreement and not let it depend on the European safety net intervention, agreement could not be reached. 

When the special negotiation group called in the aid of Mariëlle van der Coelen (European Works Council Service), the deadlock was overcome. She pointed out that the management itself has formal authorisation in this matter and proposed that the negotiations focus on rights and powers, and in addition take the new European Works Council directive, which was still in its draft phase at the time, as the point of departure. Her proposal sat well with both parties and in March 2009 Flextronics had a European Works Council agreement. Ingo Pink from Austria was unanimously elected chairman.

What does he think are the most important achievements that are now within reach? His reply: 'Firstly the right to training, which is based on the new European Works Council directive. Secondly in addition to the annual meeting of the European Works Council and the management, we ourselves meet four times a year as a steering committee, which means the four bureau members of the European Works Council and three management delegates; this leads to a lot more human contact than just one meeting a year. As the European Works Council we also have the right to visit branches. In addition we have a right to ask questions, that is to say the right to approach the management outside meetings with matters that we are concerned about. We also have an additional regulation that defines our rights in extraordinary circumstances.'

Pink feels these are all substantial improvements, even if they have not all been tested in practice yet.  For example, until now – luckily - there has not been an occasion to test how the regulation for extraordinary circumstances functions. The first meeting of the steering committee is yet to be held (this will be in July, in Budapest) and the matter of 'training' has not been elaborated yet either. But the new right to ask questions is already being used in abundance. Pink: 'We have already asked the European HR management a great number of questions about cross-border personnel matters. For example the new ICT policy and the management’s plan for a common personnel database have been discussed. As the European Works Council we are trying to ensure that the database will comply with requirements relating to protection of privacy. We could not conduct such discussions before the arrival of the European Works Council.' 

Growing interest in ‘sustainable pay'

One swallow does not make a summer, but it is an interesting development nonetheless: the companies that make their managers’ bonuses dependent upon long-term objectives and objectives with a more social character at that.

The Dutch chemicals giant DSM has partially conditioned bonus pay-outs of managers to environmental objectives such as energy use, low emissions of greenhouse gasses and the introduction of ‘green’ products. An external accountant is overseeing this.  Other major Dutch companies, such as Shell, ING and the postal company TNT have taken similar initiatives.

Actually this is not completely new.  Akzonobel, which was one of the first companies to publish environmental reports in 1993, linked a large part of the manager bonuses to the position of the company on the Dow Jones Sustainability Index at the end of 2008.  The DJSI is a benchmark for environmental policy but also for social policy.  AkzoNobel lays great store by a high position of that index, but up to now it was because a lot of their own workers laid great store by it.  Apart from that it did not see it as attractive to investors.

The Dutch advocate for VEB investors expects this change.  Erik Breen, Responsible Investment Manager of the Robeco investment bank, states that investors will place greater emphasis on things like sustainable decent treatment of workers and respect for human rights.  He believes that the financial crisis has ushered in a considerable change in the climate.  This is in line with a recent survey by the Erasmus University in Rotterdam of 100 supervisors of quoted and non-quoted companies: they think that social issues should be ‘factored’ into the calculation of variable pay more.

It is more particularly the companies that were bailed out by the State that are drawing conclusions as to bonus policy: it should be a little more sober and especially not so geared to the short-term.  SNS Real is ahead of the pack; ABN Amro, ING and Van Lanschot Bankiers have followed suit or plan on doing so.

European Works Councils wanting to focus on climate change can make use of the ‘Sustainable Remuneration’ publication by the Dutch VBDO (Associations of Investors for Sustainable Development), an organisation in which officials from trade union federations and Oxfam Novib are represented, but also almost the whole Dutch financial world.  In spring 2009 the VBDO ascertained that companies did want to change, but did not really know how to.  It asked for the help of consultants from DHV and Hay Group.  This was co-funded by the Dutch Ministry of Foreign Affairs.  The result was presented on 18 January 2010 to Heemskerk, the then State Secretary of EZ.  The VBDO is of the opinion that a third of a bonus ought to be linked to sustainability objectives and 60% of the variable pay of company managers must be conditioned to long-term objectives.  The survey lists several companies from across the globe that stand out in this area for some reason or another, and describes the methods and techniques used.

