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New Zealand Law Students' Journal |
Last Updated: 7 April 2024
The Promise of
Codetermination:
An Attractive Option for New Zealand
Companies?
LUCILLE REECE[*]
Abstract—Codetermination is a corporate governance model that gives workers the right to elect board-level employee representatives. The model exists in 19 European jurisdictions, with the German model being the most well-known and thoroughly researched. Unlike general stakeholder-centric objectives that simply encourage directors to consider the interests of stakeholders, codetermination mandates the representation of a critical stakeholder—employees—at the highest level of corporate governance. The model has been associated with various economic and non-economic benefits, including increased firm efficiency, improvements in information sharing between employees and senior management, the enhancement of firm-specific skills and the promotion of employee interests. While codetermination has recently received attention from certain policymakers and academics in the United Kingdom, Canada, Australia and the United States, the model has not yet been closely examined in New Zealand. This article explores the model’s operation in Germany and Sweden, its proven and potential benefits, its compatibility with pre-existing industrial relations structures in New Zealand and its ability to address New Zealand-specific contemporary challenges. Ultimately, it is argued that the benefits of codetermination, both theoretical and empirically tested, render it worthy of emulation in the New Zealand context.
For the past four decades, shareholder primacy has dominated
corporate governance structures across the Anglo-American
world.[1]
Despite the prevalence of this seemingly unshakeable shareholder-centric
approach, stakeholderism has recently garnered attention
in business and
academic circles.[2] Stakeholderism
advocates for the promotion of stakeholder interests such as that of employees,
customers, suppliers, the environment,
and the wider
community.[3] While those in
Anglo-American jurisdictions have tended to view the corporation’s purpose
as centred around generating value
for its shareholders, few would contest that
employees are pivotal to a firm’s success. Regardless, in
New Zealand, there remain
limited options for employees to obtain
meaningful representation in companies, let alone governance rights.
Unlike
their Anglo-American counterparts, European states have long embraced
codetermination: a legislative model that gives employees
control rights through
board seats within certain
companies.[4]
The most well-known codetermination model is that in Germany, where
employee-elected representatives may occupy a significant number
of seats on
corporate boards.[5] The German model
has proved successful and been emulated in 18 other European
jurisdictions.[6]
With its inherent emphasis on the interests of a critical stakeholder,
codetermination constitutes a direct challenge to shareholder
primacy. As such,
certain Anglo-American policymakers and commentators have cited codetermination
as a desirable corporate governance
model.[7]
Unlike generalist stakeholder-centric
objectives,[8]
codetermination mandates stakeholder representation at the highest levels of
corporate governance.[9]
While
not even the most ardent supporters of shareholder primacy would refrain from
asserting that workers are key drivers of corporate
prosperity, formal
enshrinement of worker voice in corporate governance through codetermination
remains, to some, a radical
suggestion.[10]
However, as will be discussed in Part V, the fundamental notion that worker
voice should be promoted and corporate power structures
reformulated is growing
in popularity and has been raised by politicians and academics in the United
States, the United Kingdom,
Canada and Australia.
Codetermination has
received little attention in New Zealand scholarship and has not been
seriously considered by local policymakers.
However, given the international
business community’s recent warming toward a more stakeholder-centric
approach, the time may
be ripe for evaluating the merits of codetermination and
its potential utility in the New Zealand context. Indeed, income inequality
and an increasing concentration of economic power are salient issues in
contemporary New Zealand,[11]
and are issues that have prompted contemplation of codetermination
elsewhere.[12] While external policy
measures are also required to remedy such mammoth challenges, it may be wise for
New Zealand to contemplate
mechanisms internal to company law, like
codetermination, in rethinking the distribution of corporate power.
Adopting
codetermination would certainly disturb traditional conceptions of corporate
governance in New Zealand. However, it is argued
that its theoretical and
empirically tested benefits render it worthy of consideration. These benefits
include the promotion of employee
interests, increased firm efficiency through
enhanced information-sharing, and the honing of firm-specific
skills.
Ultimately, it will be argued that codetermination, in some form, is
worth adopting in New Zealand. It is proposed that one-third
codetermination should be imposed for locally incorporated companies with more
than 3,000 employees; that is, one-third of such company
boards ought to be
composed of worker-elected employee representatives.
This article’s
analysis will unfold as follows. Part II canvasses codetermination’s
historical origins and operation in
practice. Part III reviews the literature on
codetermination’s economic and non-economic benefits. Part IV explores
considerations
of codetermination in Anglo-American states. Part V examines the
suitability of codetermination within New Zealand’s corporate
landscape with reference to New Zealand’s historical and contemporary
industrial relations climate. Finally, Part VII considers
how the described
benefits could materialise in the New Zealand context. Particular reference
will be made to the propensity for
these benefits to facilitate the avoidance of
strike action and increase employee retention.
Codetermination can be
defined as a corporate structure within which workers play a formalised role in
corporate
governance.[13]
Within a codetermined company, elected workers’ representatives are
entitled to vote on major company
decisions.[14]
Codetermination operates as a soft constraint on corporate
behaviour,[15]
designed to influence decision-making processes and give greater voice to
employee interests without imposing any particular outcome
on the
company.[16]
Collective
bargaining is distinct from codetermination as such bargaining entails a form of
employee representation and involvement
that does not inherently challenge
employers’ executive
power.[17]
Rather than dictate corporate governance structures or “shop-floor”
representational arrangements, as is achieved by
codetermination, collective
bargaining processes seek to produce firm-wide agreements. However, unlike
collective bargaining, which
takes a more adversarial format, codetermination is
intended to facilitate cooperative relations between employees and senior
management.[18] Regardless,
countries with codetermination laws tend also to feature centralised collective
bargaining frameworks.[19]
Codetermination also exists in the context of shop-floor representation,
where employers consult with representatives of organised
workers, often in the
form of works councils, on matters such as working hours, working conditions or
recruitment.[20]
While the term “codetermination” is also used in reference to worker
participation at the shop-floor
level,[21] all following uses of the
term in this article refer solely to board-level codetermination.
To
understand codetermination, it is helpful to consider example jurisdictions.
While codetermination exists in over a dozen European
states, this Part will
focus on Germany and Sweden’s application of the model. German
codetermination operates within a two-tiered
board structure, unlike the
one-tier board model present in New Zealand and other Anglo-American
jurisdictions. Conversely, Swedish
codetermination exists within a unitary board
system and offers a valuable comparison to New Zealand’s corporate
context. Nevertheless,
German codetermination will be discussed at length since
it is the most well-known and assiduously researched example of
codetermination’s
operation.
At
its core, German codetermination (Mitbestimmung) is based upon the notion
of promoting equality between capital and
labour.[22]
The model seeks to support stability and facilitate conflict resolution through
constructive dialogue.[23] Germany
has long embraced a stakeholder-centric conception of the
firm.[24] As early as the 19th
century, German legal scholars and business leaders referred to the notion of
the “unternehmen an sich” (“enterprise per
se”)—a view of the company which contemplates the interests of
shareholders, employees
and
creditors.[25]
This philosophy informed the development of codetermination, with mandatory
codetermination first arising in 1905 in the form of
shop-floor “employee
committees”.[26] By 1916, all
German companies with more than 50 employees were required to adopt
codetermination at the shop-floor
level.[27] As surveyed by legal
historian Ewan McGaughey, from 1918 until the rise of the fascist Third Reich in
the early 1930s, and again
from 1946 to 1951, German businesses and trade unions
entered into collective agreements to establish work councils and solidify
the
presence of employee representatives on company
boards.[28]
While it could be argued that German codetermination arose due to the
nation’s unique historical circumstances and cannot be
transplanted
elsewhere, the model’s proliferation across Europe in the second half of
the 20th century is evidence to the
contrary.[29]
To date, 19 of the European Union’s 27 post-Brexit members have embraced
some form of codetermination, most notably Sweden,
Denmark, the Netherlands and
Austria.[30] The model’s
expansion indicates that a specific historical context is not a prerequisite for
its success. Furthermore, historical
stability has remained a key characteristic
of European codetermination laws as the models have remained steadfast despite
changes
in political
leadership.[31]
While codetermination has thus far only been implemented in continental
Europe, this geographic confinement should not discount codetermination's
potential applicability to Anglo-American states. As will be canvassed in Part
V, codetermination has attracted interest from academics,
politicians and
representative bodies in the United States, Canada, Australia and the United
Kingdom.
Unlike the unitary board structure
present in Anglo-American states, German companies typically adopt a two-tier
board system comprising
a management board and a supervisory board¾the prevailing model across continental
Europe.[32]
The management board actively manages the
company,[33] while the supervisory
board oversees the management board’s
actions.[34] Employee-occupied seats
are reserved for the supervisory board
only.[35]
German supervisory
boards appoint and dismiss management board members, set compensation, shape
long-term strategy and review executive
performance.[36]
In this sense, supervisory boards occupy a similar role to New Zealand
boards of directors.[37] As such,
while New Zealand companies are governed by unitary boards, those boards
perform similar functions to the supervisory boards
of German companies.
The
foundations of German codetermination are located in two key pieces of
legislation: the Codetermination Act 1976 and the One-Third
Participation Act
2004. The 1976 Act is the central piece of legislation. It applies to companies
with over 2,000 employees, requiring
their supervisory boards to have an equal
number of shareholder and employee representatives, thereby imposing full parity
codetermination.[38] Approximately
70 per cent of board seats reserved for workers must be occupied by company
employees and 30 per cent by trade union
representatives.[39] Under the 2004
Act, companies with at least 500 employees must give employees the right to
elect one-third of supervisory board
members.[40]
Under
both systems, employees elect a labour director, and shareholders elect the
supervisory board’s
chairperson.[41] Both individuals
are—supposedly—neutral and entitled to a tie-breaking
vote.[42] Consequently, neither bloc
of directors can outvote the other. At least one employee representative must be
a managerial
employee.[43]
Only company employees may vote for
supervisory board
representatives.[44]
The employees of foreign branches and subsidiaries of German companies may not
vote or be voted onto their supervisory
boards.[45] To safeguard against
arbitrary dismissals and excessive shareholder control, shareholders cannot
remove employee representatives
without 75 per cent of the company’s
employees having voted in favour of
removal.[46]
German
codetermination does not exist in a vacuum. It is part of a broader industrial
relations landscape also comprising trade unions,
works councils and wide
collective agreement coverage. Works councils aggregate information about the
employees they represent and
work with management to reach mutually beneficial
outcomes.[47]
These representative bodies are mandatory in Germany’s private sector,
operating at the firm level with a company-specific
electorate—unlike
unions, which operate at the industry
level.[48] In the decades following
the Second World War, works councils became the most prominent vehicles for
advancing industrial relations
across European
states.[49] They remain the primary
bodies through which employees are represented in
Germany.[50]
Collective bargaining is also prominent in
Germany, with collective agreements covering 50.2 per cent of private-sector
employees
in
2015.[51]
Known
for its car manufacturers and home furnishing giants such as Volvo and Ikea,
Sweden boasts the world’s 22nd largest economy
and the 10th largest in
Europe.[52] Swedish companies
operate under a single-tier board
structure.[53]
Worker involvement in Swedish corporate decision-making occurs through
board-level representation and collective
bargaining.[54]
Board-level codetermination was first introduced in
1972,[55] amid a swathe of labour
reforms intended to give private-sector workers greater say in company
management.[56]
The Board Representation (Private Sector Employees) Act 1987 requires all
companies with more than 25 employees to have two board
members elected by the
employee body.[57] Companies with
over 1,000 employees and more than one branch must have three employee
representatives,[58] and employee
representatives can never be in the
majority.[59]
Swedish employee
representatives are elected via a different process to that in Germany. The
default approach is that unions bound
by a collective agreement with a company
select its employee representatives, so long as 80 per cent of the
company’s workers
belong to the
unions.[60] This approach can be
varied by agreement between the company and the relevant
unions.[61]
Like Germany, Sweden
has a long history of labour-management
cooperation.[62] The nation’s
industrial relations system is characterised as a “social
partnership” between employers and employees
through their representative
bodies, the unions.[63] Accordingly,
Sweden’s workforce is highly unionised, with 68 per cent of workers
belonging to a union in
2019.[64]
Collective bargaining coverage for Swedish employees is also high, sitting at 88
per cent in 2020.[65]
Works
councils were present in Sweden from
1946,[66] but in the 1970s were
gradually replaced by a codetermination system that placed heavy emphasis on
collective bargaining.[67] This
development is unsurprising, given that Swedish unions have historically been
sceptical of works council-like
institutions.[68]
A possible criticism of codetermination is that employees
lack the expertise and experience necessary to occupy board-level positions.
Unfortunately, data on the attributes of employee representatives on European
boards is sparse. However, anecdotal examples suggest
such representatives on
the boards of prominent German and Swedish companies are often seasoned
employees with experience in union
leadership.
