The European Company (SE)

Original expectations and deficiencies of implementation, some political remedies and the lasting political stalemate

Berndt Keller, University of Konstanz
Sophie Rosenbohm, Institute for Work, Skills and Training, University of Duisburg-Essen

The paper deals with the widely neglected failures of the implementation of the European Company Statute (SE Regulation and SE Directive) and their far-reaching consequences. It intends to shed light on new forms and concepts of employment relations at European level. With its provisions on employee involvement, the European Company Statute was supposed to set new grounds for the development of European industrial relations and, thus, to constitute an integrated part of ‘social Europe’

Initially, it was planned to establish a unitary system of employee participation by means of binding legislation at EU level. These ambitious plans of ‘upward harmonization’ had to be changed towards expanding degrees of flexibility and the primacy of negotiated agreements at individual company level. The protection of national systems with established rights was, however, a core issue in the contested debate over the SE Directive. Facilitating deviations from well-established standards has been by no means an intended consequence.

In contrast to existing studies, originally unexpected outcomes and/or definitely non-intended consequences have occurred but so far received hardly any attention. Therefore, our special emphasis is on these rather extraordinary long-term developments. Based on most recent empirical data on SEs and a critical review of research results, we will discuss major unexpected results of transposition and implementation and their evident problems. Moreover, we will analyse why no political measures have been taken and discuss options for amendments and improvements.

Our research demonstrates that there are serious deficiencies at different levels, the SE Directive itself, transposition laws at national level as well as implementation procedures at company level. The original substance of the SE Directive that already represents the smallest common political denominator is watered down by unanticipated strategies that lead to non-intended outcomes. The preemptive escape from participation, that occurred in some companies, was definitely not intended by the SE Directive. A similar problem concerns the activation of non-operational shelf SEs. The SE Directive contains provisions only for the date of establishment but no unambiguous requirements for later developments although they may have negative repercussions. Thus, the current version of the ‘before and after’ principle, which was originally introduced to safeguard existing employee participation rights, can also have the opposite consequence.

If the existing deficiencies are not removed they have long lasting consequences, exert substantial impact at lower levels and put the initial objectives at risk. This poses a major threat for building a ‘social Europe’ with the capacity to provide sufficient information, consultation and participation rights for employees.

As discussed in the paper, the aim should be to close existing legal loopholes, avoid obvious inconsistencies and guarantee that the goals that are indicated in the SE Directive are to be actually reached. One major gap of the SE Directive is the fact that it does not provide specific rules for the possibility that higher numbers of employees are reached after the formation of the SE or for the activation of a shelf SE. Therefore, the Directive needs to be amended and adopted in some focal regards. It needs more dynamic concepts instead of the existing static ones. Our proposals for re-regulation intend to remedy existing deficiencies. We elaborate on the most urgent groups: Structural changes and their consequences as well as the activation of non-operational shelf SEs.

The solution is indeed that this principle should be extended by its explicit introduction into the Directive. Such provisions could also be negotiated at individual company level or prescribed in national transposition laws. However, these latter options occur only rarely and do not constitute functional equivalents of rules in the Directive that are generally valid. More recently no political initiative has been taken to amend the SE Directive and Regulation. The resulting problem is that the longer necessary amendments are not initiated the more originally unintended effects occur and not intended opportunities of pattern setting and pattern following are not only established but continued and even strengthened. Thus, for the time being, the only realistic alternative consists in adjustments at national level, i.e. in substantial amendments of national transposition laws.