Big players, different rules? Multinational companies and collective bargaining in Europe

1. Big players, different rules? Multinational companies and collective bargaining in Europe Paul Marginson ETUI Monthly Forum, May 2010

2. Big players, different rules • MNCs as significant employers, with the capacity to move production, jobs and workers across borders, have important implications for structure, agenda and outcomes of CB • disjuncture between international scope and structure of MNCs and nationally-based systems of CB • ‘destructive’ effects • pressure for changes in national CB systems, including levels, agenda, and comparisons deployed • heightened by threats to relocate, ‘beauty contests’ for new investment • ‘constructive’ effects • transnational institution-building, including ‘agreement-making’ capacity • sources • EIRO CAR; major (2006) survey of MNCs’ UK operations; qualitative study of US and German automotive supply MNCs in CEE

3. ‘Destructive’ effects • ‘if the owners of a global firm do not find a fiscal or labour regime congenial, they will threaten to go elsewhere’ (Crouch, 2004) • MNCs the ‘visible hand’ of international processes of marketisation that are undermining the social regulations of the post-war era (Hyman, 2001) • empirical evidence on whether FDI is driven by a ‘race to the bottom’ in terms of institutional arrangements is inconclusive: • Cooke: bargaining centralisation negatively effects US FDI • Traxler and Woitech: no unambiguous relationship between the two • Traxler et al: no ‘feedback effects’ ie FDI inflows do not push changes in CB structure • if structure of CB is rather stable, the agenda and outcomes have been substantially affected by MNCs: • competitiveness agenda, focusing on costs and flexibilities • coercive comparisons, relocation threats → concession bargaining • incidence and extent of concession bargaining shaped by contingencies

4. ‘Constructive’ effects • MNCs political institutions concerned to negotiate order and secure legitimacy at transnational as well as national level (Kristensen/Zeitlin) • multi-level governance analysis: externalities of MNCs’ cross-border decisions prompts transnational social regulation (Marginson/Sisson) • no conclusive evidence that transnational CB emerging • International and European Framework Agreements do not meet traditional definition of collective agreements • implicit developments: transnational frameworks for national / local collective bargaining, primarily employer-driven • contingencies again important in shaping incidence and extent

5. MNCs’ economic and employment significance • worldwide, economic and employment significance of MNCs increased rapidly since 1990 (UNCTAD, 2008) • tenfold increase in FDI • three-fold increase in number of MNCs, and in MNC employment • MNCs’ significance amongst the EU economy even greater given: • concentration of FDI flows within the OECD economies • scale of intra-EU flows within the European ‘macro market’ • major country differences within the EU in the significance of FDI, and hence its impact on CB • three main country clusters

6. Varying prominence of FDI across countries Source: OECD, UNCTAD, EIRO national centres

7. Collective bargaining coverage [1] Source: EIRO national centres

8. Collective bargaining coverage [2] • relationship between pattern of coverage and prevailing, multi-employer or single-employer, bargaining arrangements • under multi-employer bargaining, coverage tends to be the same as for the private sector • under single-employer bargaining, coverage is more likely to differ given scope for deviation → deviation is usually upwards

9. MNCs role under multi-employer bargaining • generally affiliate to nationally-based employers’ organisations • leading role of home-based, export-oriented MNCs in some countries (Noridcs, DE, IT) • leading role of foreign-owned MNCs in some others (IE, CEEs) • 2-tier bargaining arrangements widespread, in which MNC pressure central to progressively enhancing scope for company-level negotiations • differences in looseness / tightness of coupling between levels • relatively tight articulation in Nordics, DE, Benelux, FR, IT • MNC company negotiations relatively detached from sector agreements in ES, PT and relevant CEEs • MNCs stand outside sector agreements and conclude own company agreements in a few countries (ES, NL)

10. Destabilising multi-employer bargaining? Two main possibilities … • opting-out, by leaving the relevant employers’ association → rather rare (role of legal extension mechanisms) • agreement switching, to sector agreements which specify inferior wages and conditions and permit greater flexibilities → more frequent • usually linked to new business activities by established MNCs • ICT and service activities of metalworking MNCs • call centre and processing activities of financial service MNCs Overall, adaptation by further extending ‘organised’ decentralisation, rather than radical disruption, seems the dominant trend

11. MNCs role under single-employer bargaining • MNCs often act as pacesetters for local companies, negotiating (or setting) higher wages and better conditions • spread of ‘double-breasting’ practice, involving union recognition at established sites but not at new ones (UK, IE) • UK: of 60 unionised MNCs opening new sites, 40% recognised unions at none and 40% at only some (3-year period) • non-union forms of representation as likely as no representation → impact of 2002 national consultation directive? • ‘double-breasting’ practice can also arise on a cross-border basis, although data less available • example: FI-owned MNCs in the Baltic States • Overall, signs of destabilisation with MNCs introducing non-union forms of representation as union density declines

12. MNCs and the bargaining agenda MNCs prominent in developments in the bargaining agenda, particularly at company level (either directly or through openings in sector agreements) • payments systems: introduction of new variable payments schemes, including individual appraisal-based, performance pay and profit-related bonus. • working time arrangements: introduction of greater scope for company-specific arrangements; longer reference periods / annualised arrangements; individual working time accounts • new issues, including agreements regulating use of temporary agency workers; teleworking; equality and diversity practice • innovative provisions in agreements on restructuring Cross-border context which frames MNCs national / local operations, important in driving many of these developments.