For instance, Audi’s supervisory
board includes long-time employees with backgrounds in employee advocacy. The
board comprises
10 shareholders and 10 employee representatives, all with a long
history at the company and previous leadership experience. For example,
Alexander Reinhart, appointed to the supervisory board as an employee
representative in January 2022, began working as a mechatronics
technician at
AUDI AG in 2004 and commenced union involvement that same
year.[69]
From 2004–2021, Reinhart held various union leadership positions,
including as an elected union representative, a youth representative,
a member
of Audi’s General Works Council, and a member of the board of union
representatives, including a one-year assignment
as chair of that
board.[70] Another recent appointee,
Karola Frank, is a longstanding member of the Audi Works council at Ingolstadt
and has worked at Audi since
1997.[71] In addition to working as
a master craftswoman and mediator, Frank was the vice-chair of Germany’s
largest union, IG Metall,
from
2015–2021.[72]
Mercedes
Benz, another large automaker, also has long-serving employees and union
representatives on its supervisory
board.[73]
Ergun Lümali, for example, had decades of experience as a re-fitting worker
and deputy foreman, while also acting as a union
representative for IG Metall
and various works councils, before he was appointed vice-chairman of the
company’s supervisory
board.[74]
Employee
representatives on the boards of two major Swedish companies are similarly
experienced. The SKF Group operates SKF, one of
the world’s largest
manufacturers of bearings.[75] The
company’s board features two employee representatives, Jonny Hilbert and
Zarko
Djurovic.[76]
Hilbert was employed by the SKF Group in 2005 before being appointed to the
board in 2015. He is also Chairman of SKF’s Gothenburg
union.[77] Djurovic has been
employed by the company since 2006, was appointed to the board in 2015, and
previously held the position of Chairman
for the Metalworker’s
Union.[78]
Ericsson, a
multinational information and communications technology company headquartered in
Stockholm, also features long-time employees
on its board. For example,
Torbjörn Nyman was appointed to the board by LO, the Swedish Trade Union
Confederation, in 2017 after
having worked at the company since
1996.[79]
Anders Ripa, also appointed to the board in 2017 by a leading Swedish union, was
employed at Ericsson since 1998 and currently works
as the company’s
security advisor.[80]
All
employees on the boards of the abovementioned Swedish and German companies were
similarly experienced.[81]
Ultimately, empirical research is necessary to ascertain the characteristics and
experience of employee representatives within codetermined
companies across
Europe. However, these examples¾while
anecdotal¾indicate that such board appointees in
large companies tend to have a wealth of company experience and a background in
union leadership.
Any discussion of codetermination necessitates a review of its consequences. While there is a body of scholarship on the model, it remains divided. Law and economics scholars are generally sceptical of codetermination and its potential benefits, while others are more optimistic. Moreover, empirical studies have historically contradicted one another.
In 2006, Fauver and Fuerst observed that the theoretical literature on codetermination was in its infancy.[82] Despite a recent surge in the publication of codetermination-related articles,[83] this assessment arguably still rings true. Indeed, the scholarly consensus on codetermination’s economic outcomes has ebbed and flowed since the 1980s.[84] The earliest¾and most methodologically dubious[85]¾empirical studies concluded that codetermination had minimal effects on firm profits.[86] More recent studies have concluded the opposite.[87] Against this backdrop of divided opinions, the following subpart will explore the competing theoretical perspectives on the model’s economic utility.
Increased firm
efficiency¾achieved through the avoidance of
strikes¾is a potential positive economic
consequence of codetermination. Despite being a notable proponent of shareholder
primacy, Hansmann
has argued that codetermination can promote efficiency when
paired with collective
bargaining.[88]
He contended that codetermination can enhance company–union relations,
since worker representatives on boards can streamline
communication channels
between workers and employers.[89]
Such relations may facilitate the avoidance of strikes, thereby increasing
overall firm efficiency.[90]
Other scholars have used the contractarian argument to dismiss
codetermination on the basis that the model acts as a legislative constraint
on
corporate activity. Bainbridge and Jensen and Meckling, as proponents of
contractarianism, have argued that codetermination is
an inefficient approach,
as it operates as a binding constraint which is rarely adopted by firms
voluntarily.[91]
However, Hayden and Bodie and Renaud have noted that there are various practical
reasons why individual firms may not voluntarily
embrace codetermination in the
absence of
legislation.[92]
For example, firms may be reluctant to independently introduce shared governance
structures due to concerns that doing so would generate
a negative perception of
the company’s labour relations and potentially impede its ability to raise
funds.[93] Similarly, unilateral
adoption may lead to wage compression, competitive disadvantages, and the
transaction costs associated with
altering an individual company’s
embedded hierarchies.[94]
Accordingly, it is unsurprising that when given a choice, individual companies
do not readily leap at the prospect of imposing such
internal structural
changes.
Additionally, as discussed in Part II, legal historian Ewan
McGaughey has noted that German codetermination originally sprang from
collective agreements voluntarily entered into by business and labour
representatives.[95] Codetermination
did not, therefore, arise solely as a result of economically unsound
legislation.[96] Rather, it came
about organically, suggesting that when the market conditions are right,
employees appear to “bargain for
codetermination”.[97]
In
1979, Jensen and Meckling famously predicted codetermination would lead to
economic collapse in Germany.[98]
They argued codetermination would result in workers “eating ... up”
the firm’s assets, resulting in “a significant
reduction in the
country’s capital stock, increased unemployment, reduced labour income,
and an overall reduction in output
and
welfare”.[99] Of course,
such a profound collapse did not eventuate. Codetermination endures as a
critical feature of the German economy, which
has remained competitive for
decades and now ranks as the world’s fourth largest by gross domestic
product.[100] Similarly, the
Swedish economy is highly diverse and competitive; despite suffering a financial
crisis in the 1990s, it has sustained
a rate of economic growth surpassing that
of the United States and the EU-15 over the last 15–20
years.[101]
In 1991, Smith
developed a positive economic case for codetermination based on its ability to
correct labour, capital markets and
organisational
failures.[102]
Smith explained that corporate managers possess incentives to distort
organisational structures by acting opportunistically, which
can generate
inefficiencies.[103] By providing
guaranteed joint decision-making at the board level, codetermination can correct
such distortions by providing internal
quality controls over management
decisions and thwarting management
opportunism.[104] Smith concluded
that codetermination could improve firm efficiency through this corrective
function.[105]
Scholars have
also contended that codetermination acts as a reward for employees who have
honed their firm-specific skills, thereby
improving firm
efficiency.[106] Codetermination
arrangements may encourage employees to stay at a firm long-term due to the
possibility of occupying a representative
role, and enhance the development of
skills relating exclusively to that
workplace.[107] In particular,
Smith’s economic case notes that codetermination has been shown to
generate efficiency-related benefits through
increases in technical efficiency
and knowledge generation through firm-specific skill
development.[108]
Dammann and
Eidenmüller have contended that codetermination’s emphasis on worker
upliftment discourages corporate risk-taking
and is therefore unfavourable as
boards must be willing to tread into uncharted
territory.[109] However, Hayden
and Bodie have argued that such a stance both assumes the existence of some
“optimal level of risk-taking”
and dubiously purports that
shareholders are the only individuals well-placed to assess all “downsides
of risky corporate
behavior”.[110]
The
empirical evidence tends to support the theoretical position that
codetermination can enhance firm value. While earlier empirical
studies
routinely contradicted one another, recent research has more consistently
indicated that codetermination positively correlates
with high profitability and
increased capital market
valuation.[111]
Fauver and Fuerst’s 2006 study of 250 publicly traded German companies
with varying degrees of codetermination found that “prudent
levels”
of employee representation “significantly improve[d] firm value” due
to enhanced information-sharing between
employees and employers, which thereby
improved board-decision
making.[112] The authors noted
that industries requiring more intense coordination of activities and
information-sharing, such as manufacturing,
benefit more from
codetermination.[113] Affirming
Hansmann’s theoretical position, the authors found that board-level
employee representation could facilitate the
avoidance of strikes by providing
workers and unions with helpful information about firm strategy and
profits.[114] The authors
tentatively concluded that for such positive benefits to materialise, the
optimal level of employee representation on
supervisory boards was likely less
than 50 per cent, cautioning that an excessive number of labour representatives
could reduce firm
value.[115]
A
2020 study of a 1994 German reform that abolished codetermination for some firms
but retained it in others found that codetermined
firms saw increased capital
and output per worker.[116] These
findings are consistent with the views of corporate directors in states with
codetermination laws: a 2012 survey found 71 per
cent of German executives
opposed the abolition of the state’s codetermination laws, and a 2000
study of Swedish directors
found that 76 per cent regarded codetermination in a
“positive” or “very positive”
light.[117] As noted by Harju,
Jäger and Schoefer, if codetermination were objectively bad for firm
performance, directors would surely
harbour animosity toward
it.[118]
There is no empirical
evidence supporting the assertion that codetermination negatively impacts other
stakeholders, such as shareholders,
creditors and the
environment.[119]
In fact, codetermined firms have generally provided more robust long-term
protections for such
stakeholders.[120] Lin, Schmid and
Xuan’s 2018 study found
that:[121]
Employee representatives who aim to protect the interests of the firm's
employees can (unintentionally) also help to protect the interests
of banks as
both stakeholders are interested in the long-term survival and stability of the
firm.
Regarding the model’s impact on the environment, Scholz and
Vitols’ 2019 study found that codetermined firms tended to
have
substantive corporate social responsibility policies that set concrete
emissions-reduction
goals.[122]
Despite such
benefits, recent studies have indicated that codetermination has no or minimal
positive effects on wages for workers
themselves. For example, upon surveying
changes in board-level employee representation in Finnish and German companies,
Harju, Jäger
and Schoefer found that the wage increases observed in those
companies¾1.0 per cent and 1.6 per cent,
respectively¾were statistically
insignificant.[123]
The
recent empirical evidence tends to suggest that codetermination positively
affects firm performance.[124]
These findings are consistent with the German response to recent crises; for
instance, Germany recovered from the 2008 Global Financial
Crisis more swiftly
than its Anglo-American counterparts, with some describing the phenomenon as an
“economic
miracle”.[125] During this
period, positive relations between management and employees enabled many German
companies to retain their core workforce,
since worker consent was obtained
before salaries and working hours were
reduced.[126]
More recently,
in early 2020, amidst the economic disruptions caused by the COVID-19 pandemic,
certain German firms cooperated with
employees to mitigate fallout and
criticism. Over half of German firms adopted Kurzarbeit: a strategy
whereby worker hours were shortened to preserve firm-specific human
capital.[127]
The social insurance strategy enabled companies to avoid costly re-hiring,
re-training and severance processes, thus comparatively
boosting firm efficiency
during a period of unprecedented
crisis.[128] For example, the
supervisory board of automaker Daimler AG (now Mercedes-Benz Group) agreed to
reduce work hours to avoid mass layoffs
with the unanimous support of its
employee representatives.[129] In
contrast, United States firm Tesla faced widespread criticism from employees due
to an alleged lack of
consultation,[130]
ultimately resulting in bitter relations between employees and
management.[131] These contrasting
examples indicate that codetermination may facilitate harmonious relations
between workers and senior management
during times of unprecedented crisis.
As noted above, the data does not indicate that codetermination results in
employee wage increases; however, this is arguably not
the most critical metric
by which to measure the model’s success. The fundamental purpose of
codetermination is to afford employees
the right to board-level representation,
rather than to directly improve their wages.
A critical non-economic benefit
associated with codetermination¾and indeed the
model’s overarching goal¾is the promotion
of employee interests. In theory, when workers are represented at the board
level, their interests will be advocated
for and catered
to.[132] This can be expected to
play out in practice, as the model improves communication pathways between
shareholder-appointed directors
and the employee
body,[133] entrenching the voice
of a key stakeholder at the board level.
Swedish directors have responded
positively to the increased promotion of employee interests through
codetermination. Klas Levinson’s
extensive surveys of both management and
labour in hundreds of Swedish companies in 1984, 1996 and 1998 found that
codetermination
worked well overall for the majority of companies, with most
corporate leaders believing that the model “contributes new ideas,
strengthens people’s willingness to cooperate and confers legitimacy for
such difficult decisions as production or worker
cut-backs”.[134] Similarly,
Levinson found that most Swedish directors perceived board-level codetermination
positively as it could effect change
and promote collaboration and trust within
companies.[135]
There is
limited empirical data on precisely how employee representatives advocate for
the general employee in board
meetings.[136] However,
Levinson’s survey of Swedish directors regarding the position and
influence of board-level employee representatives
sheds some light on the
matter. The data showed that, while such individuals tended to have low activity
levels during board discussions,
their involvement significantly increased when
discussing personnel matters, work environmental concerns, and reorganisation,
among
other areas.[137] While
confined to codetermined Swedish companies, this data indicates that employee
representatives become most involved in board
meetings when matters directly
concerning employee well-being arise.
