The European Company (SE): Power and participation in the multinational corporation

Abstract

The European Company (Societas Europaea or SE) is a European multinational corporation, established under European Union regulations, intended to institutionalize transnational participation of employees and management in company decision-making. This article analyses a qualitative empirical investigation of the application of participation in European Companies. The experiences of firms adopting this corporate form show that contestability of participatory power is heightened, but its institutional legitimacy retained and diversely utilized. The data display a continuum of actor orientations, formal agreement regarding participation and effectiveness and transnational diffusion of participation. The utilization of this corporate form by labour and management actors is in general underdeveloped.

Keywords

corporate governance employee participation European Company multinational corporations power

Introduction

The European Company (Societas Europaea or SE) is a multinational corporation (MNC) with a corporate form established according to European Union (EU) law. It is unique in the first instance in that it is a post-national entity, with a ‘transnational home base’. Second, the SE corporate form is unique in its legally binding establishment of two-fold channels of employee participation in company decision-making. The statutory governance of the SE provides for negotiation of transnational works councils and board-level employee representation across all its multinational sites. Hence, an ambitious dialogical and consensual politics is institutionally intended.

SEs have been established in 25 of the 28 EU member states, and this corporate form has been adopted by some major MNCs including Allianz, BASF, BP-Europa, STRABAG and MAN. In this article, we examine the practical effects of the participatory institutions that have been established. We first contextualize the study through a brief historical and institutional consideration of debates on power, politics and engagement in production organizations. We survey the research literature and then discuss our empirical study of SEs in practice, developing an analytical discussion of their dynamics and institutions.

The institutional context

In the midst of much controversy, the EU has adopted an approach of liberal flexibility in bringing national labour markets and systems of corporate governance into a single market, allowing much scope for institutional innovation and strategic choice. The free movement of capital across borders and increased competitiveness are priorities, but these should not impose negative externalities on workers. Accordingly, the social policy agenda officially encourages effective worker participation across member states through soft law measures that favour a labour-inclusive model of corporate governance. It is in this context that the regulations establishing the European Company developed.

The pursuit of participation and institutionalized cooperation at the point of production has not been easy. Efforts to negotiate the ‘structured antagonism’ (Edwards, 1986) inherent in production relations and to institutionalize its regulation play a central role in industrial relations. Theorists have focused much attention on bargaining among the parties and explored the merits and risks of conciliatory approaches. Adversarial approaches can more visibly preserve the autonomy and solidarity of the parties but produce distinctly uneven results. Trade unions have typically been disposed to adversarial engagement (Edwards, 1986; Kelly, 1998) and have been cautious towards collaborative participation. Employers have been similarly guarded towards collaborative participation. Intelligent worker participation proposes a direct challenge to management authority. Employers have frequently preferred an adversarial approach, while increasingly permitting worker expression in workplaces through the human resource management (HRM) function. Neither collective bargaining nor HRM challenges the assumed managerial right to manage.

However, advocacy of more participatory and collaborative industrial and organizational relations has persisted. Much discussion focuses on works councils in Germany and the Nordic countries (Frege, 2002; Rogers and Streeck, 1995), but there is also a substantial literature on experience in European Works Councils (EWCs; Lecher et al., 2002; Waddington, 2011). These were the first transnational industrial relations institutions at company level and are further discussed below.

Efforts to pursue collaborative relations through ‘mutual gains’ enterprises and partnerships have been variously undertaken in Anglophone countries (Johnstone et al., 2009; Kochan and Osterman, 1994). Despite frequently disappointing results in which managerial powers have overwhelmed collaborative efforts, researchers also find fruitful experiences. The detailed investigation of forms of participation and partnership approaches in seven European countries by Huzzard et al. (2004) finds a dynamic mix of adversarial and collaborative relations. Rather than mutually exclusive, ‘boxing’ and ‘dancing’ at strategic and tactical levels are potentially interdependent components in industrial and organizational relations. Their action sustains negotiated power relations among actors and interests.

These long-standing concerns about power relations and modes of engagement in production organization continue to stimulate robust debates. Variation of emphasis and institutional arrangements in regard to adversarial approaches and pursuit of collaborative participation across different countries, or varieties of capitalist systems, remain salient (Gumbrell-McCormick and Hyman, 2013; Wilkinson et al., 2010). At the same time, neoliberal macroeconomic policies in pursuit of the EU single market exert intense pressure on the accomplishments of the coordinated, cooperative model (Baccaro and Howell, 2011; Streeck, 2009). The SE is institutionally enabled to be both a liberal market actor and constrained by participation.