13. Internationalisation of MNCs’ management organisation • internationalisation of markets and production, including European integration, prompted the deepening of international forms of management organisation and coordination • downgrading of the national subsidiary, the ‘traditional building block’ of MNCs’ management structure • spread of international forms of management organisation: international business divisions; regional management organisations; global business functions • one of these forms the most important axis in internal management structure in 94% of MNCs with operations in the UK (national subsidiary in only 6%) • internationalisation of the ‘second degree’, with dispersion of business headquarters, global functions across countries

14. International HR structures • accompanied by a growing international architecture of structures, services and control mechanisms within the HR/IR function (UK survey of MNCs) • worldwide HR policy committee (53%) • regular meetings / conferences of HR/IR managers from different countries (63%) • international, electronic HR information systems (52%) • cross-border HR shared services (31%) • international performance monitoring systems • 90% of MNCs monitor 2+ HR/IR performance indicators • 53% monitor five or more HR/IR indicators • growing capacity to develop common, transnational approaches to HR and IR, including collective bargaining

15. Transnational management approaches to collective bargaining Two possibilities, of which the first is the more widespread • decentralised or ‘implicit’ through cross-border coordination of local bargaining agenda and outcomes • underpinned by cross-border benchmarking and ‘coercive comparisons of performance’ • ‘constructive’ side of the coin: identification of ‘best practices’ and pressure to adopt them • ‘destructive’ side of the coin: threats to ‘punish or reward’ sites in terms of investment and future mandates according to cost and flexibility performance • exacerbated by threats to relocate when unit labour costs significantly differ between actual and potential production sites elsewhere (eastern enlargements) • centralised or ‘explicit’ through negotiation of transnational frameworks and agreements

16. Incidence and impact of coercive comparisons Incidence • more extensive in manufacturing (especially metalworking) than services, although emerging in financial services • widespread amongst MNC operations in the EU-15, but now increasingly routine in the Visegrad countries and SI • MNC operations in Visegrad countries and SI no longer immune from relocation threats Impact • management’s deployment of ‘coercive comparisons’ results in agreements introducing cost-saving and flexibility-enhancing measures, including concessions in working conditions, reductions in company-specific payments, more flexible WT arrangements • where a threat to relocate involved, concessions sometimes – but not always – accompanied by an employment guarantee Overall: decisive shift in distribution of bargaining outcomes to employer advantage

17. International and European Framework Agreements • IFAs (concluded with GUFs) and EFAs (concluded with EWCs and/or EIFs, national trade unions) negotiated in a small, but growing number of MNCs • 68 known IFAs and 73 known EFAs (Telljohan et al, 2009) • 12% of MNCs surveyed in UK claimed to be covered by a negotiated international code • further source of transnational agreements: SEs (egNordea) • whilst extending joint regulation of aspects of MNCs’ employment practice to transnational level, IFAs and EFAs do not address core collective bargaining issues arising in national / local MNC negotiations • exception: EFAs which establish a European framework for the handling of specific restructurings across several countries → ‘crossing a line in the sand’? • contingencies: IFAs largely EU-owned MNCs, although EFAs also with prominent US MNCs; a large size (and visible) MNC phenomenon • Overall: ‘constructive’ effects remain under-developed

18. Challenges for trade unions [1] How to deal with relocation threats and cross-border comparisons? • contingencies: different responses suitable in different contexts • automotive supply MNCs in CEE: cross-border coordination only relevant in some cases • local action, where MNC operations ‘stand alone’ • coordinated cross-border response where MNC operations highly integrated • political mobilisation, political exchange as further alternatives / complements • counteract MNCs’ coercive comparisons with trade unions’ own cross-border comparisons • use of EWC networks to compile surveys of conditions in some metalworking MNCs Under SEB, how to build union membership and organisation to extend the reach of union recognition and therefore collective bargaining? • role of public policy in supporting collective bargaining

19. Challenges for trade unions [2] Opening the door further towards transnational collective bargaining • problems with current practice: role of EWCs, mandates to negotiate, implementation at national and local level • securing a legally-framed regulatory basis for company-based European agreements • the critical factor differentiating (the few) cases where European framework agreements address specific restructurings from other EFAs is the capacty of unions to coordinate negotiation and forms of action across borders

20. Conclusion • ‘destructive’ effects of MNCs have different aspects under multi-employer and single-employer bargaining arrangements • MEB: at first sight, MNCs adapt to national systems, but also drive significant adaptation • greater scope for company negotiation under ‘organised decentralisation’ the dominant trajectory • opting-out of, and switching between, sector agreements rarer • SEB: growing practice of ‘double breasting’ • interaction of ‘destructive’ and ‘constructive’ effects (and impact on CB agenda) apparent in use of cross-border comparisons in local negotiations • ‘destructive’ effects uppermost where threats to relocation involved • only a minority of IFAs/EFAs address cross-border restructuring If CB is to remain a prominent form of labour market regulation, embryonic mechanisms of transational negotiation and coordination need strengthening