Promoting employee interests through
codetermination may also lead to improved feelings of job satisfaction amongst
workers. While
empirical studies on the correlation between job satisfaction and
codetermination are sparse,[138] a
2021 study by Harju, Jäger and Schoefer found subjective job satisfaction
moderately increased within codetermined Finnish
firms.[139] Indeed, it is perhaps
unsurprising that employees experience greater work satisfaction when they are
provided meaningful avenues
to raise grievances and have their broader interests
represented at the board level.
Information-sharing between employee
representatives and other board members has already been identified as a
distinct positive economic
outcome of codetermination. However, non-economic
benefits may also arise from board members’ understanding the firm’s
daily operations. This article posits that if employee representatives with such
in-depth knowledge and experience are present at
the board level, their input
could valuably influence decision-making by ensuring that shareholder-appointed
directors are aware
of the firm’s day-to-day realities. For example,
issues relating to working conditions could be effectively communicated where
an
employee representative has direct experience working at the shop-floor
level.[140] Indeed, there is
extensive literature propounding the value of diverse
boards,[141] reflecting that
commercial expertise can be valuably supplemented by practical knowledge and
lived experience, including of a company’s
day-to-day operations.
Conversely, Dammann and Eidenmüller have suggested that the benefits of
board diversity through codetermination would be inherently
limited due to
shareholder-appointed directors and employee representatives having
“fundamentally different
goals”.[142]
However, this position assumes, without robust substantiation, that such parties
would consistently disagree on important matters.
This does not seem to be the
case in practice; for example, a 1996 study found that 86 per cent of Swedish
managing directors did
not believe union participation contributed to conflict
and the slowing down of company
operations.[143] While it may be
true that shareholder-appointed directors and employee representatives have
different mandates, no available evidence
suggests that codetermined boards
regularly suffer from stalemate.
There are some valuable non-economic benefits associated with codetermination. While the literature is still developing, and would benefit from further empirical studies, there is a sound basis to conclude that the model can generate attractive results for companies, both economic and non-economic. As such, it is argued that those intent on stakeholder-centric corporate governance reform should give codetermination ample consideration.
Turning from
codetermination’s consequences to its position within broader company law
scholarship, this Part explores the model’s
utility in the context of
stakeholder theory. While many European countries have long emphasised the
importance of stakeholders in
corporate governance, Anglo-American states have
favoured the shareholder primacy approach, at least in the past four decades.
However,
over the past decade, various challenges have been made to the
shareholder-centric orthodoxy, primarily in the form of the “stakeholder
approach”. While the stakeholder approach has garnered at least symbolic
support from prominent actors, it arguably lacks teeth
and requires more
concrete mandates to be successful.
With reference to the origins of
shareholder primacy, this Part will briefly canvass the rise of stakeholderism
and explore how codetermination
could resolve the flaws associated with the
stakeholder approach.
The orthodox law
and economics theory of shareholder primacy dictates that maximising shareholder
value is the corporation’s
central
purpose.[144] The directors derive
their authority from the shareholders, serve as their agents, and must act in
their interests when making corporate
decisions.[145]
Despite its current prominence, shareholder
primacy has not always dominated corporate governance structures in
Anglo-American states.
In the mid-20th century, United States companies were
controlled by professional managers; boards served as public representatives
and
shareholders were relegated to the
background.[146] More broadly,
one-third of employees in the United States were represented by unions, their
growth having been fuelled by the New
Deal reforms of the
1930s.[147] Management was largely
unconstrained by board members and afforded a significant degree of
agency.[148] However, such norms
were inconsistent with the statutory underpinnings of company structure in the
United States and soon gave way
to the shareholder primacy model pioneered by
law and economics scholars.[149]
By 1997, the shareholder primacy approach was firmly the default, with the
Business Roundtable then declaring that the “paramount
duty of management
and of boards of directors is to the corporation’s
stockholders”.[150]
In recent years, powerful
actors have seemingly embraced a more stakeholder-orientated corporate
philosophy. For example, in its 2019
“Statement on the Purpose of a
Corporation”, the Business Roundtable appeared to wholeheartedly adopt a
stakeholder-centric
approach, stating that companies must “deliver
value” to their stakeholders to foster future
success.[151]
With its
inherent emphasis on worker voice, codetermination constitutes a direct
challenge to shareholder primacy. However, there
is a distinct difference
between symbolic statements intended to signal a shift toward a stakeholder
approach on the one hand, and
models¾like
codetermination¾that mandate stakeholder
participation at the highest levels of corporate governance on the other hand.
As such, this article suggests
that codetermination may serve as a partial
answer to the issue of empty stakeholderism.
The
stakeholder approach emphasises the corporation’s responsibility to wider
stakeholders, including employees, creditors,
suppliers, customers, the
environment and the local
community.[152] However, the
effectiveness of the stakeholder model can be limited where directors are forced
to make trade-offs between the interests
of various stakeholders when making
decisions.[153]
Section 172 of the United Kingdom’s Companies Act 2006 encapsulates
the stakeholder approach. The
section[154] requires directors,
when promoting the success of the company, to have regard to factors
including:[155]
... the interests of the company’s employees ... the need to foster the
company’s business relationships with suppliers,
customers and others, the
impact of the company’s operations on the community and the environment
...
In New Zealand, the Companies Act 1993 merely states that directors
“may ... take into account recognised environmental, social and
governance factors” when determining the best interests of the
company.[156] The New Zealand
Act is thus even less prescriptive than the United Kingdom equivalent, falling
short of imposing positive duties
to consider stakeholder interests.
Despite
their underlying intent, such provisions are unlikely to meaningfully elevate
stakeholder interests in practice. Many scholars
have criticised the United
Kingdom’s provision on this basis, since it mandates the consideration of
stakeholder interests
insofar as shareholder interests are not impinged
upon.[157] Andrew Keay and Taskin
Iqbal’s empirical research into the effects of s 172 on the reporting of
large publicly listed companies
affirmed that the provision had little impact,
both operationally and in company
reporting.[158] Outside of the
United Kingdom, Bebchuk, Kastiel and Tallarita’s empirical study of past
choices made by directors under new
stakeholderism rules in the United States
found that directors did not tend to exercise their discretion in favour of
stakeholders.[159]
Fatally,
the directorial discretion approach simply requires directors to consider
various factors, thereby leaving the weighing-up
of relevant interests to the
discretion of corporate leaders who may¾and
often do¾choose to prioritise shareholder
interests notwithstanding statutory
directives.[160] As observed by
Bebchuk and Tallarita, there still exist overwhelming incentives for directors
to support stakeholder objectives only
to the extent that doing so advances
shareholder interests, even with a seemingly renewed sense of corporate purpose
under the stakeholder
approach.[161] Similarly, Gatti
and Ondersma argue that even where a stakeholder approach is mandated in
legislation, directors alone cannot be
trusted to consistently and meaningfully
consider all stakeholders’
interests.[162] They describe the
adoption of such an approach as a “perilous
bet”.[163] Against this
backdrop, it has been argued that the stakeholder approach is no more than a
symbolic façade that could thwart
more beneficial external
reform.[164]
Conversely,
codetermination establishes a concrete model whereby a key stakeholder, the
company’s employees, are afforded a
voice in decision-making. As asserted
by Gotti and Ondersma, any proposal purporting to reshape corporate governance
norms and shift
power to weaker constituents must include mandates and
enforcement mechanisms.[165] Under
codetermination, even where employee representatives are outvoted, they are at
least afforded a defined role in corporate governance¾one which would unlikely materialise in the absence
of legislatively mandated control rights. Where employee representatives are
present,
boards may be disincentivised from pursuing corporate strategies
detrimental to employees.[166]
Crucially, codetermination can uplift worker interests, and, as was found to be
the case within codetermined Swedish firms, promote
constructive collaboration
between executives and a key stakeholder¾employees.[167]
Codetermination
does not resolve all the impediments associated with the stakeholder approach.
Even with employee-elected directors
present on boards, trade-offs between the
interests of various stakeholders can occur. Nevertheless, it is argued that
since codetermination
ensures the presence of crucial stakeholder
representatives in the decision-making process, it could empower employees more
robustly
than under the directorial discretion approach.
Despite codetermination being so far confined to the European continent, it has not escaped the attention of those in Anglo-American states. Indeed, academics and policymakers in the United States, Canada, Australia and the United Kingdom have recently considered the model’s attractive features, indicating a growing interest in the model as an alternative corporate governance measure.
The
United States’ legislative landscape recently saw murmurings of
codetermination in the form of ambitious proposals brought
by Democratic
Senators Elizabeth Warren and Bernie
Sanders.[167]
While neither Warren’s Bill nor Sanders’ proposal gained significant
traction, they constitute valuable examples of policymakers
contemplating
codetermination outside Europe.
In August 2018, Senator Warren introduced
the Accountable Capitalism Act: a proposed federal Bill which would have
required companies
engaging in interstate commerce and receiving more than USD 1
billion in annual gross receipts to reserve 40 per cent of their board
seats for
employee-elected
representatives.[168] The Bill
would have also established a mandatory federal corporate charter for all
companies above the aforementioned valuation threshold.
Senator Sanders proposed
that publicly traded corporations and those with assets or revenues of USD 100
million be required to ensure
that employees elect 45 per cent of corporate
directors.[169]
Although these
proposals align closely with Germany’s 1976 Act, they are not identical.
Senator Warren’s approach would
see a comparably limited number of
companies become subject to codetermination rules, and these companies comprise
a slightly smaller
combined market capitalisation compared to that in
Germany.[170] While Sanders’
approach would give slightly less board power to employees than the German
model, it was more far-reaching than
Germany’s 1976 Act, as all public
corporations in the United States would have come within its
scope.[171] Additionally, if
realised, the proposal would have provided for employee ownership of at least 20
per cent of companies worth over
USD 100 million, thereby establishing a more
expansive worker empowerment regime than exists in
Germany.[172]
Unsurprisingly,
many commentators resisted these reforms, with one academic stating that
Warren’s Bill would “destroy
capitalism” and “channel
Karl Marx”.[173] However,
others lauded Warren’s and Sanders’ calls for significant corporate
reform amid record income inequality and
palpable corporate influence in United
States policymaking.[174]
Ultimately, neither candidate succeeded in their bid for the Democratic
nomination in the 2020 presidential election, and any political
fervour for such
reforms quickly dissipated.
Support for codetermination has occasionally arisen
in the United Kingdom. One can find the earliest examples of codetermination in
the Oxford University Act 1854 and the Cambridge University Act 1856, which
required that their university councils partly comprise
persons representative
of and elected by students and
staff.[175] In private enterprise,
the Port of London Act 1908 mandated labour representation on the Port
Authority’s board until its repeal
in
1968.[176]
Codetermination did
not receive considerable attention in the United Kingdom until the European
Commission released its Draft Fifth
Company Law Directive in 1975 and Germany
enacted its 1976 Codetermination Act. The Draft Directive sought to harmonise
corporate
governance law across the European Union and mandate board-level
codetermination for large
companies.[177] In response to
ongoing industrial disputes and the Draft Directive’s release, Harold
Wilson’s Labour government commissioned
the Committee of Inquiry on
Industrial Democracy to investigate labour representation, culminating in the
1977 Bullock
Report.[178]
The Majority of the Committee considered the presence of worker directors on the
boards of large companies was a natural response
to post-war economic changes
and unrealised worker
potential.[179] The Report’s
terms of reference expounded the “need for a radical extension of
industrial democracy in the control of
companies by means of representation on
boards of directors”.[180]
However, such reform was never realised, with the United Kingdom slipping into
the 1978–1979 Winter of Discontent soon after
the Report’s release
and Thatcherism solidifying its hold on domestic policy
thereafter.[181]
Surprisingly,
it was the United Kingdom’s Conservative then-prime ministerial candidate
Theresa May who most recently called
for a re-examination of company board
structures. At a 2016 conference, May advocated for adopting European-style
board-level codetermination
requirements for large
companies.[182] In criticising the
general lack of scrutiny exercised by non-executive directors, May stated,
“we’re going to change
that system¾and we’re going to have not just consumers
represented on company boards, but workers as
well”.[183] However, such
proposals did not materialise during May’s tenure as Prime Minister, and
successive Prime Ministers have been
silent on the matter.
Codetermination has rarely come to the fore in Canadian
politics. However, Canada’s 1971 Robert Dickerson Committee, which
produced
the Canada Business Corporations Act and strongly advocated for the
enshrinement of the stakeholder approach in legislation, examined
the viability
of non-shareholder empowerment through the appointment of representative
directors.[184] Ultimately, the
Committee dismissed the viability of codetermination on the basis that
ascertaining the eligible electorate would
be too cumbersome a
task.[185] However, this
contention appears not to have impeded the jurisdictions with codetermination
laws, as restricting the electorate to
the company’s employees remains the
default approach.