In our discussion, we develop an exploration of power-politics in the SE and particularly elaborate a concept we term participatory power. This refers to the power of participation that is enacted from the power to participate. Constraint on the firm is itself power, a distribution that enables actor initiative and innovation.

The European Company

The SE is a multinational European shareholding company (typically, or at least partially, denominated in euro) set up under the European Company (Societas Europaea) Statute and the Directive on Employee Participation. The Statute and the Directive, adopted in 2001, provide that key aspects of an SE establishment are governed by supranational regulation and the national law of the jurisdiction in which the SE is registered and has its headquarters, while other aspects are negotiated by the parties. The Statute places emphasis on ‘creating a uniform legal framework’ while the Directive aims ‘to promote the social objectives of the Community’. The two-part regulation, applicable to every SE, is intended to facilitate multinational and flexible business operations, integration of the single market and protection of workers. Mergers, acquisitions, transfers and restructuring can occur with fewer legal obstacles and greater cost-effectiveness, enabling increased competitiveness and market expansion along with transnational protections of labour rights and participation.

The Directive requires that on the formation of an SE, management seek to agree arrangements for employee participation with a Special Negotiating Body (SNB) of employee representatives. In order to protect national systems with established codetermination and board-level employee participation, a ‘no detriment’ principle applies. Where negotiations fail to reach agreement within months, a set of standard minimum rules applies. Participation is defined as a role for employee representatives in influencing the governance of the company, including the election or appointment of members of the board (supervisory or administrative organ). The Directive provides that an SE can choose between a unitary or two-tier board (even if this choice does not exist for national companies within its country of registration). The SE, at the employer’s initiative, must negotiate the formation of an SE works council (SEWC). That obligation, together with the absence of a minimum employment threshold, accords the SEWC a stronger regulatory foundation than the EWC.

Analysts note that institutional flexibility and ambiguity enable more strategic choices and entail risks and opportunities for various organizational actors (Capriglione, 2008; Cremers et al., 2013; Lenoir, 2007; Nagel, 2007). They point to the potential for encouraging a market for incorporation and regulatory competition. As member states retain control of their tax systems, SE companies may engage in ‘regime-shopping’ for tax optimization or debt restructuring (Njoya, 2011). At the same time, EU taxation law reform is intended to facilitate cross-border mobility and integration of the internal market, which the SE corporate form can exploit (Eidenmüller et al., 2009). That liberal flexibility has prompted some analysts to regard the SE regulations as a path-setter for European company law (Grumberg and Le Gall-Robinson, 2006; Wenz, 2004).

The Directive may facilitate an expansion of employee participation in company decision-making, but may equally enable firms in countries, notably Germany, with long-standing institutions of codetermination to pursue a strategic escape (Keller and Werner, 2009) from perceived constraints. Debates in corporate and labour law anticipate the use of the SE principally for that purpose (Davies et al., 2013; Lange, 2006; Villiers, 2006), despite the Directive’s explicit encouragement of employee participation. Hence, industrial relations researchers observe the SE with a mix of optimism for its potential and critical concern over the ways in which it is being implemented (Keller and Werner, 2012; Stollt and Kluge, 2011). While the stated intention is to avoid misuse of the SE corporate form, in practice this may be loosely interpreted or breached. Observers remain uncertain and highly cautious in regard to the effects of flexible institutions and negotiation on fragile institutions of employee participation. Unions and works councils in countries with high standards of worker participation, such as Germany, Austria and the Scandinavian countries, fear erosion, while those in the United Kingdom, Ireland or Spain may gain new powers of access to highest level decision-making. In Italy, it is suggested that the SE may provide workers with ‘a very significant role’ in corporate governance and revitalize economic democracy in Italy (Baretta, 2004: 13).

ETUI data show that by mid-2014, about 2150 SEs had been established in 25 of the 30 EEA states. Only a quarter of registrations are of ‘normal’ companies that conduct business activities and employ people. The large number of ‘irregular’ (shell, unknown, extant but likely illegal) SEs are not investigated in our study, as only ‘normal’ SEs with business activities and more than five employees are relevant to our research on participation and politics. SEs have been established in a range of sectors, with services (financial, commercial, communications) and chemical and metal industries especially prominent. They also exist in healthcare, food, transportation and construction industries as well as textiles and other services. The majority have headquarters in Germany, the Czech Republic, the Netherlands, France and Austria, with Germany home to approximately half the normal SEs.

