UK holds out against model for Euro-firm

Date: 29/05/1997

By Simon Coss

HOPES that almost 30 years of deadlock could be broken by the latest bid to get agreement on a formula for creating pan-European firms have suffered a set-back.

The UK's new Labour government has all but declared that it will not agree to the principle of allowing workers to take part in management decisions.

The initial response from industry to the plan has also been decidedly lukewarm.

Reacting to a report published two weeks ago by a group of experts headed by former European Commission Vice-President Etienne Davignon, Lord David Simon, the British minister for trade and competitiveness in Europe, said London would study the document “with care but realism”.

But he warned that it would be “difficult” for companies “which are not familiar with co-determination” to accept the minimum fall-back position suggested in the report.

He was referring to the proposal that members of the workforce should be allowed 20&percent; of the seats on the board of any pan-European company if efforts to negotiate a satisfactory agreement on employee involvement in management decisions proved unsuccessful after three months.

Davignon's report is the latest in a long line of attempts, dating back to 1970, to create a 'one-stop shop' for companies setting up as pan-European enterprises.

Businesses currently wanting to operate across the EU have to establish national subsidiaries in each of the 15 member states, hugely increasing their administrative and running costs.

Progress on drawing up a European Company Statute has long been blocked by apparently irreconcilable differences between member states over worker involvement.

The Germans already have extensive legislation guaranteeing employees the right to sit on company boards and have fiercely resisted any attempts to water this down at European level, while London has always opposed compulsory worker involvement.

It had been thought that the new UK administration would be more amenable to the principle, given the emphasis the Labour Party placed on social and employment issues during the recent election campaign, and Prime Minister Tony Blair's announcement immediately after taking office that London would sign up to the Maastricht Treaty social chapter.

But as the initial euphoria over Labour's triumph subsides, other EU ministers are starting to notice a certain continuity in London's stance.

“We will find it difficult to accept the model Davignon has come up with.

The basic position has not changed since before the election,” said one UK official this week.

This British reluctance is echoed by employers, who are less than keen on the idea of having to cede a fifth of the seats on the company board to workers' representatives.

“I find it a highly unattractive proposition. We do need something to help make Europe more competitive, but I do not think following the German model is the way forward. This formula is too prescriptive,” said one industrialist.

“Giving one or other side the whip hand seems to negate the negotiating process. Under this scheme, it seems that workers can just say 'no' for three months and then be assured 20&percent; representation,” said another expert.

Setting up as a European company has only ever been foreseen as one option for businesses but, as one expert put it: “There is not much point devising an optional system no one wants to opt in to.”