More recently, the 2021 Canadian federal election saw
then-Conservative Party leader Erin O’Toole promise to ensure federally
regulated companies had elected worker representatives on their boards should he
be elected Prime Minister.[186]
However, O’Toole lost the election to Justin Trudeau and the proposal
never materialised.[187]
Codetermination has recently received some attention in
Australia. In 2018, the Australian Council of Trade Unions passed a motion
at
its national Congress advocating for a federal policy to install employees on
company and government-managed
boards.[188] Ahead of the 2019
election, the Australian Labor Party indicated a willingness to consider
international codetermination models and
the viability of their emulation in the
Australian corporate context; however, this proposal failed to gain any
meaningful traction.[189]
In
sum, while codetermination has momentarily captured attention in a handful of
non-European jurisdictions, it is yet to be seriously
considered in most
Anglo-American states. This is likely due to a range of factors, including a
lack of political will, the persistence
of the shareholder primacy model in
these jurisdictions, and potential pushback from business leaders. Additionally,
given the urgency
of recent public health crises, climate change-related
concerns and geopolitical
tensions,[190] codetermination
reform is likely not viewed as a particularly pressing item on the political
agenda. In the absence of widespread
enthusiasm for such reform, it is
unsurprising that these proposals have tended to recede into the political
backwaters following
some initial attention.
Nevertheless, this Part has
attempted to convey that codetermination, while still unusual to some, is not a
new concept in the Anglo-American
world, and those intent on exploring
alternative forms of corporate governance have pushed for its consideration. It
is apparent,
however, that if codetermination is to be successfully introduced
in New Zealand or other Anglo-American states, there must be sufficient
political impetus to bring the reform to fruition.
Despite having received limited political attention in
New Zealand, codetermination’s philosophical intent is not entirely
absent
from local corporate governance. The fallout from the Global Financial
Crisis prompted some local industry leaders to reconsider
their corporate
structures, with companies such as KiwiRail and Air New Zealand pursuing
the “high-performance high engagement”
(HPHE)
model:[191] a non-board policy
that seeks to boost worker participation through engagement with workers and
unions.[192] While the HPHE model
cannot be directly equated to codetermination as it does not allocate board
seats to employees, the two models
share the same fundamental emphasis on worker
empowerment in support of firm growth.
In
2015, Air New Zealand adopted its High Performance Engagement model to
facilitate greater worker involvement in company decision-making.
The model
features a charter designed by the company and the relevant unions, stating that
the parties are to facilitate the “direct
and substantive
involvement” of workers in decision-making processes and foster
collaborative
relationships.[193]
High Performance Engagement was afforded a somewhat aspirational definition,
with the charter stating that the model prescribes “a
way of working...
[involving] employees, management and unions working ... to achieve mutually
beneficial outcomes”.[194]
However, the charter stops short of allocating board seats for employee or union
representatives or dictating formal processes by
which employees are to be
involved in decision-making.
Despite its lofty intentions, a 2019 review
conducted by the union found workers did not believe the partnership was giving
effect
to its promises.[195] While
the company has not released specifics regarding the model’s
implementation, union members Newman and Freilekhman have
asserted that the
charter’s lack of specificity and enforceability resulted in a lack of
consultation between Air New Zealand
and E Tū, the nation’s
largest aviation union, during the height of the COVID-19 pandemic, which
ultimately left employees
without a voice during the crisis
period.[196] Additionally, Newman
and Freilekhman have suggested that High Performance Engagement was adopted to
reduce costs by avoiding adversarial
relations with unions, rather than to
genuinely empower workers.[197]
Regardless of the precise intentions behind the model’s introduction,
the Air New Zealand example illustrates that employee
representation
partnerships can have lacklustre effects if unsupported by concrete mechanisms
to ensure participation in decision-making.
If employees are to be given a
meaningful voice in the governance of companies like Air New Zealand, then
such participation ought
to be mandated rather than merely encouraged.
The
general lack of codetermination structures in New Zealand to date arguably
suggests that the model is unlikely to be a useful
fit domestically, given that
companies have not embraced codetermination organically. However, as discussed
in Part III, Hayden and
Bodie and Renaud have noted that companies may be
deterred from embracing codetermination in the absence of legislative mandates
for a range of reasons, making it difficult to draw such simplistic
conclusions.[198]
While
codetermination-like arrangements have not been voluntarily adopted by
New Zealand’s most prominent companies, the Air
New Zealand
example illustrates that a leading domestic company has been independently
willing to implement a model that at least
in theory uplifts workers and
involves them in decision-making. The next question is whether the model could
co-exist with current
industrial relations arrangements in New Zealand.
Codetermination has been shown to work effectively in various
European states. However, whether the model could be successfully transplanted
elsewhere remains to be seen. As discussed in Part II, in Germany and Sweden,
codetermination forms part of a broader industrial
relations system that
emphasises worker empowerment. Indeed, codetermination is said to be most
effective when implemented in states
already supportive of employee
representation, such as those with a strong union presence and collective
bargaining frameworks.[199]
Nevertheless, it is unlikely a country would need to directly emulate the extent
of unionisation and collective agreement coverage
present in Germany and Sweden
for the model’s benefits to materialise.
Despite an absence of works
councils, New Zealand has a broader legislative architecture that empowers
workers, albeit to a lesser
extent than in Germany. Unionisation and collective
bargaining are on the rise, and Fair Pay Agreements have recently received
statutory
backing.
A complete analysis of the potential impediments and
harmonious preconditions associated with the introduction of codetermination
in
New Zealand is outside the scope of this article. However, this Part will
explore the similarities¾or lack thereof¾between New Zealand’s unique industrial
relations context and the German and Swedish examples. It then critically
analyses the
limited utility of these similarities in realising the benefits of
codetermination.
From 1894 until the 1990s,
New Zealand’s industrial relations landscape featured high union
membership rates, highly centralised
bargaining and a compulsory arbitration
system.[200]
However, the 1990s saw the decline of unions in many industrialised societies,
and New Zealand was no
exception.[201]
Furthermore, the enactment of the Employment Contracts Act in 1991 radically
altered New Zealand’s collective bargaining framework.
The Act
decentralised New Zealand’s industrial relations system, emphasising
individual employment contracts over pattern bargaining
at the firm and industry
level.[202]
Union membership was rendered voluntary, and the benefits associated with
compulsory arbitration
diminished.[203] A mere four years
after the Act’s introduction, workers covered by collective agreements
plummeted from three-fifths of the
workforce to
three-tenths.[204] In the years
following, the collective agreement coverage of private sector workers reduced
dramatically compared to those in the
public
sector.[205]
While the
Employment Relations Act 2000 purported to support the negotiation of collective
agreements, it had limited practical effect.
The share of the workforce covered
by collective agreements has continued to fall, with only 10.2 per cent of
private sector workers
covered by such arrangements in
2015.[206] In contrast, collective
agreements covered 50.2 per cent of German workers in 2015, and 88 per cent of
Swedish workers in
2020.[207]
Despite
the decline in union membership rates over the past three decades,
New Zealand’s union statistics are relatively high
compared to other
OECD
countries.[208]
For example, New Zealand has higher union membership than France,
Switzerland, Spain and
Portugal.[209] As of 2021,
unionised workers comprise 17 per cent of New Zealand’s
workforce,[210]
compared to 13.7 per cent of Australia’s and 10.3 per cent of the United
States’.[211]
New Zealand coverage is slightly higher than Germany’s, which sat at
16.3 per cent in 2019.[212]
However, New Zealand’s figures predominantly comprise public sector
workers: 60 per cent of unionised workers were employed
in the public sector in
2019.[213]
Only 10.3 per cent of New Zealand’s private sector workers were
unionised in 2017, a figure only slightly higher than in Australia
and the
United
States.[214]
In
May 2021, the Labour-led government announced its plans to introduce the Fair
Pay Agreements regime, and in doing so catalysed
the most significant structural
shift in New Zealand industrial relations since the
1990s.[215] The Fair Pay
Agreements Act 2022 allows for the creation of Fair Pay Agreements (FPAs), which
are “sector-level collective
agreement[s] that [set] minimum terms and
conditions for all employees within an industry or
occupation”.[216] FPAs are
intended to complement existing collective agreements at the enterprise level
and individual employment agreements while
making it easier to instigate
sector-wide
negotiations.[217]
As the Fair
Pay Agreements Act only came into force on 1 December 2022, and only a handful
of industries have commenced negotiations,
one’s ability to assess its
impact is limited. However, with its robust support for industry-wide
agreements, the regime is
poised to boost collective bargaining across various
sectors, at least in comparison to current
levels.[218] If this occurs,
New Zealand’s industrial relations landscape will be aligned more
closely with those of Germany, Austria and
the codetermined Nordic countries,
all of which have strong industry-level collective bargaining
regimes.[219]
While there are some key differences between New Zealand’s industrial relations system and those of Sweden and Germany, there arguably exists a sufficient framework to support the imposition of codetermination in this country. Unions are prevalent in some corners of the private sector, and collective bargaining will soon receive stronger legislative backing. Additionally, a lack of union coverage in some sectors may generate a greater need for codetermination.
New Zealand’s
union coverage statistics are relatively low compared to certain European
jurisdictions, such as the codetermined
Nordic
states,[220] and union membership
remains a predominantly public sector phenomenon. While New Zealand’s
statistics are relatively similar
to Germany’s and higher than, for
example, France’s and
Hungary’s[221]¾two other codetermined states¾these figures may be explained or tempered by the
prominence of works councils in these
jurisdictions.[222]
Noting the
dominant role of German unions in organising codetermination arrangements,
Jäger, Noy and Schoefer have cited low
union influence in the United States
as one reason why codetermination may be ineffective in that
jurisdiction.[223] While
New Zealand has a higher percentage of unionised private-sector workers
than the United States, if one were to measure codetermination’s
likely
success solely based on a jurisdiction’s union membership rates, it would
seem New Zealand does not fare exceedingly
well.
Despite differences in
coverage to that in Europe, there is arguably sufficient union infrastructure in
New Zealand to support a mandatory
codetermination regime. Union membership
rates have increased since 2018, reversing a decades-long
decline.[224] In March 2021, there
were 136 registered unions in New Zealand—an increase of 5 per cent
from the year prior.[225] Certain
industries, such as aviation, manufacturing (including the food and beverage
subsector) and postal and warehousing services,
are comparatively highly
unionised.[226] Accordingly,
prominent companies in such industries, such as Air New Zealand, AFFCO
Holdings and Mainfreight, could benefit from
the involvement of union leaders in
developing codetermination arrangements.
In any event, high union coverage
may not be a prerequisite to the success of codetermination, as a lack of
extensive unionisation
across New Zealand’s private sector might
actually enhance the model’s beneficial effects. Even in industries with
low
union coverage, such as mining, agriculture and
construction,[227] the presence of
employee representatives on the boards of large corporates could mitigate the
lack of union representation. Codetermination
requirements for companies in such
sectors could serve as a valuable internal mechanism to prevent adversarial
relations between
employers and employees. Additionally, company employees who
previously did not have recourse to an influential union body could
relay
concerns or suggestions to their elected employee representatives, thereby
opening previously non-existent communication channels.
As such, a lack of high
union coverage may not necessarily undercut any codetermination proposal in
New Zealand; in fact, it could
further highlight the need for board-level
worker representation.
As discussed in Part II, board-level employee
representation can theoretically streamline communications during the collective
bargaining
process, thereby preventing strikes and increasing firm
efficiency.[228] However, as noted
by Dammann and Eidenmüller, the likelihood of this benefit materialising
depends on the prominence of collective
bargaining in a country’s
economy.[229]
New Zealand’s collective bargaining rates pale in comparison to
Germany’s and Sweden’s. This may change with the
new statutory FPA
regime, which aims to facilitate sector-wide bargaining, likely increasing
collective agreement coverage. However,
even under the FPA regime, it is
unlikely that rates of collective bargaining in New Zealand will grow to
rival the likes of Germany
and Sweden, at least in the short term. FPAs would
need to become widespread across New Zealand’s private sector to
emulate
the coverage rates seen in those jurisdictions. Instead, it is more
likely FPAs will first be sought within specified low-paying
sectors
representing a minority of private sector
workers.[230] However, given that
collective agreement coverage will almost certainly increase under the new
regime, it is more likely that codetermination’s
efficiency-related
benefits could materialise should the model be introduced.
Despite
the existence of a general industrial relations infrastructure,
New Zealand’s unionisation rates and collective agreement
coverage
are substantially lower than Germany’s and Sweden’s. Does this spell
the end of any realistic consideration
of codetermination in New Zealand?
Not necessarily.