Researchers report that a number of German-headquartered SEs, through strategic use of the SE regulations, have established new arrangements that reduce worker participation in governance, usually through a reduction in absolute or proportional numbers, in comparison to that required by German law for nationally based companies (Keller and Werner, 2009; Rosenbohm, 2013). SEs such as Allianz, BASF and Bilfinger Berger have reduced their supervisory board size but have retained the proportions of employee and shareholder representatives. Some have adopted a unitary board structure. Gold (2011) reports, conversely, the case of an SE in Germany which increased employee representatives to 50 percent of the supervisory board. Studies also find that SEWCs have frequently extended their reach and role beyond that required by law, gaining improvements for workers in countries without previous participatory arrangements (Rose and Köstler, 2011; Telljohann, 2009).

The institutional flexibility of the SE regulations provides opportunity for negotiations among the parties and generates a considerable variety of negotiated outcomes. Rosenbohm (2014), like Stollt and Kluge (2011), finds no evidence that the SE poses a threat to national involvement rights. Nonetheless, the ETUI reports that board-level representation in SEs has been agreed in relatively few cases (Cremers et al., 2013). Moreover, a firm’s establishment of subsidiaries as SEs in other member states poses a threat especially in regard to diminished negotiation competencies and employees’ lack of understanding of rights of information and consultation, a point observed by others (Casey et al., 2012).

The development of the SE is of particular interest for an empirical investigation of the institutionalization of conflict and regulation of powers in production and organization relations. As indicated, we adopt a historical-institutional analytical approach (Jackson, 2011; Streeck, 2009), recognizing broad contexts in which actors and institutions interact under dynamic forces of constraint and enablement. This framework enables investigation into corporate regulation and governance, organizational behaviour and transnational industrial relations to find key intersections and enrich analytical understanding (Ferner et al., 2012; Hertwig et al., 2011; Keune and Marginson, 2013). It enables insight into the effect of actors’ interactions with the supranational regulatory context of the SE, in which companies adopt and interpret those regulations for a new MNC form at EU level. SEs, on establishment, enter into a political contestation over arrangements for and utilization of participation rights. How does this affect participation routes, roles and powers?

The SE and participatory power: an empirical study

During 2013 and 2014, we studied the operation of SEs, drawing on the ETUI database, company documents and reports, previous case studies and interviews with key actors associated with SE business operations. We approached large-sized MNCs that had adopted the SE corporate form, because of their greater transnational reach and because their political dynamics were likely to be of particular interest. We gained interviews with company personnel and employee representatives from SEs headquartered in Germany, Austria and the Netherlands. Information on French experience was gained from trade unionists and expert informants. The firms studied operate in sectors including chemicals, manufacturing, healthcare, finance, retail, transportation, marketing and food. That range and the size of firms corresponds with the known distribution of SEs, but our study is not fully representative, since it covers only a small number of countries and excludes small SEs. Furthermore, our cases are not representative in that the majority (17) had established dual participative arrangements, with both SEWCs and board-level membership. This may reflect the large size of the case firms, and it may be that individual SE personnel willing to give time to a research interview did so because of an active interest in SE issues and dual participatory mechanisms. But we contend that our study is illustrative of participatory politics in large SEs and reasonably justifies our interpretative analysis and conclusions that follow.

We utilize data from 65 interviews involving 23 SEs, conducted with participants in Germany, Austria, Italy, the Netherlands and the United Kingdom. The interviewees comprised company executive officers and managers (N = 22), employees, works council members, trade union actors (N = 33) and expert informants such as external company lawyers and consultants, EU-level trade union actors and academic researchers and experts (N = 10). Of the 65 respondents in this sample, 28 are current or former members of the management or supervisory board of an SE. Eighteen are current or former members of an SEWC. In order to protect anonymity of respondents, companies are not identified. The authors conducted the interviews in person, by telephone or Skype, using the preferred language of the participant. In the Netherlands, we were helped by a Dutch colleague. We used a semi-structured interview guideline and manually coded the material.

We were especially interested in how the power of participation is used in the SE. Among these early adopters of the SE, how do the power-politics of participation work out? What are the effects of the formal transnational participatory structures and channels across the MNC? We identify three key themes for discussion: the politics of participation, effects of participation and its transnational dispersion within the MNC. In order to explicate nuanced and actor-shaped participatory power among actors at the level of the firm, a data-rich discussion is pertinent.

