TFR 18 – Collective Bargaining and Employee Participation in Western Europe, North America and Japan

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This study examines trends in the industrial relations systems in Western Europe, North America and Japan. The focus is on changes in collective bargaining and on the development of other forms of employee participation in managerial decisions.

Collective bargaining, though its pattern varies widely, is now strongly established in all of the countries covered. There is a general trend, stronger in some countries than others, toward an extension of the scope of collective bargaining in terms of the issues and decisions covered. The importance of collective bargaining is evidence of its advantages as a process to reconcile conflicting interests in employment relations, but its limitations have also become apparent, both within the enterprise and at the level of the wider society. Within the enterprise, collective bargaining provides an insufficient foundation for the legitimacy of managerial decisions, often not covering a wide range o decisions of great importance to the welfare of employees. In the wider society, collective bargaining processes have given rise to continuing problems of inflation and led to conflicts over adjustments to technological and economic change. Conflict is inevitable in labor-management relations, but without cooperation based upon an ideology that makes it possible to develop constructive industrial relations, the marvels of modern technology and raised expectations may lead to disaster.

Alternative forms of employee participation in managerial decisions help provide the basis for enhanced cooperation. Employee participation, which varies widely among countries, has developed at different levels: At the shopfloor level, various arrangements for direct employee participation have emerged, such as semi-autonomous workgroups. At the plant or enterprise level, works councils and consultative or joint committees have developed to varying degrees in all three trilateral regions, At the level of boards of directors, worker representatives are now present in a number of European countries. At a somewhat wider level, plans have been developed in some countries for major union participation in capital ownership and allocation. At the national level, arrangements exist in a number of countries for union (and employer) participation with government through tripartite consultative bodies, for instance in the making and administration of national economic and social policy. It is the middle three of these five levels that particularly interest us in this study.

Collective bargaining differs in significant respects from other methods of participation, although the two processes may overlap to a considerable extent. In collective bargaining, the relationship between union and management is adversarial. Each side knows that, though they may be compelled by circumstances and law to recognize mutual advantage in agreeing with each other, a gain for one may be a loss for the other. The nonbargaining participative process, by contrast, is based upon the principle that managers and employees share to a large extent a common interest and that there is mutual advantage in its recognition.

Western Europe (Chapter II)

Alternative forms of employee participation are more fully developed in some European countries than anywhere else in the trilateral regions with regard to works councils, worker representatives on boards of directors, and "democratizing capital formation."

Works councils were established rather early in the postwar era in a number of European countries. The most dramatic development was in the early 1950s in West Germany, where works councils have become an extremely influential body in most enterprises. This influence is exercised independently of the trade unions, but in contact and collaboration with them. The works council has no legal authority to call a strike; its influence depends upon its statutory rights and the acceptance of its role by management. Nevertheless, German unions have no wish to see this situation changed and testify to its effectiveness in protecting the interests of employees. The history of works councils has been somewhat different in other European countries. In the Netherlands, the radicalizing of union policies has led to demands that works councils assume more of the character of joint negotiating committees. Likewise in Italy, the original concept of works councils as consultative committees is disappearing as they are radicalized by more militant shop stewards. In Britain, joint consultative committees have often become pre-bargaining forms, and managers have been willing partners of shop stewards in allowing many of these committees to fade away.

Germany provides the most notable example of worker participation on boards of directors, with its highly complex system of codetermination. In coal, iron and steel companies, employees (of companies with more than 1000 employees) have had the right since 1951 to elect the same number of representatives as shareholders to supervisory boards the upper tier of Germany's two-tier board structure. Controversial legislation passed in 1976 increased employee representation in large companies in other industries to one-half, though in other aspects the 1951 legislation remains more advanced on employee board rights. A crucial factor in the success of the codetermination system is the limitation of collective bargaining to decisions made at the industry level. negotiations at the enterprise level are carried out between the works council and management, without direct union involvement. Were the unions to become more directly involved in plant and company bargaining, this would almost certainly create tension more akin to the situation in some other European countries. In all three Scandinavian countries, there is no pressure from the unions to emulate the German model by extending existing minority board representation to the parity level. The Norwegians are considering introducing a third-party element a director from the local community. The Dutch, under a 1973 compromise, have no direct employee representation on supervisory boards, but new board members, co-opted as needed, are subject to the veto of both the shareholders meeting and the works council. There is very little support for the German model of codetermination in Belgium and Italy. The Sudreau proposals in France, suggesting one-third employee representatives on supervisory boards, have proved unacceptable to both unions and employers. The British government is planning legislation to assure at least minority representation for employees on upper-tier policy boards, but neither unions nor employers are enthusiastic about the legislation.

With regard to "democratizing capital formation," the unions in Sweden and Denmark have adopted the most radical schemes, designed to give the unions ultimate control over the bulk of equity capital within a term of years. Sweden also presents the most striking example of the extension of the scope of collective bargaining with the 1977 law giving the unions a legal right to bargain on almost every management decision.