While European states tend to place more emphasis on worker
empowerment than their Anglo-American counterparts, the general contours
of
New Zealand’s industrial relations are not so dissimilar to
codetermined European countries. Union membership is rising
and the FPA regime
is poised to boost collective bargaining coverage. Additionally, Sweden largely
phased out works councils after
introducing codetermination legislation in 1973,
indicating that works councils are not essential for a country to benefit from
codetermination.
Works councils are also absent or minimally relevant in
Finland, Denmark and Norway¾three other
codetermined Nordic states.[231]
Indeed, codetermination has proliferated across many European countries, all
of which have diverse industrial relations landscapes
with varying emphasis
placed on unions, collective bargaining arrangements and general employee
upliftment.[232] There is no
empirical evidence that any particular structure or condition is a necessary
prerequisite for the successful introduction
of codetermination, so
New Zealand need not concern itself with emulating the various other
aspects of European industrial policy
canvassed in this article. Additionally,
some of the aforementioned benefits, such as the development of firm-specific
skills and
promotion of employee interests, could materialise in a company
without external unions and collective agreements. This is because
such benefits
are inherently internal to a company and do not rely on the presence of outside
bodies. Moreover, as suggested above,
industries with low unionisation rates may
further highlight the need for codetermination, and see the model succeed
independently
of unions.
As canvassed in Part III, various economic and non-economic benefits, both theoretical and empirical, have been associated with codetermination. This Part considers the extent to which certain benefits could address, improve, or mitigate contemporary challenges in New Zealand. Specifically, it will consider the ability of codetermination to encourage employee retention through honing firm-specific skills and increasing firm efficiency through the avoidance of strike action.
Hansmann and Fauver and
Fuerst have contended that codetermination can result in the avoidance of strike
action by improving communication
channels between employees, union
representatives and company
executives.[233] Assuming the
efficacy of this benefit, this subpart will consider the extent to which it
could assist industrial relations in contemporary
New Zealand.
Under the
Employment Relations Act, workers can lawfully strike when their union is
actively negotiating a collective agreement or
if there is a serious health and
safety issue.[234]
New Zealand has a long history of strike
action,[235] and strikes remain
common in the 21st
century.[236]
While strike action has ebbed and flowed since the early 2000s, the years
spanning 2018–2020 saw a sharp spike in work
stoppages.[237] In 2018, there
were 143 stoppages involving 11,109 employees and 192 lost work days, while 2019
saw 158 stoppages involving 53,752
employees, 142,651 lost work hours and an
estimated $9.78 million in lost wages and
salaries.[238]
From
2018–2020, the Ministry of Business, Innovation and Employment did not
release precise data on the proportion of strikes
carried out by private sector
workers compared to the public sector. Nonetheless, Business
New Zealand’s comprehensive list
of all private sector strikes from
2017–2020 helpfully illustrates that at least 40 companies were threatened
with or affected
by strikes during this
period.[239] In 2018, for example,
employees of Event Cinemas, Farmers and Wendy’s New Zealand went on
strike in response to pay
cuts.[240] A recent private sector
strike involved egg producer Zeagold, whose employees went on strike for three
days in early August 2022.[241] On
30 August 2022, fuel tanker truck drivers employed by SouthFuels announced they
would commence a two-month-long strike from 12
September to 12 November
2022.[242]
While publicised
instances of strike action in 2021 and 2022 mainly involved public sector
workers, such as nurses and bus
drivers,[243] private companies
face strikes more frequently than one might suspect. While strikes are a valid
and important form of industrial
action, any instance of strike action reduces
firm efficiency through lost hours and additional time and resources spent
engaging
in negotiations¾a loss that could have
been mitigated by effective dialogue between firms and employees. With the
intensification of the cost of living
crisis and the arrival of a
recession,[244] it might not be
unduly pessimistic to expect an increase in strike action in the coming months.
As such, New Zealand companies could
benefit from the existence of any
internal mechanism that facilitates the constructive resolution of labour
issues¾like codetermination.
Codetermination is said to encourage
the enhancement of firm-specific skills, as employees may be motivated to stay
at a company long
term due to the prospect of attaining a board-level
position.[245] While empirical
research is necessary to thoroughly scrutinise this benefit’s efficacy,
Smith and Furubotn have convincingly
argued that employees will be incentivised
to remain at a firm where representative governance opportunities are
available.[246]
Dammann and
Eidenmüller have argued that retention-related benefits might be confined
to countries with stronger termination
laws¾like
Germany, where employers must give a specific reason before terminating an
employee¾and are unlikely to materialise in
“fire at will” jurisdictions like the United
States.[247] New Zealand law
is closer to Germany’s, as dismissals are deemed unlawful unless
procedurally and substantively “fair
and
reasonable”.[248]
Given
recent trends, this retention-related benefit may be of particular relevance in
contemporary New Zealand. The COVID-19 pandemic
has arguably induced or at
least accelerated what has come to be known as the “Great
Resignation”: an international trend
that has seen voluntary resignations
by millions of employees across various Western
democracies.[249] In the United
States alone, over 24 million people resigned between April and September
2021.[250] New Zealand has
not been immune to this trend, and a 2021 Employee Sentiment Research survey
indicated that around 40 per cent of
New Zealanders intended to search for
a new job in 2022.[251] With the
reopening of New Zealand’s borders in 2022, the issue has been
compounded by a growing “brain drain” as
employees look to overseas
opportunities.[252] From January
2022 to January 2023, over 97,000 New Zealanders emigrated overseas,
constituting a net migration loss of
17,500.[253] While “overseas
experiences” have long been a rite of passage for young
New Zealanders,[254] the
COVID-19 pandemic has resulted in a greater concentration of young people
choosing to relocate overseas at the same time, exacerbating
pre-existing
staffing shortages.[255]
It is
not suggested that codetermination presents a catch-all solution to current
challenges in New Zealand’s job market. However,
viable incentives to
enhance firm-specific skills and prevent talent from relocating offshore can
only be welcomed. Similarly, since
codetermination has been associated with
increases in worker
satisfaction,[256] resignations
could be rendered less likely and local talent kept
onshore.[257]
This article has attempted to highlight codetermination’s
economic and non-economic merits and demonstrate how the model could
serve as a
useful, albeit partial, response to contemporary issues, including strike action
and employee relocation.
The primary intent has been to prompt contemplation
of codetermination in the New Zealand context. In the interests of clarity
and
completeness, this article proposes that if New Zealand were to
legislate for codetermination, mandatory requirements should be imposed
only on
the nation’s largest companies. On balance, it is argued that the
model’s theoretical and empirically tested
benefits render it worthy of
emulation. While New Zealand’s overarching industrial relations
system may differ from those found
in the discussed European states, it is
suggested that these dissimilarities are insufficient to wholly discount the
model’s
potential utility in this country. New Zealand has moderately
high union coverage compared to other OECD countries; impending legislation
is
set to strengthen industry-level collective bargaining; and even the sectors
without a strong union presence could distinctly
benefit from mandated
board-level employee representation.
This proposal does not purport to
provide an exhaustive blueprint for a New Zealand codetermination model.
Instead, it sets out its
possible key tenets and identifies aspects of European
models that could be directly emulated or built upon.
The most contentious aspect of
any codetermination proposal is likely to be the number or proportion of
employee representatives on
corporate boards. Too few, and the representatives
are rendered tokenistic; too many, and we risk the emergence of untenably high
levels of representation for a one-tier board system (as is the norm in
New Zealand).
This article has drawn comparisons between
New Zealand and Sweden because both states utilise a unitary board
structure. However,
it is argued that for the benefits of codetermination to be
fully realised in New Zealand, more than two or three employee
representatives¾the number present on the boards
of Sweden’s largest companies, regardless of the overall size of said
boards¾will be required. This is especially so
in the context of the democracy-preservation benefit, which depends on the
presence of a large
enough proportion of employee representatives to generate
sufficient disincentives. The quantum of representatives should therefore
be set
at a static proportion of the board, rather than requiring a fixed number of
representatives regardless of the board’s
size.
Acknowledging that full
parity codetermination requirements may be excessive in the context of a
one-tier board, this article proposes
that one-third codetermination would
constitute a reasonable mid-point. Such a proposal is consistent with Fauver and
Faust’s
suggestion that the optimal level of codetermination to see
efficiency-related benefits come to fruition is likely below 50 per
cent.[258]
While one-third
codetermination would mean worker representatives could be outvoted, this
article contends that their presence on
the board would still see the described
economic and non-economic benefits materialise. These benefits include increases
in firm
efficiency and worker empowerment, improved information-sharing and
collaboration, and enhancement of firm-specific skills. The presence
of even a
minority of employee representatives in the boardroom could positively influence
corporate decision-making and operate
as a positive soft constraint on company
activity.
Employee empowerment is the
central rationale behind the codetermination model. As such, it is suggested
that the threshold at which
companies ought to become subject to codetermination
requirements be personnel-based rather than revenue or market
capitalisation-based;
after all, the larger the employee body, the greater the
need for representation. Similarly, the greater a company’s size,
the
greater the societal precedent it sets through its treatment of employees.
Accordingly, it is proposed that locally incorporated
companies with 3,000 or
more employees be subject to codetermination requirements. Such a threshold
would ensure that codetermination
requirements are only imposed where the
company’s activities affect a relatively large number of employees. If
implemented,
such a codetermination model would be more conservative than the
status quo in Germany and Sweden.
The consequences of such a requirement
could materialise as follows. The proposed threshold would mean many listed
companies would
become subject to codetermination requirements. For example, the
boards of most listed companies tend to have around 8–12
directors.[259] If one-third
codetermination were imposed, 2–4 board members would be employee
representatives.
This article supports the adoption of the
German-style electoral process for employee representatives on codetermined
boards. That
is, employee representatives would be elected by company employees,
rather than selected by the unions as is the method in Sweden.
This position is
taken for two reasons: unions are less dominant in New Zealand than in
Sweden, and election from the employee body
rather than union selection would
constitute a more democratic process.
As is the process in Germany,[260] it is proposed that shareholders could only remove employee representatives if at least 75 per cent of employees were to vote in favour of removal. This requirement would safeguard the democratic process underpinning employee board appointments by ensuring shareholders cannot unilaterally disrupt codetermination arrangements.
Stakeholder-focused
reform has been toyed with by many an academic in recent years. Despite having
received limited recognition across
the Anglo-American world, codetermination is
associated with economic and non-economic benefits that render it deserving of
further
academic and political attention. This article has highlighted the
model’s propensity for boosting firm performance, increasing
worker
empowerment, honing firm-specific skills and improving communication channels
between employees and senior executives. The
model is time-tested, has garnered
the lasting support of many European directors, and could represent a concrete
solution to the
practical problems associated with generalist
stakeholder-centric objectives.
Further empirical research is necessary to
fully ascertain some of the model’s effects. That proviso notwithstanding,
this article
has attempted to prompt serious contemplation of codetermination in
a local academic environment that has been largely silent on
the matter.
Accordingly, this article has explored codetermination’s workings in
practice, outlined how those in Anglo-American
jurisdictions have looked to the
model with interest and examined the nature of New Zealand industrial
relations. By reference to
the Air New Zealand example, this article has
suggested that to see meaningful outcomes in the worker empowerment space,
avenues
for worker participation must be mandated by legislation. This article
then analysed codetermination’s ability to respond to
local challenges,
concluding that codetermination could reduce strike action and assist employee
retention. Finally, a tentative
proposal as to the nature of a New Zealand
codetermination model was laid out, encompassing only the largest locally
incorporated
companies.
It would be naive to assert that the introduction of
even one-third codetermination legislation would be readily accepted by all
across
New Zealand’s political spectrum. Ideological disagreements
will always render employee-related corporate governance reform
controversial.
However, if the promotion of stakeholder interests is to be meaningfully
pursued, concrete forms of stakeholder governance¾like codetermination¾deserve a place on the agenda.
[*] LLB(Hons), BA Wgtn. Lawyer, Bell Gully. Recipient of the New Zealand Law Students’ Association Prize for Legal Writing. I am most grateful to my supervisor, Dr Mark Bennett, for his invaluable guidance, wisdom and encouragement. I also thank my father, for his unwavering support and tutelage throughout the entirety of my degree.
[1] When this article uses the term “Anglo-American”, it is in reference to states that feature English as an official language and were, at some stage, colonised by the United Kingdom. The term encompasses Australia, New Zealand and the United States.
[2] See R Edward Freeman “stakeholder theory” in Cary L Cooper (ed) Wiley Encyclopedia of Management (online ed, John Wiley & Sons, Chichester, 2015) vol 2 for an overview of stakeholder theory.
[3] See Heiko Spitzeck and Erik G Hansen “Stakeholder governance: How stakeholders influence corporate decision making” (2010) 10 Corp Gov 378 at 379–380.