The politics of participation

Institutionalized participation is intended to contribute to conciliatory regulation of organizational power and conflict. Nonetheless, parties to participation arrangements recognize that participation is itself a political and contested power. Firms establish SEs for strategic business objectives in liberalized transnational EU markets. That is the purpose of the Statute. Their enthusiasm for, toleration of or hostility towards employee participation enabled by the Directive is highly variable.

The requirement to negotiate at the point of SE establishment recognizes both the power of participation and its contestability. Though the regulation provides the fall-back option of standard rules, parties open negotiations with opportunity to reinterpret and re-contest their perceived interests and relationships. Negotiation also allows a free hand to liberal ambiguity, strategic manoeuvring and the craft of negotiation. The manner in which parties undertake the SE process and its mandatory negotiations with employees indicates their political stance towards participation.

Our data indicate a continuum, from stronger to weaker, of company actor disposition towards participatory engagement. Political disposition is evident in the timing of initial notification, the sharing of knowledge and information and the strategic pitch, all of which varied often widely across different companies. Some firms viewed the process positively. One management executive stated that:

‘I always perceived the [pre-SE] company as very German, and this was a barrier. We wanted it to be a European entity in which other European colleagues and countries could participate and also be part of the board’.

An employee representative reported that management

told us in advance… they were thinking of converting to an SE, they didn’t know for certain, but maybe it is a good idea if we start to prepare.

Other respondents, conversely, reported companies exploiting their advantage in order to prevail in negotiations:

‘the employer was only focused on getting his agenda. It started with language … They said, “your colleagues from other countries can do the translation themselves” …. They intended to leave everyone confused’.

A trade union lawyer said that

‘I had a recent case in which there was so much pressure put on the employees that they surrendered their rights to obtain expert advice. They were threatened with redundancies …. They ended up signing an agreement that was terrible’.

Furthermore, while the regulations stipulate that a firm adopting the SE corporate form cannot avoid participatory arrangements, a CEO in the retail sector argued that the employees

‘are not well trained or educated. They don’t understand their rights. If they demanded participation within the legal requirement we would enact it immediately. But as long as there is no demand … we can work more freely’.

Negotiating over participation enables actors to exert new pressures on pre-existing institutions. Their relative strength and skill in a dynamic political process conducted within a new institutional framework produce varied outcomes. The continuum of strategic intent illustrated in the above quotations ranges from transnational preference and cooperation to apparent breach of the regulations. However, the multinational SE generates a complex politics. Where dual forum arrangements are agreed, respondents report that management’s option to choose its board configuration is frequently contentious. Reduction in size reduces trade union presence at board level. That portends a strengthening of employer power in regulating the firm. However, the composition of supervisory board representatives both adds to and addresses the complexities of corporate politics and transnational tensions. As a trade union representative indicated,

‘establishing a trans-European supervisory board is a considerable development. But some employees [especially German] from certain areas of the company have to step down from the board to make room for the [other] Europeans’.

Such a process is a learned accommodation. A further illustration of the strategic politics of flexible SE structures includes a large SE choosing to change from a dual to a single-board structure for strategic market reasons. The former CEO explained that:

the employees agreed to give up the dual board structure because they understood it was for the benefit of the company. Our strategy intended to list on the US stock exchange. We all knew that US investors would have no understanding of the dual board system.

However, the company has retained transnational employee representation on the SE board.

Across the companies and respondents in our research, it is evident that political disputation over the size, structure and representation on the board remains highly salient. Similarly salient, but less contentious, are the role and capacities of the SEWC. Both parties pragmatically recognize the political arena of the works council in the midst of its generalized aim for conciliatory outcomes. According to an employee representative,

we reached an agreement that is better than before. For our international subsidiaries, the SEWC is a huge step. They can now access information that was beyond their reach in the past …. The level of information may be surprisingly high.

Employers frequently contest board-level representation but value the relatively consensual politics of works councils. A senior manager reported that ‘some managers may say they have less freedom as a result of the works council, but most of them see its value … There are fewer disputes or renegotiations or conflicts which could stop cross-border projects’.

Effects of participation power

Much MNC research addresses persistent challenges of achieving inter-organizational control, coordination and cooperation especially between national headquarters and their subsidiaries in different national contexts (Dörrenbächer and Geppert, 2011). Linguistic and cultural-cognitive differences frequently present barriers to cross-border flows of production knowledge and operational and financial relationships (Heidenreich, 2012). These are usually seen as a management problem and responsibility. Notwithstanding contestation over the degree and reach of participatory arrangements, our respondents typically reported that participatory structures contribute to cross-border flows of knowledge and competencies and improve cross-cultural relationships and capacities. The effects are especially visible through the SEWC.

