Employee representation on the board of directors and their participation in strategic discussions is part of the key questions linked to diversity on boards.
Most of the countries in the European Economic Area have some sort of employee representation at the board level. This representation can be divided into 3 groups:
- Employee representation only in state-owned or privatised companies
Ireland, Poland, Greece, Spain and Portugal.
- Representation once the company has reached a certain amount of employees
Austria, Croatia, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Luxembourg, the Netherlands, Norway, Slovakia, Slovenia and Sweden.
The number of employees requiring representatives on the board ranges from 25 in Sweden to 5 000 in France.
- No board representation
Belgium, Bulgaria, Cyprus, Estonia, Italy, Latvia, Lithuania, Malta, Romania and the UK.
Concerning these companies, there are no official laws but some boards have chosen, voluntarily, to integrate employees into the boardroom.
Pros and cons on employee representation in the boardroom
>>> Employee representation on the board allows a better combination between capital and labour, strengthening the performance of the business and social peace.
- With employee representatives, directors can improve their knowledge of the realities of everyday business and what is going on in the company.
- Receive new ideas, have new discussions, perspectives and visions for the future of the company.
- With representatives, directors can more easily take into account the interests of employees and issues relating to employment and human resources.
- Allow employees to understand better management and strategy issues.
>>> Allowing employees into the boardroom can have a negative impact on discussions and decisions.
- Employees in the boardroom can bring a higher risk of disclosure of financial strategies, trade secrets… and could also lead to a loss of confidentiality of the discussions of the board.
- Independent directors could feel intimidated by the presence of employees who know all about the company while they do know that much.
- The discussions between board members could be less free and honest.
- Having employee representatives may raise conflicts between workers and management if they do not agree on some decision.
Having employee representation on the board of directors can have many positive effects on the company. In some situations, a good compromise when having representatives on the board could be to ask them to leave the room or organize in camera sessions when the issues discussed concern directly the employees and are highly sensitive. Indeed, the representatives elected are held by a duty of loyalty to the board but it still is a high risk to take on the confidentiality of some information.
Do you think employees should sit on the board of directors?
Have you been on a board with employee representation?
The situation in France
Since June 14th, 2013 and the vote of the law on secure employment, companies with more than 5 000 employees must have employee representatives on their boards of directors. At least one representative with a right to vote, must be appointed in companies where the number of directors is less than or equal to twelve. Companies with more than twelve directors are required to appoint two employees representatives.
These representatives can be chosen by the employees, by the staff representative bodies or the representative trade union. To be elected, the employee must have at least two years of service in the company and when elected obtains the status of a protected employee.
For instance, in October 2013, the employees of Orange, one of the world’s leading telecommunications operators, elected three (of the fifteen) directors to represent them in the boardroom.