[4] See Miguel Martínez Lucio “Co-determination” in Adrian Wilkinson and Stewart Johnstone (eds) Encyclopedia of Human Resource Management (Edward Elgar Publishing, Cheltenham, 2016) 48 at 48; Simon Jäger, Shakked Noy and Benjamin Schoefer “What Does Codetermination Do?” (2022) 75 ILR Rev 857 at 859; and Gary Gorton and Frank A Schmid “Capital, Labor and the Firm: A Study of German Codetermination” (2004) 2 J Eur Econ Assoc 863 at 868–869.
[5] Lucio, above n 4, at 48; and Gorton and Schmid, above n 4, at 868–869.
[6] Jens Dammann and Horst Eidenmüller “Codetermination: A Poor Fit for US Corporations” (2020) 3 Colum Bus L Rev 870 at 880.
[7] See for example Lenore Palladino “Economic Democracy at Work: Why (and How) Workers Should be Represented on US Corporate Boards” (2021) 1 J Law Pol Econ 373; and Grant M Hayden and Matthew T Bodie “Codetermination in Theory and Practice” (2021) 73 Fla L Rev 321. As will be discussed in Part V, Anglo-American policymakers such as Elizbeth Warren, Bernie Sanders and Theresa May have expressed support for codetermination.
[8] See for example Business Roundtable Statement on the Purpose of a Corporation (August 2019), which contains broad commitments to various stakeholder groups but little guidance on how to balance such interests.
[9] Codetermination as a partial answer to some of the practical difficulties associated with the stakeholder approach will be discussed further in Part IV.
[10] See for example Michael C Jensen and William H Meckling “Rights and Production Functions: An Application to Labor-managed Firms and Codetermination” (1979) 52 J Bus 469 at 504; and Samuel Hammond “Elizabeth Warren’s Corporate Catastrophe” National Review (online ed, New York City, 20 August 2018) for a conservative news outlet’s critique of Senator Elizabeth Warren’s Accountable Capitalism Bill that, if enacted, would have imposed codetermination requirements on United States companies.
[11] The wealthiest 20 per cent of households hold 69 per cent of total household net worth: see Statistics New Zealand “Distribution of wealth across New Zealand households remains unchanged between 2015 and 2021” (3 March 2022) Stats NZ <www.stats.govt.nz>.
[12] See for example “Theresa May vows to put Conservatives ‘at service’ of working people” (11 July 2016) BBC <www.bbc.com>; and Elizabeth Warren “Accountable Capitalism Act” <www.warren.senate.gov>.
[13] Hayden and Bodie, above n 7, at 324; and Eirik G Furubotn “Codetermination and the Modern Theory of the Firm: A Property-Rights Analysis” (1988) 61 J Bus 165 at 166.
[14] Jäger, Noy and Schoefer, above n 4, at 860–861; and Sophie Rosenbohm and Thomas Haipeter “German board-level employee representation in multinational companies: Patterns of transnational articulation” (2019) 25 Eur J Ind Relat 219 at 219–220.
[15] See Jens Dammann and Horst Eidenmüller “Corporate Law and the Democratic State” [2022] U Ill L Rev 963 at 1010 for further discussion of codetermination acting as a soft constraint for companies.
[16] Dammann and Eidenmüller, above n 15, at 1010; and Hayden and Bodie, above n 7, at 346.
[17] Carola M Frege “A Critical Assessment of the Theoretical and Empirical Research on German Works Councils” (2002) 40 Br J Ind Relat 221 at 222; and Hermann Kotthoff “Plant-level Co-determination as Reflected in Recent Research” (Doctorate in Sociology, University of Frankfurt, 1981) 1 at 11.
[18] Kotthoff, above n 17, at 5; Hayden and Bodie, above n 7, at 354; and Jäger, Noy and Schoefer, above n 4, at 862.
[19] Kotthoff, above n 17, at 5. For example, German works councils can initiate negotiations around and advocate for the establishment of a mandatory time recording system for working hours. See this mechanism detailed in L&E Global “Germany: Recording of working hours – works council can initiate negotiations regarding the configuration of the recording system” (27 July 2023) L&E Global: Alliance of Employers’ Counsel Worldwide <leglobal.law>.
[20] Simon Jäger, Shakked Noy and Benjamin Schoefer “Codetermination and Power in the Workplace” (2022) 3 J Law Pol Econ 198 at 200; Leo E Strine Jr, Aneil Kovvali and Oluwatomi O Williams “Lifting Labor’s Voice: A Principled Path Toward Greater Worker Voice and Power Within American Corporate Governance” (2022) 106 Minn L Rev 1325 at 1331; and see generally Katharina Pistor “Codetermination in Germany: A Socio-Political Model with Governance Externalities” in Margaret M Blair and Mark J Roe (eds) Employees and Corporate Governance (Brookings Institution Press, Washington DC, 1999) 163.
[21] Frege, above n 17, at 222.
[22] John T Addison The Economics of Codetermination (Palgrave Macmillan, New York, 2009) at 5; and Pistor, above n 20, at 163–164.
[23] Addison, above n 22, at 5.
[24] From 1949–1989, codetermination was present only in West Germany. As such, references to “German” codetermination during this period are only in relation to West Germany.
[25] See Markus Roth “Employee Participation, Corporate Governance and the Firm: A Transatlantic View Focused on Occupational Pensions and Co-Determination” (2010) 11 EBOR 51 at 62; and FA Mann “The New German Company Law and Its Background” (1937) 19 J Comp Leg 220 at 223–227.
[27] At 62.
[28] Ewan McGaughey “The Codetermination Bargains: The History of German Corporate and Labor Law” (2016) 23 Colum J Eur L 135 at 135.
[29] Klaus J Hopt “Labor Representation on Corporate Boards: Impacts and Problems for Corporate Governance and Economic Integration in Europe” (1994) 14 IRLE 203 at 203; and Jäger, Noy and Schoefer, above n 20, at 204–205.
[30] See Dammann and Eidenmüller, above n 6, at 880, Table 1 for a list of the European states that have adopted the model and the percentage of board seats reserved for employees. Norway is a notable non-European Union state that has also embraced codetermination.
[31] Only Hungary and the Czech Republic partly abolished mandatory codetermination. However, Hungary has retained mandatory codetermination for firms with two-tier boards (which constitute the vast majority), and the Czech Republic reintroduced mandatory codetermination in 2017 for companies with at least 5000 employees after its abolition in 2014: see Worker Participation EU “Hungary – Board-Level Representation” <www.worker-participation.eu>; and Worker Participation EU “Czech Republic – Board-Level Representation” <www.worker-participation.eu>.
[32] The two-tier board structure is mandated by the Stock Corporation Act 1965 (Germany). See Gorton and Schmid, above n 4, at 868; and Christoffer Saidac, Mattias Friberg and Khaled Talayhan “Sweden” in Willem J L Calkoen (ed) The Corporate Governance Review (11th ed, Law Business Research, London, 2021) 304.
[33] In this sense, management boards occupy a similar role to that of “managers” within Anglo-American companies. Management boards are responsible for the company’s day-to-day operations. See for example Klaus J Hopt and Patrick C Leyens “The structure of the board of directors: Boards and governance strategies in the US, the UK and Germany” in Afra Afsharipour and Martin Gelter (eds) Research Handbook on Comparative Corporate Governance (Edward Elgar Publishing, Cheltenham, 2021) 116 at 116; and Walther Müller-Jentsch “Formation, development and current state of industrial democracy in Germany” (2016) 22 Transfer 45 at 50.
[34] Hayden and Bodie, above n 7, at 331–332; and Klaus J Hopt The German Law of and Experience with the Supervisory Board (ECGI, Law Working Paper No 305/2016, January 2016) at 2.
[35] Codetermination Act 1976 (Germany), s 7.
[36] Hopt, above n 29, at 204; Pistor, above n 20, at 184; and Gorton and Schmid, above n 4, at 868. See Larry Fauver and ME Fuerst “Does good corporate governance include employee representation? Evidence from German corporate boards” (2006) 82 J Financ Econ 673 at 675 for a discussion of the nature of German supervisory boards in comparison to those in the United Kingdom and the United States, which have the same unitary board system as is present in New Zealand.
[37] See Institute of Directors New Zealand “Starting a Board” <www.iod.org.nz> for an overview of key board functions in New Zealand.
[38] Codetermination Act, s 7; and Pistor, above n 20, at 174.
[39] Codetermination Act, s 7(2).
[40] One-Third Participation Act 2004 (Germany).
[41] Codetermination Act, s 27(2).
[42] Gorton and Schmid, above n 4, at 869.
[43] Dammann and Eidenmüller, above n 6, at 884.
[44] Codetermination Act, s 3(1); and Mathias Habersack “Corporate Codetermination German-Style as a Model for the UK?” (18 July 2016) University of Oxford <www.ox.ac.uk>.
[45] Codetermination Act, s 3(1).
[46] Section 23.
[47] Joel Rogers and Wolfgang Streeck “The Study of Works Councils: Concepts and Problems” in Joel Rogers and Wolfgang Streeck (eds) Works Councils: Consultation, Representation, and Co-operation in Industrial Relations (2nd ed, University of Chicago Press, Chicago, 2009) 3 at 6.
[48] At 55.
[49] Frege, above n 17, at 221.
[50] See generally Rogers and Streeck, above n 47, for further discussion of works councils and their relation to unions.
[51] See the OECD/AIAS database on Institutional Characteristics of Trade Unions, Wage Setting, State Intervention and Social Pacts, version 1.1 (September 2023): OECD “OECD/AIAS ICTWSS database” <www.oecd.org>. This database was originally developed by Professor Jelle Visser at the University of Amsterdam’s Advanced Labour Studies-Hugo Sinzheimer Institute (AIAS-HSI), but is now produced jointly by the OECD and AIAS-HSI.
[52] WorldData “Biggest Economies in 2021 By Gross Domestic Product” <www.worlddata.info>; and Statista “Gross Domestic Product at Current Market Prices of Selected European Countries in 2021” (27 July 2022) <www.statista.com>.
[53] Saidac, Friberg and Talayhan, above n 32, at 304.
[54] Jeff Wheeler “Employee Involvement in Action: Reviewing Swedish Codetermination” (2002) 26 Labor Stud J 71 at 75.
[55] At 76.
[56] Klas Levinson “Codetermination in Sweden: Myth and Reality” (2000) 21 Econ Ind Democr 457 at 457.
[57] Board Representation (Private Sector Employees) Act 1987 (Sweden), s 4.
[58] Levinson, above n 56, at 459.
[59] Gregory Jackson “Employee Representation in the Board Compared: A Fuzzy Sets Analysis of Corporate Governance, Unionism and Political Institutions” (2005) 12 Ger J Ind Relat 252 at 256.
[60] Board Representation (Private Sector Employees) Act, s 8.
[61] Section 8. The appointing party, which will often be the relevant union, fixes the length of an employee representative’s term. However, this term cannot exceed four financial years: see s 10 of the Act.
[62] Wheeler, above n 54, at 72.
[63] The social partnership model places emphasis on partner dialogue and collective bargaining, rather than regulation. The social partners themselves include the Swedish Trade Union Confederation, the Confederation of Swedish Enterprise, and the Swedish Confederation of Professional Associations: see The Swedish Trade Union Confederation The Swedish Model – The Importance of Collective Agreements in Sweden (2011) at 3; Dominique Anxo “Shaping the future of work in Sweden: The crucial role of social partnership” in Daniel Vaughan-Whitehead (ed) Reducing Inequalities in Europe (online ed, Edward Elgar Publishing, Cheltenham, 2018) 519 at 519–520; and Wheeler, above n 54, at 72.
[64] Anders Kjellberg “The Swedish Model in an Uncertain Time: Trade Unions, Employers and Collective Agreements in a Changing Labour Market” (7 June 2020) Lund University <www.portal.research.lu.se>.
[67] Instead of relying on works councils, centralised union organisations and codetermination arrangements work to ensure compliance with collective agreements: see Göran Brulin “Sweden: Joint Councils under Strong Unionism” in Joel Rogers and Wolfgang Streeck (eds) Works Councils: Consultation, Representation, and Cooperation in Industrial Relations (2nd ed, University of Chicago Press, Chicago, 2009) 189 at 189–190.
[68] At 189.
[69] Audi MediaCenter “Audi Supervisory Board: Changes to members representing employees” (14 January 2022) <www.audi-mediacenter.com>.
[70] Audi MediaCenter, above n 69.
[71] Audi MediaCenter, above n 69.
[72] Audi MediaCenter, above n 69.
[73] Mercedes-Benz Group “The Supervisory Board” <www.group.mercedes-benz.com>.
[74] Mercedes-Benz Group “Ergun Lümali” <www.group.mercedes-benz.com>.
[75] Thomas “Top Global and USA Bearings Suppliers” <www.thomasnet.com>.
