STRENGTHENING THE POSITION OF MEMBERS OF A SUPERVISORY BOARD ELECTED BY EMPLOYEES – CO-DETERMINATION IN THE LIGHT OF LEGAL AND EXTRA-LEGAL REALITY

Abstract

One of the most frequently discussed issues of corporate governance is co-determination – mandatory employee representation on supervisory boards. The voices of employees are often strengthened through further legislation. Companies may thus be required to record all dissenting opinions of employee representatives and communicate them at general meetings. However well-intentioned, it is debateable whether such involvement really strengthens the voice and involvement of employees. On joining the board, an employee representative may find themselves receiving a remuneration far in excess of their regular salary. There is a perverse – but human – incentive in some cases that they want to hold onto this new role as long as possible. To do so they ensure that their views and votes do not deviate from those of the majority. The value of such ‘constructive’ approach is then frequently emphasised by management, increasing the chances of the representative’s re-election. However, the described rules initially designed to protect dissenting opinions conflict with this reality. Recording opinions and further communicating them can have a dampening effect. Rather than feeling safe to express strong opinions, there is the potential to tone-down comment, resulting in a passive, non-committal approach. As well as suppressing personal opinions, it ultimately reduces the motivation to defend employee interests. So how to act? It seems more appropriate to record a dissenting opinion only if the representative deems it appropriate; for example, to be able to demonstrate in the future that they acted in the best interest of the company, regardless of how this is perceived by different jurisdictions.