Respondents reported that SEWCs tend to include formally regulated consultative procedures and joint initiatives. Many also feature substantive strategic issues as well as operational ones within particular subsidiaries. That capacity assists intra-MNC knowledge and relationship networks and their spill-overs. In the words of a trade union representative,

everyone who works on the SEWC gains insight into the business as a European company. One learns about the processes in the subsidiaries in the different countries and sees management practices that were usually only known at the supervisory board level.

Another worker representative commented that:

before we had the SEWC, different parts of the company were played off against each other … They [employer] said, in France, they’re a thousand times better than here in Germany. But in France our colleagues were told exactly the opposite … We can now stop this happening.

In addition, where SEs adopt two-fold participatory institutions, there is increased capacity for management and executive learning. Management, as well as workers, gain capabilities in managing the complex relationships and tensions with and between transnational subsidiaries. In combination with the SEWC, employees have a channel of access to the board, a dynamic which exerts some constraint on managerial power within the subsidiaries as well as informing boards more fully. As is frequently observed in corporate governance research, boards tend to get good information quickly and bad information is delayed and distorted (Davies et al., 2013). Respondents reported that employee participation in the two transnational SE-level forums provides both more efficient responses to problems at subsidiary level, and greater shared responsibility for overall company problems. In the words of a manager,

employees now have a direct contact to the top management, to the board … In France there were major economic problems in a subsidiary because of serious management errors … It came out first through the SEWC and … then we were able to respond quickly to the problems.

Such transnational participation has a two-fold utility, both for production objectives and for employee roles in regulating managerial politics. It can also stimulate greater managerial respect and recognition of employees’ competencies. A CEO reported that

we talk to the SEWC about strategy: This is what is important to our company; this is the competitive landscape, these are the opportunities, these are the threats … We are able to achieve a great deal by working in a collaborative manner.

However, the variations among SEs in their arrangements for, and attitudes towards, participation influence effectiveness. Respondents reported cases of SEs with ‘a few’ companies in the headquarters country, 10 companies in one country and several more companies in other countries (one group had approximately 100 employees in Germany and 3000 in the EU and beyond). Personnel in the individual companies in the group can be unaware of the establishment of the SEWC. The role of individual actors can be significant, as a trade union representative indicated:

due to the efforts of two employee representatives on the SEWC, a culture has been established within the company that fosters information flow across the company that goes far beyond the legally required information provision. Employees working in smaller subsidiaries receive valuable information first hand, even when they are not able to participate directly in the SEWC.

Transnational distribution of participation

The participation institutions, when effectively activated, contribute a dispersion of participatory and distributed power within the SE. We discovered a complex pattern in which the retention of various national institutions, formal and normative, generates hybrid and innovative forms. The company’s multinational expansion and the accompanying diversity of its personnel are enabled by the SE Statute, but its utilization of the Directive to include full participation channels appears to enhance capacities for its business objectives as well as employee rights.

Our study indicates the practical development of transnational European participation, but there are also indications of further dispersion of participatory sensibilities and functions in SEs operating beyond Europe, notably in Australia, Brazil, India and South Africa. SEWCs, apparently through self-initiated action, are developing regular information exchange with their transnational colleagues beyond the EU. These workers are thus exposed to participation rights, norms and capacities rarely available in their own countries. The effects of this exposure and learning outside Europe, while under-researched, have been noted in trade union conversations in international arenas:

The [former] EWC had been more like a political forum in which we were informed … But the SEWC is now completely involved in all cross-border activities … They have established working groups that take part in all the company’s business.

In addition to the SEWC, employee participation on the transnational board is especially indicative of enhanced capacities as well as rights. Board-level worker participation entails that supervisory boards comprise employees from several different countries working alongside each other. While this transnational dimension increases complexity, it simultaneously contributes a cross-cultural understanding useful for productivity efficiencies, conflict processing and the distribution of decision-making power. A union representative commented that

‘for many colleagues in different countries it is unthinkable to sit together with management around a table and to discuss [strategic decisions]. But we influence decision-making from the outset’.