[76] SKF “SKF Board of Directors” <www.investors.skf.com>.
[79] Ericsson “Board members” <www.ericsson.com>.
[81] See Ericsson, above n 79; SKF, above n 76; Audi MediaCenter, above n 69; and Mercedes-Benz Group, above n 73.
[82] Fauver and Fuerst, above n 36, at 678–679.
[83] This surge in publication on codetermination, at least in the United States, can largely be attributed to the proposals released by Senators Elizabeth Warren and Bernie Sanders in 2018 that included codetermination requirements.
[84] Hayden and Bodie, above n 7, at 351.
[85] These studies have been criticised on various bases, including sample size, data frequency and lack of controls: see Hayden and Bodie, above n 7, at 351, n 180.
[86] See Jan Svejnar “Relative Wage Effects of Unions, Dictatorship and Codetermination: Econometric Evidence from Germany” (1981) 63 Rev Econ & Stat 188 at 195.
[87] Kornelius Kraft, Jörg Stank and Ralf Dewenter “Co-determination and innovation” (2011) 35 Camb J Econ 145 at 167.
[88] Henry Hansmann “When Does Worker Ownership Work? ESOPs, Law Firms, Codetermination, and Economic Democracy” (1990) 99 Yale LJ 1749 at 1803.
[89] At 1803.
[90] At 1766.
[91] Stephen M Bainbridge “Privately Ordered Participatory Management: An Organisational Failures Analysis” (1998) 23 Del J Corp L 979 at 1054–1055; and Jensen and Meckling, above n 10, at 473.
[92] Hayden and Bodie, above n 7, at 344; and Simon Renaud “Dynamic Efficiency of Supervisory Board Codetermination in Germany” (2007) 21 Labour 689 at 691.
[93] Hayden and Bodie, above n 7, at 344.
[94] At 344–345; and Renaud, above n 92, at 691–692.
[95] McGaughey, above n 28, at 1.
[96] At 2.
[97] Hayden and Bodie, above n 7, at 344.
[98] Jensen and Meckling, above n 10, at 504.
[99] At 504.
[100] ResearchFDI “The Top 20 Largest Economies in the World by GDP” (8 February 2021) <www.researchfdi.com>.
[101] The EU-15 refers to the European Union’s 15 member states as of December 2003, before enlargement of the Union. IMD “World Competitiveness Ranking 2022” <www.imd.org>; McKinsey & Company Growth and renewal in the Swedish economy: Development, current situation and priorities for the future (McKinsey Global Institute, May 2012) at 9; and Swedish Institute “The Swedish economy” <www.sweden.se>.
[102] See Stephen C Smith “On the economic rationale for codetermination law” (1991) 16 J Econ Behav Organ 261 at 261.
[103] At 263–273.
[104] At 267.
[105] At 277.
[106] Furubotn, above n 13, at 170–174; and Smith, above n 102, at 276–277.
[107] Dammann and Eidenmüller, above n 15, at 986.
[108] Smith, above n 102, at 279.
[109] Dammann and Eidenmüller, above n 6, at 932–934.
[110] Hayden and Bodie, above n 7, at 348.
[111] Kraft, Stank and Dewenter, above n 87, at 167; Fauver and Fuerst, above n 36, at 677; and Jörg Heining, Simon Jäger and Benjamin Schoefer “Labor in the boardroom” (2021) 136 Q J Econ 669.
[112] Fauver and Fuerst, above n 36, at 674 and 677.
[113] At 703.
[114] At 703.
[115] At 703.
[116] Heining, Jäger and Schoefer, above n 111, at 672.
[117] Jäger, Noy and Schoefer, above n 4, at 868.
[118] At 868.
[119] Matthew Bodie and Grant Hayden “Codetermination: The Missing Alternative in Corporate Governance” (13 January 2022) Law and Political Economy Project <lpeproject.org>.
[120] Bodie and Hayden, above n 119; and Hayden and Bodie, above n 7, at 356.
[121] Chen Lin, Thomas Schmid and Yuhai Xuan “Employee representation and financial leverage” (2018) 127 JFE 303 at 321.
[122] Robert Scholz and Sigurt Vitols “Board-level codetermination: A driving force for corporate social responsibility in German companies?” (2019) 25 Eur J Ind Relat 233 at 243–244.
[123] Jäger, Noy and Schoefer, above n 4, at 6.
[124] Hayden and Bodie, above n 7, at 354.
[125] See Hayden and Bodie, above n 7, at 353; Michael C Burda and Jennifer Hunt “What Explains the German Labor Market Miracle in the Great Recession?” (2011) BPEA 273 at 273–275; and Ulf Rinne and Klaus F Zimmermann “Another economic miracle? The German labor market and the Great Recession” (2012) 1 IZA J Labor Policy 1 at 1.
[126] Hayden and Bodie, above n 7, at 353.
[127] See International Monetary Fund “Kurzarbeit: Germany’s Short-Time Work Benefit” (15 June 2020) <www.imf.org>; and Joseph Nasr “Half of German firms using shortened working hours due to coronavirus: Ifo” (23 April 2020) Reuters <www.reuters.com>.
[128] International Monetary Fund, above n 127.
[129] Stuttgarter Zeitung “Daimler extends Short-Time Work Until the End of April” (8 April 2020) <www.stuttgarter-zeitung.de> as cited in Dammann and Eidenmüller, above n 15, at 1003, n 280.
[130] In May 2020, Tesla employees were given permission to work from home. However, some received termination notices alleging a “failure to return to work”. Additionally, later that year it was alleged that workers were forced to return to work during quarantine, leading to protests from employees. See Faiz Siddiqui “Tesla gave workers permission to stay home rather than risk getting covid-19. Then it sent termination notices” The Washington Post (online ed, 25 June 2020) as cited in Dammann and Eidenmüller, above n 15, at 1003, n 279; and Rupert Neate “Tesla shareholders urged to oust Elon Musk over $55bn pay deal” The Guardian (online ed, 30 June 2020) as cited in Dammann and Eidenmüller, above n 15, at 1003, n 278.
[131] Siddiqui, above n 130; and Dammann and Eidenmüller, above n 15, at 1003.
[132] Hayden and Bodie, above n 7, at 346. See generally Carola Frege and John Godard “Varieties of Capitalism and Job Quality: The Attainment of Civic Principles at Work in the United States and Germany” (2014) 79 ASR 942; and Elizabeth Anderson Private Government: How Employers Rule Our Lives (and Why We Don’t Talk About It) (Princeton University Press, Princeton (NJ), 2017).
[133] Fauver and Fuerst, above n 36, at 677.
[134] Levinson, above n 56, at 463.
[135] At 460. In a 1998 study, 60 per cent of Swedish directors responded positively to the question: “What are your experiences of employee board representation and its advantages and disadvantages for the company?”
[136] Naturally, extensive information on the actual dynamics of such meetings is unavailable for commercial confidentiality reasons.
[137] Levinson, above n 56, at 464–466.
[138] Jäger, Noy and Schoefer, above n 4, at 5.
[139] At 8.
[140] Smith has stated that codetermination “provides employees with a regular grievance channel to either higher level managers or to owners”: see Smith, above n 102, at 266.
[141] See for example Seletha R Butler “All on Board! Strategies for Constructing Diverse Boards of Directors” (2012) 7 Va L & Bus Rev 61 at 76; and see generally Mijntje Lückerath-Rovers “Women on boards and firm performance” (2013) 17 J Manag Gov 491.
[142] Dammann and Eidenmüller, above n 6, at 910.
[143] Levinson, above n 56, at 462.
[144] See generally Milton Friedman Capitalism and Freedom (40th ed, University of Chicago Press, Chicago, 2002); and Jensen and Meckling, above n 10.
[145] See Michael C Jensen and William H Meckling “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure” (1976) 3 JFE 305; and Stephen M Bainbridge “Director Versus Shareholder Primacy: New Zealand and USA Compared” [2014] NZ L Rev 551 at 552.
[146] Bainbridge, above n 145, at 552.
[147] Hayden and Bodie, above n 7, at 322.
[148] Bainbridge, above n 145, at 552.
[149] At 553.
[150] Business Roundtable Statement on Corporate Governance (September 1997) at 3. See Lynn Stout “New Thinking on ‘Shareholder Primacy’” (2012) 2 Account Econ Law 1 at 2–3 for a summary of the rise of shareholder primacy.
[151] See Business Roundtable, above n 8.
[152] Silvia Ayuso and others “Maximising Stakeholders’ Interests: An Empirical Analysis of the Stakeholder Approach to Corporate Governance” (2014) 53 Bus Soc 414 at 414; Jean Tirole “Corporate Governance” (2001) 69 Econometrica 1 at 24; and Stephen M Bainbridge “Director Primacy: The Means and Ends of Corporate Governance” (2003) 97 NW U L Rev 547 at 549.
[153] See Lucian A Bebchuk and Roberto Tallarita “The Illusory Promise of Stakeholder Governance” (2020) 106 Cornell L Rev 91 at 121; and Matteo Gatti and Chrystin Ondersma “Can A Broader Corporate Purpose Redress Inequality? The Stakeholder Approach Chimera” (2020) 46 J Corp L 1 at 68.
[154] Section 172 of the Companies Act 2006 (UK) is, for all intents and purposes, the equivalent of s 131 of New Zealand’s Companies Act 1993.
[155] See Companies Act (UK), s 172(1)(b)–(f).
[156] Companies Act (NZ), s 131(5) (emphasis added).
[157] See for example Charlotte Villiers “Narrative reporting and enlightened shareholder value under the Companies Act 2006” in John Loughrey (ed) Directors’ Duties and Shareholder Litigation in the Wake of the Financial Crisis (Edward Elgar Publishing, Cheltenham, 2012) 97 at 102–108; Richard Williams “Enlightened Shareholder Value in UK Company Law” [2012] UNSWLawJl 15; (2012) 35 UNSWLJ 360 at 376; and Andrew Keay “Tackling the Issue of the Corporate Objective: An Analysis of the United Kingdom’s ‘Enlightened Shareholder Value Approach’” [2007] SydLawRw 23; (2007) 29 Syd LR 577 at 611.
[158] Andrew Keay and Taskin Iqbal “The impact of enlightened shareholder value” (2019) 4 JBL 304 at 327.
[159] Consistency statutes adopted by over 30 US states give directors the ability to consider stakeholder interests when making decisions. Bebchuk, Kastiel and Tallarita found that directors often gave little weight to stakeholder interests: see Lucian A Bebchuk, Kobi Kastiel and Roberto Tallarita “For Whom the Corporate Leaders Bargain” (2021) 94 S Cal L Rev 1467 at 1536 for an overview of the authors’ findings.
[160] Bebchuk and Tallarita, above n 153, at 122–123. Bebchuk and Tallarita’s empirical study of past choices made by directors under stakeholderism rules show that directors will not tend to exercise their discretion in favour of stakeholders. See Bebchuk and Tallarita, above n 153, at 156 for the authors’ discussion of their findings.
[161] Such incentives include executive compensation and career prospects, both of which are enhanced through adherence to shareholder-value maximisation strategies: see Bebchuk and Tallarita, above n 153, at 148–155; and Stephen N Kaplan and Bernadette A Minton “How Has CEO Turnover Changed?” (2012) 12 Int Rev Fin 57 at 58.
[162] Gatti and Ondersma, above n 153, at 73.
[163] At 73.
[164] At 73; and Bebchuk and Tallarita, above n 153, at 171. Specifically, Bebchuk and Tallarita contend that relying on shareholder-appointed corporate leaders alone could divert attention away from more effective reforms that “preclude or discourage” the imposition of negative externalities on stakeholders: see Bebchuk and Tallarita, above n 153, at 171–172.
[165] Gatti and Ondersma, above n 153, at 70. While Gotti and Ondersma do not explicitly endorse or reject codetermination as a means to uplift such constituencies, they do note that codetermination could hold the most promise for employees: see Gatti and Ondersma, above n 153, at 71.
[166] See Dammann and Eidenmüller, above n 15, at 994–995 where the authors discuss how such disincentives arise in the context of lobbying-related decisions.
[167] Levinson, above n 56, at 460.
[167] See Elizabeth Warren “Accountable Capitalism Act” <www.warren.senate.gov>; and Bernie Sanders “Corporate Accountability and Democracy” <www.berniesanders.com>.
[168] See Accountable Capitalism Act 2018, S 3348, 115th Cong § 2(2)(A) and 6(b)(1).
[170] Dammann and Eidenmüller, above n 6, at 886.
[173] See Interview with Jeffrey Miron, Harvard Professor (Jim Cramer, Mad Money, CNBC, 16 August 2018); and Interview with BET founder Bob Johnsen and former Medtronic CEO Bill George (Jim Cramer, Mad Money, CNBC, 16 August 2018).
