A Legal Analysis of Employee Involvement in the European Company (SE) and EU Corporate Governance

Abstract

Employee involvement in a company's affairs is one of the elementary aspects of European corporate governance, but is yet to make substantial progress. European Company Statute (Council Regulation No 2157/2001 and Council Directive No 2001/86/EC) was legislated to secure employees’ involvement rights in company decisions and with a vision to establish a uniform legal framework, but specific legal frameworks have been left at the discretion of Member States where the European Company (SE) is registered. As a result, 28 different national SE laws are now in force. This research critically analyses and compares employee involvement in the corporate governance of Member States and in the SE, and then recommends modifications to the European Company Statute so that the SE can become a more popular company form in the EU. The prime focus of the research is board-level employee representation, which is the most controversial aspect of employee involvement. Employee representation, which supposedly constrains managements' privileges, has been debated by the European Commission since 1960s. However, the specific issue of board-level employee representation in the SE from a legal standpoint has remained principally untouched. The provisions for board-level employee representation reflect a laissez-faire approach. The European Company Statute is quite ambiguous and the employee involvement aspect within the Member States is largely uncertain. The research challenges the existing narratives about the shortcomings and suggesting reforms to the European Company Statute. In that process, dismissing the standard explanation of shortcomings and subsequently identifying novel solutions to those shortcomings. The last major contribution was Ernst & Young’s ‘Study on the operation and the impacts of the Statute for a European Company (SE)’, but this was published in 2008 with limited data and experience of only three years of the SE coming into force. It was a decade ago. However, this research is based on the SE’s 13 years of experience, thereby, providing a better assessment on the issue.