Another remarked that

‘the French [representatives] now use the board very effectively …. They realize that they can get a lot of information through the board that you can’t get in France, where there is more a culture of conflict. So now senior management is willing to visit these [subsidiary] companies and to say, let’s talk before we engage in [industrial] action’. Likewise a company lawyer reported that ‘we didn’t just want to set up a council for discussions, we wanted to Europeanize the decision-making … on the company board … and achieve greater transparency and responsibility’.

A number of respondents reporting favourably on participatory outcomes also pointed to the influence of particular senior executives in some large companies. They could use their political and organizational power to stimulate, disperse and utilize collaborative transnational relations among company actors. The much-noted complexities of the SE regulations and the difficulties in their enactment pose considerable challenges to company policy-makers and affect the decision to embark on the transnational SE route. That decision, in itself, may indicate a scarcely articulated (and under-researched) predisposition among key coalitions of managers, as Amable (2003) has argued, to accept or optimize powers of employee participation in the firm. A senior executive, in reflecting on the outcome of his firm’s transformation to the SE, summarizes its pressures and prospects:

‘many firms say that the SE is very difficult to grasp, to understand. It is an extremely complex process. But it [SE status] has been a good decision, particularly in regard to internationalization and the involvement of transnational employees’.

The role of key actors, whether senior executives or workers, in shaping and enacting the process of employee participation is thus significant. A worker representative sums up this point: ‘personalities played a big role. There was one board member; he was hostile to the unions ….We didn’t get codetermination’. The parties, however, are developing a ‘strong SEWC…. They [management] listen to us’.

Discussion: dispersed power of participation in the SE

The supranational regulations for the SE institutionalize transnational participation, in order to contribute to both protection of workers’ interests and a conciliatory politics in a collaborative regulation of firm powers. The establishment of EWCs, as bodies for information and consultation between management and employee representatives, shares that general objective, though the EWC Directive contains no rights to negotiate participation at board level. An extensive literature on EWCs over the past 20 years includes efforts to develop typologies of their functioning and effectiveness. Lecher et al. (2002) identify four types: participative, symbolic, service and project-oriented EWCs. Kotthoff (2006), in broad agreement, draws on the experience of German works councils and adds further insight on the role of organizational culture and internal relationships. Researchers to date (Marginson et al., 2004; Waddington, 2011; Whittall et al., 2007) find that very few EWCs have become effective European collective actors. Few have achieved active involvement in managerial decision-making (mitgestaltendes Arbeitsgremium; Kotthoff, 2006) and developed articulated relations with other industrial actors or have developed a European identity. As ‘innovative transnational institutions’ their ‘intensity of participation’ (Waddington, 2011) is a matter of negotiation and practical enactment; they are a work in progress.

A detailed comparison of EWCs and SEWCs in operation is a task for future research. However, our data at this stage suggest particular similarities with the most developed EWCs (‘participatory’ in the typology of Lecher et al., 2002). As noted above, our data display a continuum of firm actors’ political stance, formal agreement in regard to participation, and effectiveness and transnational dispersion. We find that the 23 SEs in our study cluster towards greater intensity of participation. We stress that quality of participation and effectiveness in a complex MNC group is a dynamic, always incomplete accomplishment. Structural arrangements do not map neatly onto quality of lived reality or effectiveness. Individual actors and intra-organizational subcultures are significant for the quality of relations and sustained engagement. With these provisos, we find that nine SEs exhibit ‘stronger participation practices’. These entail the following: first, full parity of board representation; second, strong transnational works councils with joint projects, working groups and multiple meetings; third, effective board and council interactions; and fourth, effective transnational dispersion across the company group. Respondents in these nine companies report greater respect and mutuality between parties along with strong trade union roles. Those relations contribute to a more collaborative management.

We identify a larger cluster of 12 SEs as ‘participative and transnational’, with variable articulation and quality of effectiveness and extent of transnational reach. All 12 report active and variably effective transnational SEWCs. They are distinguished from the 9 stronger SEs on the basis that, first, employee board-level participation occurs without full parity (seven companies) or does not exist (five companies); second, more frequent adversarial contestation over agenda and decisions, less mutual respect and cooperation among parties, and weaker or inconsistent trade union relations. Furthermore, in four of the 12 companies, there was uneven transnational dispersion, probably attributable to the complexity of subsidiary ownership and merger rules or the early stage of SE formation.

The remaining two SEs have ‘poor or not activated’ participation at transnational level. One has no SEWC, and the other ostensibly has one but management repeatedly postpones its meetings. Neither has board-level representation. The two companies differ widely in sector and skill levels: one is a highly specialized, advanced technology firm with a global market; the other employs predominantly low-skilled workers in the EU retail sector. Both company groups have notably weak trade union activity and membership.