[174] See for example Robert Hockett “Bernie Sanders on Corporate Democracy” (14 October 2019) Forbes <www.forbes.com>.
[175] See Oxford University Act 1854 (UK) 17 & 18 Vict c 81, s 6; and Cambridge University Act 1856 (UK) 19 & 20 Vict c 88, ss 6 and 12.
[176] Port of London Act 1908 (UK) 8 Edw 7 c 68, s 1(7).
[177] See Commission of the European Communities Employee participation and company structure in the European Community (Supplement 8/75, 12 November 1975).
[178] Adrian Williamson “The Bullock Report on Industrial Democracy and the Post-War Consensus” (2016) 30 Contemp Br Hist 119 at 120.
[179] Committee of Inquiry into Industrial Democracy Report of the Committee of Inquiry on Industrial Democracy (Cmd 6706, January 1977) at [9]–[12].
[180] At [9].
[181] See generally Williamson, above n 179, at 127 and 135–136 for an overview of the Conservative backlash to Bullock.
[183] “Theresa May vows to put Conservatives ‘at service’ of working people” (11 July 2016) BBC <www.bbc.com>.
[184] PM Vasudev “Corporate Stakeholders in New Zealand – The Present, and Possibilities for the Future” (2012) 18 NZBLQ 167 at 184.
[185] Robert Dickerson, John Howard and Leon Getz Proposals for a New Business Corporations Law for Canada (Information Canada, Ottawa, 1971) at 9.
[186] “Conservative Leader Erin O’Toole to ensure Canadian workers have their voices heard” (23 August 2021) Conservative <www.conservative.ca>.
[187] “Canada election 2021: Full results” The Guardian (online ed, 21 September 2021).
[188] Australian Council of Trade Unions “Worker Representation on Boards (Our Economic Future)” (Motion at National Congress, 18 July 2018) at 2.
[189] Australian Labor Party “Our Plan” (2018) <www.alp.org.au>.
[190] Here, this article refers to recent crises such as the COVID-19 pandemic, climate change-related weather events and the war in Ukraine.
[191] The High-Performance High-Engagement model is not explicitly associated with the stakeholder movement and has primarily been deployed in the New Zealand context only. The model has also been embraced by the Ministry of Health: see Ministry of Health “High Performance High Engagement” <www.health.govt.nz>.
[192] See “High performance depends on high engagement” The New Zealand Herald (online ed, Auckland, 6 April 2011); Fiona Rotherham “Air NZ and unions collaborate on high performance engagement” The National Business Review (online ed, 23 July 2015); and KiwiRail Building a Sustainable Future (Statement of Corporate Intent 2022–2024) at 19. See also Employment Relations Centre “What is High Performance through Engagement?” <www.employmentrelations.co.nz>.
[193] Annie Newman and Irina Freilekhman “A case for regulated industrial democracy post-Covid-19” (2020) 45(2) NZJER 70 at 71.
[194] Air New Zealand Air New Zealand High Performance Engagement Charter (2015) as cited in Newman and Freilekhman, above n 194, at 71.
[195] Newman and Freilekhman, above n 194, at 71.
[196] At 71.
[197] At 72.
[198] Hayden and Bodie, above n 7, at 344; and Renaud, above n 92, at 691.
[199] Josh Child “Organizational participation in post-covid society – its contributions and enabling conditions” (2021) 35 Int Rev Appl Econ 117 at 134; and Newman and Freilekhman, above n 194, at 75.
[200] Erling Rasmussen Employment Relationships: Workers, Unions and Employers in New Zealand (Auckland University Press, Auckland, 2010) at 4.
[201] At 4; and Andy Charlwood and Peter Haynes “Union Membership Decline in New Zealand, 1990–2002” (2008) 50 J Ind Relat 87 at 90–92.
[202] See Stephen Blumenfeld and Noelle Donnelly “Collective Bargaining Across Four Decades: Lessons from CLEW’s Collective Agreement Database” in Gordon Anderson (ed) Transforming Workplace Relations in New Zealand 1976–2016 (Victoria University Press, Wellington, 2018) 107.
[203] Charlwood and Haynes, above n 202, at 92.
[204] Blumenfeld and Donnelly, above n 203, at 201.
[205] At 202.
[206] At 202.
[207] International Labour Organisation Collective bargaining in Germany and Ukraine: Lessons learned and recommendations for Ukraine (2021) at 16.
[208] For example, New Zealand has higher union coverage rates than France, Switzerland, and Spain: see OECD Statistics “Trade Union Dataset” <www.stats.oced.org>.
[209] OECD Statistics, above n 209.
[210] PricewaterhouseCoopers Fair Pay Agreements: What will they mean for New Zealand businesses? (August 2021) at 5.
[211] OECD Statistics, above n 209.
[212] Despite having high collective bargaining coverage rates, union membership is comparably low in Germany due to its voluntary nature and the greater emphasis placed on works councils: see Rogers and Streeck, above n 47, at 55; and Bernd Fitzenberger, Karsten Kohn and Qingwei Wang The Erosion of Union Membership in Germany: Determinants, Densities, Decompositions (IZA Discussion Paper No 2193, July 2006).
[213] Centre for Labour, Employment and Work “Union Membership in New Zealand shows further growth” Victoria University of Wellington <www.wgtn.ac.nz>.
[214] Sue Ryall and Stephen Blumenfeld Unions and Union Membership in New Zealand – report on 2017 Survey (Centre for Labour, Employment and Work, Victoria University of Wellington, 2017) at 8.
[215] PricewaterhouseCoopers, above n 211, at 2.
[216] At 3; and Fair Pay Agreements Act 2022, s 3.
[217] See New Zealand Parliament “Bill to enable Fair Pay Agreements” (4 May 2022) <www.parliament.nz>; and Fair Pay Agreement Working Group 2018 Fair Pay Agreements: Supporting workers and firms to drive productivity growth and share the benefits (December 2018).
[218] It is noted that should the National Party win the 2023 general election, the survival of the Fair Pay Agreement regime could be jeopardised: see Anneke Smith “Fair Pay Agreements Bill Flies Through First Reading” (5 April 2022) RNZ <www.rnz.co.nz> where Paul Goldsmith, National’s workplace relations spokesperson, stated that the party would repeal the legislation. However, since neither the 2023 election results, nor whether National would follow through with repealing the legislation, can be reliably predicted at the time of writing, this article will assume that the regime will persist.
[219] Jäger, Noy and Schoefer, above n 4, at 5.
[220] OECD Statistics, above n 209.
[221] OECD Statistics, above n 209.
[222] See Rogers and Streeck, above n 47, at 55. See Worker Participation EU, above n 31, at “France” and “Hungary” for an overview of the nature of works councils in France and Hungary.
[223] Jäger, Noy and Schoefer, above n 4, at 21.
[224] Centre for Labour, Employment and Work, above n 214, at 6.
[225] New Zealand Companies Office “Union membership return report 2021” <www.companiesoffice.govt.nz>.
[226] Centre for Labour, Employment and Work, above n 214, at 6. Prominent unions in these sectors include E Tū (encompassing manufacturing, food, aviation, infrastructure workers, among others), the New Zealand Air Line Pilots’ Association and FIRST Union (logistics and warehousing). See generally NZCTU “Find Your Union” <www.union.org.nz> which contains an interactive tool that matches work areas to relevant New Zealand unions.
[227] See Ryall and Blumenfeld, above n 215, at 6 for data on union membership across industry sectors.
[228] Hansmann, above n 88, at 1766.
[229] Dammann and Eidenmüller, above n 6, at 902.
[230] New Zealand unions have prioritised seeking Fair Pay Agreements for cleaners, security guards and supermarket workers: see Henry Cooke “Cleaners, security and supermarkets priority for unions for sector-wide Fair Pay Agreements” (25 June 2019) Stuff <www.stuff.co.nz>.
[231] See country-specific worker participation information at Workplace Participation EU “National Industrial Relations” <www.worker-participation.eu>.
[232] Industrial relations systems are by no means uniform across European states. For example, France, a country with mandatory codetermination requirements for certain companies, had union density rates of only 8.8 per cent in 2018: see Udo Rehfeldt Board-Level Representation in France: Recent Developments and Debates (Institute for Codetermination and Corporate Governance, Mitbestimmungs report no 53, 2019) at 3. Hungary and the Czech Republic also have low coverage rates: see OECD Statistics, above n 209.
[233] See Fauver and Fuerst, above n 36, at 703; and Hansmann, above n 88, at 1803.
[234] Employment Relations Act 2000, ss 83–84.
[235] See John E Martin “Labor History in New Zealand” (1996) 49 ILWCH 166 for an overview of New Zealand industrial relations including instances of strike action; and John M Howells “Causes and Frequency of Strikes in New Zealand” (1972) 25 ILR Rev 524 for a synopsis of strike action in New Zealand from 1952–1970.
[236] See data on work stoppages at Ministry of Business, Innovation and Employment “Work stoppages” <www.employment.govt.nz>.
[237] The term “work stoppages” encompasses both strikes and lockouts.
[238] It is noted that the data for these years encompasses partial strikes where, for example, employees perform their role but refuse to wear their uniform or only carry out select duties: see Ministry of Business, Innovation and Employment, above n 237.
[239] Business New Zealand “Businesses threatened with or affected by strikes since 2017 Election” <www.businessnz.org.nz>.
[240] Michael Hayward and Oliver Lewis “Wendy’s workers strike after negotiations break down” (26 May 2018) Stuff <www.stuff.co.nz>; Susan Edmunds “Event cinemas pay-cut threat ‘legal’” (28 May 2018) Stuff <www.stuff.co.nz>; and Jessica Tyson “Farmers retail workers strike” (5 July 2018) Te Ao Māori News <www.teaomaori.news>.
[241] Rebecca Macfie “Big wage rises: ‘It’s our turn now’” (4 August 2022) Newsroom <www.newsroom.co.nz>.
[242] Scoop Business “FIRST Union, Fuel Tanker Truck Drivers at SouthFuels Limited Have Issued a Strike Notice” (30 August 2022) Scoop <www.scoop.co.nz>.
[243] Leith Huffadine “New Zealand has a long history of going on strike. Now, it’s a complex issue” (30 May 2018) Stuff <www.stuff.co.nz>.
[244] See for example William Hewitt “Concerns cost of living crisis could lead to malnutrition and health issues” (25 May 2023) Newshub <www.newshub.co.nz>; and Anan Zaki “New Zealand in recession as GDP falls for a second quarter” (15 June 2023) RNZ <www.rnz.co.nz>.
[245] Furubotn, above n 13, at 170–174; and Smith, above n 102, at 276–277.
[246] Furubotn, above n 13, at 170–174; and Smith, above n 102, at 276–277.
[247] Dammann and Eidenmüller, above n 15, at 32.
[248] See Employment Relations Act, s 103A(2)–(4).
[249] See for example Gabriela Ksinan Jiskrova “Impact of COVID-19 pandemic on the workforce: From psychological distress to the Great Resignation” (2022) 76 JECH 525 at 525.
[250] US Bureau of Labor Statistics “Job Openings and Labor Turnover Survey” <www.bls.gov>.
[251] ELMO Employee Sentiment Index – New Zealand (February 2022) at 2.
[252] See Susan Edmunds “‘Brain drain is underway’: Workforce shrinks as young people leave” (16 May 2022) Stuff <www.stuff.co.nz>; and Jean Bell “Stemming the brain drain” (25 July 2022) RNZ <www.rnz.co.nz>.
[253] Statistics New Zealand “International migration: January 2023” (14 March 2023) StatsNZ <www.stats.govt.nz>.
[254] For example, in 2021 Prime Minister Jacinda Ardern described overseas experiences as a “rite of passage”: see Dan Lake “What the Free Trade Agreement means for travel between New Zealand and the United Kingdom” (21 October 2021) Newshub <www.newshub.co.nz>.
[255] Ireland Hendry-Tennent “Explainer: Are the impacts of brain drain being overhyped and how worried should the average Kiwi be” (15 August 2022) Newshub <www.newshub.co.nz>.
[256] Jäger, Noy and Schoefer, above n 4, at 8.
[257] Many studies indicate that there is a positive relationship between worker satisfaction and employee retention: see for example Bidisha Lahkar Das and Mukulesh Baruah “Employee Retention: A Review of Literature” (2013) 14(2) IOSR-JBM 8 at 13; and Ricardo Biason “The Effect of Job Satisfaction on Employee Retention” (2020) 8 IJECM 405 at 413.
[258] Fauver and Fuerst, above n 36, at 703.
[259] See for example the boards of Fonterra (Fonterra “Board of Directors” <www.fonterra.com>); Spark New Zealand (Spark “Board of Directors” <www.sparknz.co.nz>); and Mercury NZ Limited (Mercury “Our Board of Directors” <www.mercury.co.nz>).
[260] Codetermination Act, s 23.
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