However one cannot speak of high summer.  The Dutch Minister of Economic Affairs, Maria van der Hoeven, refuses to impose the VBDO objectives on companies where the State has a stake, as was put forward by Members of Parliament from the small Christian party, the CU.  The Christian Democrat upholds the principle of self-regulation and is waiting on the results of the yearly benchmark survey of top 500 Dutch companies.

www.sustainability-index.com
www.vbdo.nl

Basemet EWC holds talks with management four times a year

At the beginning of this year an EWC was set up by the Basement group, the aluminium producer that Aldel, previously part of Corus and the former Pechiney smelter in Zeeland are a part of.  The group is active in Germany as well as The Netherlands. Basemet belongs to the Klesch group.  Other parts of Klesch, such as TAL International, the container rental company do not fall under the agreement and do not have their own EWC yet.

Basemet’s new agreement contains some interesting aspects:

- The agreement grants worker representatives the right to have as many as four meetings with management a year.  He EWC can hold additional meetings after notifying the management.
- The EWC will be informed and consulted about ‘social aspects that are relevant to more than one Company’.
- All members have access to all the sites of Companies in their own country.

Employees force Opel to make a concession

After months of deadlock Opel has signed an agreement with its German Central Works Council that is generally being viewed as an important concession of Opel.  The hierarchical structure of the car manufacturer has been changed in a way that was inconceivable to General Motors, the parent company. However, it is still unsure if this plan will be realised.

GM Europe, which is composed of Opel and Vauxhall, has been losing millions for years.  According to the trade unions and the Works Councils this is because the US parent company wants to be very involved with too little knowledge of things. That is why cars are being produced that European consumers do not really like.

Under the leadership of the European Works Council the workers on the different sites have held the same position for months: they want to contribute to a bail-out/rescue plan financially, but only if the authorities pay as well.  Other important conditions are that workers would get increased participation and GM Europe would have to adjust structurally in return for that money.  But up to now the US management has regarded worker participation to be like the 'Devil before a tub of Holy water', as was written in the financial press.

The Friday before Whit Sunday Nick Reilly, the Opel boss and Klaus Franz, the Chairman of the German Works Council, who is also the Chairman of the EWC, made known that it would happen anyway.  In the years to come GM is to scrap 8,300 of the 48,000 jobs in Europe.  In order to improve the company’s balance in the future German workers are going to contribute EUR 177 million, assuming that workers elsewhere will top up the amount up to EUR 265 million.  German workers are willing to give up their salary increase, part of their leave and bank holiday pay, they had agreed upon previously.  The total amount, EUR 1 billion in the next 4 years will be placed in an independent fund during that time.  If other commitments are not met, then the money and the interest on it will be given back to the workers.  In return for the workers’ contribution GM in going to invest EUR 11 billion in new models, among which a model that is smaller than the Corsa.  What is more: the German Opel company will be switched from a GmbH (“Ltd”) to an AG (“plc”).   

In Germany, an AG is different from a GmbH in that the management is not obliged to do what the shareholders (in this case, GM) want.  Decisions are subject to a supervisory board, and half of the seats on that supervisory board are occupied by German worker representatives in accordance with German law. 

GM request the European authorities for an aid of total of 1.8 billion Euro, of which 1.3 billion would have to be paid by the German government. 

However on Wednesday 6^th of June 2010 the German government rejected General Motors' request for aid for its Opel unit, saying the U.S. automaker had enough funds to pull its subsidiary through. This is a shock for the employees:"The economy minister is leaving the Opel employees out in the rain — against his better knowledge and against the interest of the German sites," Klaus Franz said in a statement.

Franz warned for the closure of at least two Opel plants and has announced a protest manifestation in front of the Frankfurt stock exchange.

It is curtains for the Antwerp site in December, in spite of the agreement reached. The only thing that the unions and politicians can do now is get new investors interested in the plant

Rudy Kennes, the Chairman of the Works Council at Opel Antwerpen, recently stated in OR-Informatie that if it would not have been for the European Works Council, his production plant would have been closed down a long time ago.

 

 

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