The growth of trade union support for participative rights in management is only one aspect of the widening role of trade unions in the Postwar period. In every country in Europe, the unions have gained the right to be consulted by governments on almost every aspect of economic and social policy. The crucial question for the unions is how far they should go in supporting cooperation with employers and governments rather than pursuing their traditional role of engaging in open conflict.

There is an ideological divide in Europe on this question. Not only Marxist unions hold the conflictual view of industrial relations. Some non-left unions are strongly opposed to the idea that they should accept a significant element of joint responsibility for the efficient management of the enterprise. Strongly motivated entrepreneurs hold firmly to the belief that they must be in sole command. Professional managers tend to be hostile to concepts of organization which may undermine their authority. On the other side of the divide are those managers who believe that, under contemporary circumstances, they can only wield power by sharing it. Many unions are anxious to participate in management. In sum, there is a major difference of view in Europe which cuts across unions, employers and countries.

North America (Chapter III)

More than any other trade union movement in the world, American unions rely on collective bargaining as the principal means of advancing the interests of their members. The strength of American collective bargaining lies to a great extent in the fact that, because most contracts involve only one employer or even one plant, collective agreements tend to be very specific about a wide range of issues. The typical contract has been steadily widened and its comprehensive character makes unilateral action by the employer as restricted as possible. There are tensions in the system lagging union recruitment, employer hostility, inadequate political support for union causes, increased government intervention, low productivity, and worker alienation but they have not led to much support for employee participation in management along the lines of some European countries. American unions cherish their adversarial posture. "We do not want to blur in any way the distinction between the respective roles of management and labor in the plant," a high AFL-CIO official has stated. Moreover, he added, American unions already "bargain on more issues than the number we might have any impact on as members of a board of directors."

Although beliefs deeply held by unions and employers rule out major support in the United States for employee participation on boards of directors, there has been a remarkable development of joint labor management committees plant production committees and bodies concerned with improving productivity, the quality of working life or community relations. This study examines some specific cases such as the experimental negotiation agreement in the steel industry and cooperation between General Motors and the United Automobile Workers.

There are differences of view regarding the interpretation of these developments. Some see the long-standing resiliency of the existing American industrial relations system, making empirical adjustments, as it has it, the past to changing circumstances. On the other hand, Professor Lodge sees the evolving new structures and procedures reflecting an important shift away from the traditional American ideology, associated with the general notion of Individualism, to a new ideology which Lodge calls Communitarianism. In this light, the U.S. experience becomes more comparable to that of Europe and Japan.

We believe that the new developments are evidence of a shift. Although some regard them as idiosyncratic and unrepresentative of broad trends in the United States, we feel that managers and the managed in the United States, as in Europe, are finding that the contract relationship is insufficient and are developing new consensual relationships to meet their needs without unions giving up established bargaining rights or managers yielding up their responsibility for efficient management.

The Canadian system of industrial relations is firmly rooted in a collective bargaining system significantly influenced by the United States model, but its philosophy and practice have also been influenced by strong Canadian attachments and affinities to Europe, especially Britain and France. Up to now there has not been any general enthusiasm for the industrial democracy ideas which have gained support in Europe, but the opposition is based much less upon the notion that such ideas are alien to Canadian concepts than upon a concern with how they would be reconciled with collective bargaining. In the longer run, Canada may well come closer to Europe in its style of industrial relations.

Japan (Chapter IV)

Collective bargaining is conducted at the enterprise level in Japan, but it is coordinated by federations at a higher level. Each spring the enterprise unions submit claims for pay increases known as the "spring offensive." The response of the employers is influenced though not determined by the central employer organization, Nikkeiren. When agreement is reached in the major enterprises in one of the influential industries, this sets a pattern which is quickly and closely followed, though there may be deviations depending upon circumstances, the medium-sized and smaller enterprises, though less directly involved in the spring wage round, will be influenced by its outcome and will adjust pay levels as appropriate. The scope of collective agreements has been extended to cover a wide range of issues in addition to wages and hours, Including such matters as safety, workshop conditions and welfare, recruitment, transfer, promotion, discipline and discharge.

Joint consultative committees exist in 60 percent of all unionized enterprises, and in over 70 percent of the larger enterprises. Moreover, even in enterprises without formal consultative committees, employers have legal obligations to consult. There is a complex and subtle relation. ship between the collective bargaining process and joint consultation. In some cases, the aim is to achieve joint decision through the consultative process, but in others, consultation takes the form of prior discussions to collective bargaining. The majority opinion is that joint consultative committees have served both parties extremely well. They have matured into an institution which works effectively both as a means of joint consultation and as a preliminary stage in the collective bargaining process.

