Aleksandra Gregorič – Bringing workers into the boardroom: the Nordic way

L’apertura di Theresa May alla partecipazione dei lavoratori all’impresa può aver colto di sorpresa l’opinione pubblica, soprattutto perché è stato uno degli argomenti con cui ha voluto esordire nel nuovo ruolo. In realtà lo considererei una conferma della trasversalità del tema che, in quanto tale, dovrebbe sottrarsi al dibattito politico ed essere valutato come possibile strumento di miglioramento della produttività aziendale. Nei contesti economici de-industrializzati, in particolare, si affermano i “lavoratori della conoscenza”, detentori di competenze specialistiche spesso di alto livello, la cui partecipazione agli organi amministrativi dell’impresa può velocizzare i processi decisionali e aumentare la propensione alla ricerca, allo sviluppo, all’innovazione. Da non sottovalutare, inoltre, l’attuale carenza di rappresentanza sindacale per queste categorie professionali, le quali, partecipando alla gestione, potrebbero contribuire alla trasformazione della “rituale” conflittualità in confronti aperti e apolitici. Gregorič fa riferimento al modello nordico e ne evidenzia i vantaggi in termini di flessibilità e di performance rispetto ad altre governance “stakeholder-friendly”; personalmente condivido, un ottimo esempio di gradualità nell’applicazione di modelli organizzativi innovativi che potrebbe fare breccia nel sistema delle PMI italiane. (nota del redattore)  

Aleksandra Gregorič is Associate Professor at the Center for Corporate Governance, Department of International Economics and Management at Copenhagen Business School. She is also the current President of the International Association for the Economics of Participation (IAFEP).

The idea that a company’s employees could elect their representatives to the board of directors (i.e. board co-determination) might be gaining new momentum. For instance, the British Prime Minister Theresa May has recently mentioned this possibility as one of the steps aiming to improve the governance and management of the corporations in the UK, boost their competitiveness, while ensuring higher wages and job creations. The idea of employee board representation is however not a new one. A number of European countries during the seventies introduced legislation that provides (to various degrees) for employee representation on the board of directors. The adoption of those rules was presumably based on social and political considerations rather than economic efficiency.

This is, however, not the case today. There are various reasons for why we should expect that allowing the employees to participate in the governance of corporate affairs could create significant economic benefits, at least in the firms whose competitiveness depends on the firm-specific skills and knowledge that employees develop during their employment. For example, employees might need to learn how to operate a specific machine or specialize in a product that pertains exclusively to their current employers, i.e. develop skills and knowledge that only their current employers are willing to pay for. In this case, the employees (similar to the shareholders) bear the risk of losing the return on these investments in case of employment loss and the firm’s decay. The employees’ willingness to develop such firm-specific skills should, therefore, be higher when they have some voice in the conduct of corporate affairs.

The most common reference in the debates on employee board representation is the German system. For some, it is due to this pillar of corporate governance that German companies were better able to deal with the shock of the 2008-2009 financial crisis, and are now enjoying lower unemployment and higher wage levels than elsewhere. For others, it is a major barrier to companies’ competitiveness and agile decision-making. The critiques have reached a peak just a few years before the hit of the Great Recession, with the employers voicing demands for the dissolution or modernization of the system. Based on the scholarly evidence, one might argue that, if any, the problem in Germany might not be the codetermination rights per se but rather the fact that these rights apply to all types of large corporations and that, in the largest firms, they assign the workers (and union representatives) a parity influence on the board. In fact, some studies show that the positive effects of employee board representation might not pertain to all types of firms, that they might depend on whether employee representatives are actually employed in the firms (rather than being union representatives external to the firm), and that they might decrease (or even turn negative) when employee representatives hold as much as half of the board seats (parity codetermination). Therefore, what might be preferred are below-parity employee representation, and a more flexible, customized model that allows for an efficient distribution of employee representation across different firms.

The Nordic model of board co-determination represents a practical example of such system. In the Nordics, the law gives the employees the possibility (but not also an obligation) to appoint about a third of board members. In Denmark, for example, this right applies to all firms employing at least 35 employees. The employees get seats on a firm’s board if decided so by 1/10 the firm’s workers, or a trade union representing such a percentage. Employee representatives are always individuals employed in the company or the business group to which the company belongs. And how does this system work in practice? In collaboration with colleagues from the Center for Corporate Governance, Copenhagen Business School, I have been studying various aspects of employee board representation in Scandinavia. Using a unique sample of all Danish public and private limited companies with a board of directors, we find that the employees have chosen to be represented on the board of directors in about 25% of all the companies subject to codetermination rights, and in about half of all (larger) publicly listed firms. This choice to a large extent reflects the expected viability and benefits of employee-shareholder cooperation. For example, the probability of employee board representation is significantly higher in companies, where workers hold more specialized knowledge and, therefore, they should value control and might be in possession of information/knowledge relevant for firms’ strategic decisions. This is also reflected in the characteristics of those elected to the board, which mirrors the structure of the firm’s workforce, and the distribution of expertise at different job positions in the firm[1].

Our research moreover shows that employee representation can lead to solutions that are beneficial for both, the employees and the shareholders. For example, in a recent empirical analysis involving longitudinal sample of Nordic non-financial firms during 2001-2013, we find that the Scandinavian firms with employee directors were less likely to significantly reduce employment during the Great Recession, compared to other firms. These higher employment levels were, however, at least in part ensured by downward adjustments in the earnings per employee. Moreover, such cooperative responses to crisis are primarily observed in R&D intensive firms, where the value of maintaining employment (because of greater firm-specific investments by employees) should be most beneficial for the firm. Indeed, the R&D intensive firms with employee directors experienced a lower decline in market value, compared to other firms. Other stakeholder-friendly governance models, such as family control or higher females’ participation in governance, were not found to be equally relevant in this regard[2]. In sum, our research suggest that the employee board representation in Scandinavia potentially facilitates the creation of a platform, on which the shareholders and skilled employees are able to co-operate in search of solutions that are mutually beneficial to both the shareholders and the employees, and that the benefits derived from such cooperation cannot be entirely replicated by other governance arrangements.

[1] Gregorič, A, Poulsen, T. (2016), Understanding employee board representation: Empirical analysis using Danish linked employer-employee data, manuscript

[2] Gregorič, A., Rapp M. S., Sinani, E. (2016), Board-Level Employee Representation and Firms’ Responses to Crisis, manuscript

(Aleksandra Gregorič,, 16.01.2017)

Lascia un commento

Il tuo indirizzo email non sarà pubblicato. I campi obbligatori sono contrassegnati *