The clustering towards transnational participation even when board-level representation is not established suggests that SEWCs may activate particular advantages accorded by their stronger regulatory foundation. The obligation for the employer to initiate an SEWC from the outset potentially reduces the risk of obstruction by parent company actors, a feature regularly observed of ordinary EWCs. In addition, it appears that SEWCs more typically involve formalized consultation, joint projects and tri-annual meetings. These favourable achievements may be the result of actors having learned from pre-existing EWCs.

Researchers of MNC management and employment relations frequently observe the cross-national transfer of HR policies and practices to subsidiaries (Ferner et al., 2012). The role of EWCs in that transfer produces mixed results, enhancing participatory roles and organizational effects in European MNCs (Hertwig et al., 2011) or leading to managerial advantage in reconstituting collective bargaining (Arrowsmith and Marginson, 2006). Our data suggest that SEWCs accomplish transfers of participation similar to that observed by Hertwig et al. In addition, our study indicates emergent patterns in regard to the effects of two-fold channels of transnational participation of employees in high-level decision-making, that enhance organizational capacities as well as recognition of labour’s socio-political interests.

Rosenbohm’s (2013, 2014) studies categorize SEs on the basis of extensive quantitative data on formal participatory arrangements including board-level participation. Across her categories of SEs, she finds, like others (Keller and Werner, 2009, 2012; Rose and Köstler, 2011), no generalized diminution of participation rights in German-based SEs. We find, like Rosenbohm, few systematic differences according to such characteristics as size, sector or employee skill levels. We do find notable variation in intra-organizational political culture and effectiveness, and, in the two ‘poor’ SE cases, trade union activity. We attribute these differences to actor sensibilities and behaviour, from individual personnel to CEOs. Since our data are not drawn from site-level company observation, they cannot illuminate the complex dynamics of key coalitions or organizational-cultural and ‘social orders’ (Kotthoff, 1981). But they do indicate their rudiments in actor attitudinal dispositions and actions that result in practical effect.

We suggest that the quality and effectiveness of participation can be highly dependent on the level of trust, competence and commitment of parties in specific companies. One respondent described how the efforts of just a few active individual workers who ‘championed’ participation channels ensured their company operation and enabled their transmission to subsidiaries beyond the EU; another emphasized a respect and trust towards worker competences that invoke capacities for collaboration. Others point to the learning that occurs by participation in transnational forums. This implies a transnational ‘sensibility’ that constitutes a resource for actor utility. These observations on the role of purposeful actors working within institutional structures, and actively shaping their practical enactments, are important. They attest to key roles of the individual in groups (Kotthoff, 1981, 2006) and of coalition formation, as Amable (2003) elaborates, in setting the tone and mode of decision-making and the dispersion of participatory sensibilities.

Kotthoff (2007) argues that EWCs are ‘forced to become European when management becomes so’ (p. 180). In our view, the adoption of SE status, even if initially politically contested, indicates a substantive step in a company’s move towards such a normative identity. The capacities accompanying transnational sensibilities are matters for individual companies to forge and utilize. Formal participatory channels and behavioural norms of participation encourage the negotiation of tensions among parties and interests in the direction of joint decisions. Those debates and decisions on both SEWCs and boards, increasingly of operational and strategic importance, contribute to a regulation of higher level firm actions and of everyday level organizational personnel relations.

SE status results in the utilization of the power of participation to achieve some substantive gains for workers – both practical and ideational – in subsidiaries in countries where provisions for worker participation are weak or non-existent. That appears to be the principal benefit for workers. However, close observation indicates that participatory rights and channels also enable valuable flows of organizational knowledge and practical collaboration in operational business problems across the company. This latter point, which may be referred to as the ‘business case’ for participation, is easily underestimated and under-utilized. Management and labour actors can develop important local collaborations that improve or facilitate company operations. While this process is explored in research literatures on ‘learning organizations’ (Bishop et al., 2009; Gustavsson, 2009), it is largely neglected in labour and employment research. Similarly, in business literatures, the transaction costs of participatory regimes and obstacles to management decision-making more frequently attract attention and criticism than the positive outcomes. Labour actors, in turn, may be ambivalent towards advancing the productivity case for participation because of the risk of understating the socio-political, rights-based case for participation.

