Prof. Markus Roth

Co-Determination in the Multi-National Firm

Co-determination as a concept of employee participation is widely associated with Germany. The German term Mitbestimmung is wider and covers works councils (betriebliche Mitbestimmung, employee participation at plant level) as well as co-determination in corporate boards (employee participation at board level). The German law product had its origin at plant level during the Great War and linked both forms after the Great War in the Weimar Republic. The works council had the right to nominate supervisory directors. After World War II, co-determination was reintroduced in the coal and steel industry in the British Zone (Ruhrgebiet). Both concepts focused on national companies but questions of multinational enterprises were discussed already in the 1970s when quasi-parity co-determination was introduced for all stock corporations with more than 2000 employees. Some authors argued that employees of subsidiaries in the then European Economic Area should be included. In a recent decision (Erzberger), the European Court of Justice, accepted a restriction to employees employed in the home country of the multinational firm, however the discussion in Germany will go on.

Among the members of the OECD, co-determination is laid down in the national laws of European countries, but not substantially in other parts of the world. However, China is to be mentioned, but Chinese multinational firms are just evolving. Especially due to the common market, multinational firms are quite common in Europe. At European level, the European Company, Societas Europaea (SE) is to be mentioned. The SE is, by definition, a multinational firm; one of its characteristics is the procedure for multinational employee representation at board level, however restricted to members of the European Union.

At national level, the Netherlands address the multinational firm for some decades, however in the form of excluding the multinational holding company from mandatory co-determination at board level. Since the Great Recession, some European countries explicitly regulated co-determination in the multi-national firm. The possibility to include employees employed in other countries was first laid down in the Danish Companies Act, altering an existing co-determination regime. Contrary to that, France introduced mandatory co-determination in the 2010s, also giving the general meeting the possibility to foresee the representation of employees employed in other countries. Both countries avoided the complicated procedure of the European Company and did not limit representation to the territory of the European Union. As a designated leaver of the European Union, Great Britain is also considering co-determination, but is unlikely to introduce a mandatory form. A green paper is open for comments and a consultation of a revision of the UK Corporate Governance Code due to take place in autumn.