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Finland is one of the few European countries which already have experience of both of the possible structures for an SE: one-tier and two-tier.
Historically Finland has had until very recently a highly centralised and corporatist industrial relations system with a strong state in alliance with powerful trade union federations and employer associations to administer the political economy. But until recently there was also a contrary tradition of industrial conflict between employers and employees. Somehow Finland was able to reconcile a corporatist with an adversarial system.
As a result, worker participation at company board level was slow to gain support. Indeed, the very concept of industrial democracy was not well developed in Finland until 1979, mainly because the country’s trade unions and employer associations were unenthusiastic about such a development.
It was only in that year that a law was passed that provided for the creation of co-determination structures in commercial undertakings. This measure formalised the rights of employees to information, negotiation and co-determination at board level in private enterprises employing more than 30 workers. Under the law there must be a maximum of between one and four employee representatives but they should constitute no more than a quarter of the company board members. The workers themselves are entitled to elect their own representatives directly but they can also be elected through recognised trade union structures.
But the 1979 legislation was not concerned with giving employees a direct influence in the decision-making of companies at board level. Its main intention was to encourage greater co-operation between management and employees outside the board decision-making process and to improve the working environment by collective agreement at enterprise level.
It was not until 1990, however, a specific law was passed in Finland that provided for the direct election of worker representatives to the boards of private companies which employ more than 150 workers. This law is implemented through an agreement between the company and its workforce. Under this agreement, both sides must together on which board in the company the workers should be represented. And the number of worker directors. Basically, employees may sit on a variety of boards: the supervisory board, the board of directors or the management group. Such a binding agreement may of course be concluded – on a voluntary basis – in companies with a workforce of less than 150. The personnel groups supporting the agreement must represent at least the majority of the employees.
If no agreement can be reached, two personnel groups representing at least 50 per cent of the employees, may demand the application of statutory minimum requirements. The law gives the employees the right to send representatives to one or more administrative boards. But in this case, the employer and not the workers can decide on what executive body the employee representatives can sit. Under the legislation there is a maximum of four employee representatives on the board of the company depending on its size.
The employee representatives are nominated by the personnel groups. If these do not agree on common representatives, election must take place. The candidates in these elections are nominated by the personnel groups. Employee representatives must always come from the employees in the company involved and not from trade union officials and others who are not employed by the firm.
Employee representatives basically have the same rights and duties as the other members on the board involved. However, they are not entitled to participate in making the decisions on the election, dismissal or contract terms of the management, the personnel’s terms of employment, or industrial action. Furthermore, the agreement provides for a restriction on the voting rights of employee representatives.
Employee representatives are released from their regular work for the board meetings as well as for the necessary preparatory work. They are compensated for their relevant expenses and receive a fee for attending meetings outside their normal working hours.
A survey carried out in 2001 of employee representatives in Finland’s metal and electronic industry found that the majority were satisfied with the increased cooperation achieved between management and labour but argued that the practical work of representatives on the board of directors needed to be encouraged.
However, employee representation at company board level still remains underdeveloped in Finland. More than half of the firms in the country that employ between 150 and 200 workers have no employee representation in their structures at all. As many as a third of the larger enterprises lack such representation as well.
Although there may be no intensive public debate at present on the question of workers on company boards, the implementation of the European Company Statute promises to stimulate discussion in Finland. However, whether the issue gains a higher priority than it does at present on the country’s industrial relations agenda remains debatable.
source: Robert Taylor (2004) in ETUI and Hans Böckler Foundation, The European Company - Prospects for board-level representation
DOCUMENTS: - BRIEF OVERVIEW: Company law and existing legislative provision for employee participation in Finland (by A. Büggel).
(pdf)
 COUNTRY REPORT FINLAND: Workers' participation at board level
(by Jari Hellsten)
prepared within the project "Prospects for participation and co-determination under the European Company Statute" - more about this project
download country report (pdf, 141kb) download whole report (pdf, 1.3 MB)
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(3) Transposition process
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Update: September 2004
by Prof. Niklas Bruun, Hanken School of Economics and Business Administration
The Finnish Act on employee involvement in European Companies (SE) passed through Parliament and was approved by the President of Finland on 13 August. It came into force on 8 October 2004. During its passage through Parliament, no amendments were made to Government Proposal 107/2004. The number of the approved Act is 758/2004.
DOCUMENTS:
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report: 13.06.2004
In Finland the Government submitted its proposal to the parliament for an Act on Employees’ Involvement in European Companies on 4 June 2004 (Government proposal 107/2004). This proposal was prepared by a tripartite working group within the Finnish Ministry of Labour. Earlier this year a proposal was submitted for a number of changes in general company law (Government proposal 55/2004).
Implementation by Legislation
The point of departure for proposal 107/2004 is that a separate act on employees` involvement in European companies will be adopted in Finland. This is a detailed act with 40 sections implementing Directive 2001/86/EC. The government intends to have the legislation in place on 8 October 2004.
Legislative Background
The starting point for the implementation process was the current Finnish legislation on representation on company boards on the one hand and the legislation on information and consultation within companies (co-operation) on the other (725/1978).
Employee involvement in management is regulated by the Act on the Representation of Personnel in the Administration of Enterprises (Act 725/1990). The legislation came into effect on 1 January 1991 after negotiations between the social partners, who made their proposals to the government. The purpose of the law is to improve cooperation between employer and employees and to increase the influence of the latter. To this end, employees have the right to “participate in decision-making on important economic issues and working conditions in the company’s decision-making, executive, supervisory or consultative management bodies”. In Finland this act applies to companies with 150 employees or more.