However, greater emphasis on the practical accomplishments of high-level participation has the potential to encourage greater managerial interest in, and cooperation with, participatory regimes. Managerial learning from successful SEs may extend to non-SE corporate forms. The SE, when implemented to establish both council and board-level participation, enables a transnational distribution of participation rights and practices that contributes to dispersion of power across and within the company. Of particular importance, our data indicate, is the interplay of the roles of the SEWC and the transnational supervisory board. Respondents reported that communication flows between council and board contribute to enhanced collaborative commitments, including favourable senior executive attitudes and recognition of employee and trade union expert roles in enhancing effectiveness. Labour actors are presented with much scope to elaborate from successful SE experience the socio-political and productivity cases for expansion of participatory powers beyond SEs.

The effectiveness of participatory power, the power to participate and power of participation appears to be correlated to the coexistence of effective unions. Respondents’ accounts of participatory forums and trade union intensity in the SE indicate the strategic involvement of trade unions. This demonstrates, as Huzzard et al. (2004) argue, a complementarity of adversarial and consensual politics and power. Adversarial and consensual politics limit potential for maverick behaviour or systemic rupture. The role of adversarial engagement, especially through collective bargaining by effective and independent trade unions, is to ensure that participation does not degrade into incorporation or preoccupation with trivia. At the same time, trade unions’ principled action extends to a role, as Urban (2005) argues, as ‘constructive veto-players’. In that role, their participatory power is aimed not at preserving existing structures but at contributing to responsible company action and socio-economic development more broadly.

Conclusion

The multi-level governance institutions that are a prominent feature of the EU are key features of the SE. Such multi-level governance necessarily involves diverse actors operating in regulating both private and collective interests. The SE, with its particular mix of supranational and national, legal and company-regulated levels of governance, is a contestable and pliable configuration. Actors’ choices and scope, enabled by the Statute and formally negotiable and constrained under the Directive, continue to be forged and adapted as the SE operates across and beyond European borders.

Transnational participatory power that exerts constraints on the firm is at the same time a generative power. It generates consequential and significant new powers among actors and institutions, through the enactment and practice of participation rights and competencies. It distributes and disperses power that stimulates new capabilities, capacities and developments. A large majority of SEs cluster towards stronger participation, and in that feature they exhibit key similarities with participative EWCs. However, SEs that establish transnational board-level participation along with transnational works councils effective across the MNC display a particular strength and potential in forging collaboratively regulated transnational labour action.

A prominent source of variation in SE behaviour in regard to the provision, reach and effectiveness of participatory bodies and channels is that of political actor characteristics and behaviour. Features such as employer representatives’ attitudes and commitment towards participation and cooperation, whether rights- or utility-based, or conversely of hostility, are clearly significant. Furthermore, the roles of individual activists at workplace level in striving to make participatory channels effective and hence democratize relevant knowledge and powers are important. Actor-institutional features among the parties to organizational production – their sentiments, learning, malleability and tenaciousness – warrant closer attention in analysing the politics and power relations of industrial and organizational relations in MNCs.

The power of employee participation is a perennially contested, politically won, tensely sustained power. The experiences of MNCs adopting the SE corporate form clearly show that contestability of participatory power is heightened but its institutional legitimacy retained and newly distributed, including to non-European subsidiaries. Recognition of the potency of participation, as distributed power, to contribute to the regulation of the firm may stimulate some actors to oppose it. It may, conversely, stimulate others to endeavour to capture its productive value and the association of producer and capital interests, even though those interests are in part contradictory.

Labour actors are especially well placed to optimize the plural values of political rights-based employee participation and its under-recognized role in transnational organizational capacities and development. The constructive powers of participation contribute a model of corporate governance that contests, both politically and organizationally, pressure for shareholder sovereignty rights to governance. The resulting mutual benefits of participatory power and intra-organizational constraint and collaboration reveal the potential of the SE to craft a sophisticated corporate governance model appropriate to transnational, and socially embedded, economies. However, low levels of adoption of SE status and the limited application of the Directive across the EU mean that its utility for transnational labour actors, as well as management actors, is severely underdeveloped. The SE remains a highly ambitious project. Its potential to distribute responsible powers in governing the MNC is emergent.

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Author biographies

Catherine Casey is Professor of Organization and Society at the University of Leicester, UK.

Antje Fiedler is Lecturer at the University of Auckland Business School, New Zealand.

Benjamin Fath is Lecturer at the University of Auckland Business School, New Zealand.

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