Joint consultative committees have spread rapidly at the enterprise level in the last decade, supplementing the earlier development of joint consultative committees at the plant level and paralleling the development of enterprise-wide collective bargaining. There has been a clear tendency for joint consultation at the enterprise level to involve discussions of major corporate business and production decisions, and this trend is likely to develop further. With this development in mind, the Japan Productivity Center recently suggested one way of achieving a Japanese system of participative codetermination: the introduction of a joint management policy council made up of trade union and management representatives, which would discuss the same matters as the board of directors and function as an advisory organ to top management. A joint management policy council of this "shadow board" type has been tentatively introduced in a number of large firms in recent years.

Despite divergent attitudes in various groups, there is a wide measure of agreement in Japan on three future directions: (1) The joint consultative committee system should be improved in order to increase the significance of worker participation and influence in major corporate decisions. (2) This development should be encouraged by voluntary agreement rather than by legislation. (3) In order to meet needs that may arise in the longer term, some new institutional arrangements should be introduced to provide for worker representatives on a board of auditors or some other top management organs.

The industrial relations system in Japan, at least in the large and medium-sized firms, is evolving towards a pattern made up of elements of collective bargaining, consultation and codetermination. The institutions and processes are growing out of cultural, economic and social factors peculiar to Japan, but they are being influenced by developments taking place elsewhere. The strongly enterprise-oriented system of trade unions in Japan and the underlying strength of the basic attachment to group responsibility and harmonious resolution of conflict, except where specifically sanctioned by clearly understood and accepted rules, are likely to reinforce the trends identified.

It is abundantly clear that increased participation and the substitution of consensus-based decision-making for traditional adversary systems do not of themselves provide an automatic solution for such problems as low productivity, cost inflation or inadequate capital accumulation and investment. Indeed, participation may perpetuate endemic problems in industrial relations systems such as the tendency for unions and enterprises to develop bureaucratic features. On the other hand, there is much evidence that increased participation reduces alienation toward work, although there is little hard evidence that it actually increases productivity. The evidence suggests that well-established systems of direct and representative participation, linked to the collective bargaining system, are an important means of underpinning managerial legitimacy and of winning support for change. Extensive participation may lead to slower decision-making, but against this, it seems possible to make decisions that are technically superior and to carry them out even when they involve major changes, without the bitter conflict often characteristic of more authoritarian systems and systems based upon the institutionalization of conflict. In sum, participation is an imperfect process, but we believe it offers to employees, managers, trade unions and governments a means through which to achieve a more rewarding working life, and to satisfy legitimate expectations of workers and their unions.

Authors

Benjamin C. Roberts, Professor of Industrial Relations, London School of Economics
Hideaki Okamoto, Professor of Industrial Relations, Hosei University
George C. Lodge, Professor of Business Administration, Harvard Business School

Table of Contents

Summary of the Report
I. Introduction: Collective Bargaining and Employee Participation
A. Collective Bargaining
B. Employee Participation and the Limitations of Collective Bargaining
C. Collective Bargaining versus Employee Participation
D. Participation with Government
E. Shopfloor Participation
F. Three Most Challenging Developments
II. Western Europe
A. Trade Union Patterns
B. Employer Organizations
C. New Models: Works Councils and Trends in Collective Bargaining
- Germany
- France
- The Netherlands
- Italy
- Scandinavia
- Great Britain
D. Winds of Change: From Stability to Crisis
E. New Models: Codetermination
- Codetermination in Germany
- Board Participation in Scandinavia
- The Netherlands
- Belgium, Italy
- France
- Great Britain
F. New Models Extending the Scope of Collective Bargaining
- Sweden
- Other Countries in Europe
- Collective Bargaining and Employee Participation
G. New Models: Democratizing. Capital Formation
H. Other "Industrial Democracy" Ideas and Developments
- Cooperatives and Workers' Control
- Participation in the Management of Pension Funds
- Worker Satisfaction, Motivation and Productivity
I. European Community Harmonization
J. How Much Cooperation with Government and Employers?
K. The Ideological Divide: Conflict or Cooperation
L. Postscript
III. North America
A. Fundamental Aspects of the American System of Industrial Relations
B. Tensions within the System
C. Attempts to Improve Employee-Employer Relations
- Steel: The Experimental Negotiation Agreement
- The United Automobile Workers and General Motors
- Harman International Industries
- Work Redesign in Nonunion Settings
- Employee Participation in Corporate Gains
D. Experimental Continuity or Ideological Transformation?
- Experimental Continuity
- Ideological Transformation
E. More Participation, but in American Modes
F. Canada
IV. Japan
A. Main Characteristics of the Japanese Industrial Relations System
- Trade Union Patterns
- Collective Bargaining
- Consultative Committees
B. Pressures for Change
C. Proposals for Increased Participation
V. Conclusions
A. Some Common Trends in Different Systems
B. Participation not a Panacea, but....

  • Topics: Economics, Trade
  • Region:  North America, Europe, Pacific Asia
  • Publisher:  The Trilateral Commission
  • Publication Date:  © 1979
  • ISBN:  0-930503-36-8
  • Pages:  90
  • Complete Text: Click here to download
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