Employee involvement in company decision-making can be established either voluntarily, by agreement, or, if agreement cannot be reached, according to the law. If employee involvement in company decision-making is to be established according to the law, employees’ representatives can be elected to the company’s management council, the board or the management group. They can also be elected to ”an analogous institution which covers all the company’s establishments”, according to section 5 of the Act.
If employee involvement in company decision-making cannot be established by agreement, representation shall include at least two employee groups which represent the majority of the workforce. Employee representatives shall be elected for at least one year and shall constitute up to a quarter – at least one member but no more than four – of the members of the relevant body, the rest of whom shall be appointed by the company.
Employees’ representatives have the same rights and obligations as the other members of the management body. However, they are not entitled to participate in the appointment, dismissal or establishment of the terms and conditions of directors of the undertaking. Employees’ representatives’ right to vote can also be limited by agreement.
According to the Act on Cooperation within Undertakings the employer shall, before taking a decision, consult with the employees affected and their representatives about the reasons for the decision, as well as its effects and possible alternatives. When the employer has fulfilled his obligation to consult he can proceed unilaterally.
The cooperation procedure forces the employer at least to listen to the opinion of employees before taking the final decision. The Act on Cooperation within Undertakings operates in such a way that it “breaks up” decision-making in accordance with certain time rules, stipulated in the Act, which determine the start and duration of the negotiation procedure. According to section 7a of the Act, the negotiation proposal must be submitted in writing at least three days before the negotiations begin. In case of measures that are likely to cause one or more employees to be transferred to part-time employment or to be given notice of dismissal or suspension, the period is five days.
The Finnish Proposal
Generally speaking, the Finnish proposal for an Act implementing Directive 2001/86/EC closely follows the text of the Directive. It does not present any particularly controversial proposals. For example, the Finnish government has not proposed any use of the so-called opt-out clause (Art. 7 III and consideration 9) in relation to merger situations. To some extent the proposal follows the example of the earlier Swedish proposal, although it naturally builds on the Finnish tradition of employee involvement.
The Special Negotiating Body
National rules shall dictate how the seats in the special negotiating body are to be distributed. The Finnish proposal stipulates that:
1) if the number of seats is the same as or below the number of participating Finnish companies the seats will be distributed in proportion to workforce size;
2) if the number of seats is above the number of participating companies, every participating company will get one seat, the remainder being distributed in proportion to workforce size.
Deviations from these rules are possible by agreement, but the employees must guarantee that all participating Finnish companies and personnel groups are represented as far as possible.
How members are to be appointed to the special negotiating body is likewise a national matter. The Finnish practice for resolving this kind of dispute – if no agreement can be reached – is that the labour protection representative representing the largest number of employees shall organise an election in which the whole workforce may participate. This procedure also forms part of the proposed Act.
Proposal on Employee Involvement
The legislative proposal stipulates the different areas in which the parties should reach agreement on the organisation of employee involvement in SEs. There are no restrictions on what the agreement can contain, but voting rules differ depending on the issues covered. Generally speaking, a draft agreement must be approved by an absolute majority of members of the special negotiating body, who must also represent an absolute majority of the workforce. A qualified – two-thirds – majority is needed to approve a draft agreement that involves a reduction in employee participation on company boards or equivalent bodies. The same applies to decisions to terminate employee involvement.
There is no obligation to reach agreement on every point enumerated in article 4.2 of the Directive. However, all issues must at least be discussed during the negotiations and this must be documented in the agreement. The parties can decide to leave particular issues unregulated, but if the negotiations result in the employees relinquishing effective involvement, the requirement of a majority in favour of such a decision must be observed.
The agreement should also regulate the circumstances under which it shall be renegotiated: for example, in the event of changed conditions within the SE, its subsidiaries or establishments. It should also include information on what is to apply in the event of renegotiation as a result of changed conditions or of expiry of the agreement period if a new agreement has not yet been concluded.
The costs of the special negotiating body – including set-up costs – and its experts shall be borne, within reason, by the participating companies.
What Happens If No Agreement Is Reached?
If the parties do not reach agreement the standard rules on information and consultation will apply on condition that the special negotiating body has not decided to relinquish employee involvement. To this end a number of conditions must be fulfilled depending on the way in which the SE was established. If different forms of participation exist in the various company bodies, the special negotiating body must decide on which form shall apply; otherwise, the participating companies can decide for themselves.
Impact of Changes in the SE and its Subsidiaries
The proposal contains a specific rule according to which the European Company must at least once a year modify the number and allocation of seats in the representative body – set up in accordance with the Act – insofar as the SE has undergone any changes.
Procedural Abuse
Section 36 of the proposed act deals with procedural abuse. The Finnish proposal covers the situation in which the structure of the SE changes substantially within one year of registration. Insofar as these changes would have given employees a higher level of participation rights if they had been in place at the time of SE registration, employee involvement must be renegotiated.
Renegotiations are not necessary if the SE can justify the changes, including why they could not be implemented before registration.
Sanctions
The Act contains two enforcement mechanisms: first, conditional fines can be imposed (section 38) if a participating company or the SE does not fulfil its obligations according to the law or an agreement; second, legal sanctions can apply in case of failure to comply with specific obligations in the Act.
Limitations
No rules have been proposed on the legal status of the special negotiating body or the representative body. The consequences and the legal nature of agreements which may be concluded by these bodies therefore remain at least to some extent unclear under Finnish law.
by Prof. Niklas Bruun, Hanken School of Economics and Business Administration
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(5) Other relevant information (Info-Box)
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