Corporate governance, industrial relations and trends in company-level restructuring in Europe:...

copy Blackwell Publishing Ltd 2004 9600 Garsington Road Oxford OX4 2DQ UK and 350 Main St Malden MA 02148USA

Industrial Relations Journal

356ISSN 0019-8692

Blackwell Science LtdOxford UKIRJIndustrial Relations Journal0019-8692Blackwell Publishing Ltd 2004 2004356Original Article

Corporate governance industrial relations and company-level restructuring Tony Edwards

Tony Edwards is Senior Lecturer in International HRM Kingrsquos College London Correspondenceshould be addressed to Tony Edwards The Management Center Kingrsquos College London 150 StamfordStreet London SE1 9NN UK email tonyedwardskclacuk

Corporate governance industrial relations and trends in company-level restructuring in Europe convergence towards the Anglo-American model

Tony Edwards

ABSTRACT

This article addresses the issue of how patterns of corporate restructuring are shapedby national systems of corporate governance and industrial relations Using casestudies of three multinationals it sheds light on the question of whether the way inwhich restructuring takes place is converging towards the norms characteristic of theAnglo-American model It is argued that considerable changes are evident amongnational systems but that these changes are not all occurring at the same pace norare all countries moving in the same direction Consequently the way that multina-tional companies restructure their activities varies markedly according to both thebusiness system in their country of origin and the various host systems in which they

are located

INTRODUCTION

Across Europe firms are facing pressures to restructure their operations Restructuringat company level has taken a number of forms mergers and acquisitions (MampAs)particularly international ones rationalisations and closures of sites and divisions inlarge companies moves into new lines of business an increase in subcontracting innon-core operations and internal changes such as the move towards devolved busi-ness units Two key sets of institutions that influence restructuring are those in thefield of corporate governance especially the way that firms are financed and ownedand those in the area of industrial relations particularly the way that managementsare required to consult and negotiate with their workforces Important differences inthe nature of institutions in these two spheres shape the way that firms undertakerestructuring

However there are undoubtedly challenges to the role of these national-level insti-tutions One such challenge is the rise in corporate ownership by American and to alesser extent British pension funds Second national-level institutions are supple-mented from above by institutions at the European level for example European Union

Corporate governance industrial relations and company-level restructuring 519

copy Blackwell Publishing Ltd 2004

(EU) policies and rulings such as the Takeover Directive the emergence of European-wide stock exchanges and regulations concerning information and consultation pro-vision Third a shift in the nature of national models can be caused by elite groupsseeking to advance their material interests For example senior managers may use therhetoric of lsquoshareholder valuersquo to justify share options and profit-related bonusesalong Anglo-American lines Thus authors such as Lane (2003) emphasise thestrength of pressures towards convergence along the lines of the Anglo-Americanmodel

Other authors however have emphasised the likelihood of continuing divergencebetween countries in terms of the dominant institutions in the fields of corporategovernance and industrial relations These institutions are embedded in distinct legaland institutional frameworks that continue to differ markedly across countries andare only being reformed gradually Moreover while it may be the case that particulargroups stand to gain from changes in a national business system it is also the casethat others may lose from this process and would therefore look to use the resourcesthey control to block change or shape it to meet their aspirations Thus those suchas La Porta

et al

(1999) predict continued national distinctiveness among lsquonationalbusiness systemsrsquo (Whitley 1999) Thus the ways that firms respond to the pressuresto restructure their operations are conditioned by a number of national-level factorsWithin any national business system there is a degree of interdependence betweeninstitutions in various spheres of the economy with the nature of those institutionsin one sphere shaping the nature of those in the others It is these interdependenciesthat we refer to as lsquoinstitutional complementaritiesrsquo (Hall and Soskice 2001)

In relation to restructuring two key aspects of national business systems that areparticularly important are the systems of corporate governance and industrial rela-tions In relation to corporate governance one distinction that is often made isbetween lsquoinsiderrsquo and lsquooutsiderrsquo systems In the former ownership is concentratedamong a small number of shareholders and owner-management relations are stableand close Owners use this proximity to assess a range of lsquoorganizational competenciesrsquoas their basis for predicting future performance It is often argued that the stability ofownership in firms in these systems and the criteria used to assess firm performanceallow managers to respond to changed market conditions in a measured gradualmanner and hence firms tend to restructure incrementally in the main (Hall andSoskice 2001) The ownership patterns and tendency towards incremental restructur-ing are compatible with an industrial relations system that allows employee lsquovoicesrsquoto be heard through statutory rights for employees to be represented on companyboards and works councils as is the case in Germany or through the negotiation ofa lsquosocial planrsquo to deal with the consequences of restructuring for employees as isrequired in France

In outsider systems of which the UK and Ireland are examples ownership is widelydispersed across a large number of shareholders each of which holds only a smallproportion of the total equity Shareholders have fluid and distant relations withmanagers and current financial performance is used as the primary indicator of thehealth of the firm The need to convince shareholders lacking detailed inside knowl-edge of firms that market challenges are being confronted leads managers in thiscontext to undertake more rapid and radical restructuring (Hall and Soskice 2001)This preoccupation with the interests of distant and some argue fickle shareholdersmakes firms in outsider systems reluctant to engage in consultation and negotiationof their restructuring plans with employee representatives Thus outsider systems of


520 Tony Edwards

corporate governance mesh neatly with deregulated labour markets and whereemployees have relatively little scope to exercise lsquovoicersquo

The corporate governance systems in Europe loosely grouped under the insidercategory are evolving in different directions and at varying paces (for an overviewsee EIRO 2002a) Where the pressures from shareholders on firms to engage in radicalrestructuring are particularly acute this may lead to change in industrial relationsinstitutions themselves employers may seek to dismantle or radically reform systemsof collective bargaining Where the pressures to restructure are significant though lessdramatic firms may respond by continuing to accept the core aspects of the industrialrelations system while seeking to reduce their engagement with systems of workerparticipation Where the pressures from shareholders to engage in restructuring aremuch more modest the core aspects of both the institutions and the dominantpractices in the field of industrial relations are likely to remain intact In short a rangeof new lsquoaccommodationsrsquo can be reached with the precise nature of these accommo-dations varying according to the extent of the pressures for change in each country

It is argued in this article that there is a high degree of persistent diversity in bothnational institutional frameworks and patterns of corporate restructuring To theextent to which there are common trends this does not constitute a neat process ofconvergence and harmonisation but rather a highly uneven process with changeoccurring at varying paces in different countries These changes do not always takecountries in precisely the same direction and a high degree of diversity within as wellas between countries is in evidence We explore these issues with particular referenceto four European countriesmdashGermany the Netherlands France and the UKmdashandthree company case studies all of which illustrate the way that corporate restructuringis influenced by common market pressures but distinct institutional frameworks

THE DIVERSITY OF NATIONAL INSTITUTIONAL FRAMEWORKS

Germany

Germany is widely seen as the classic case of the insider model of corporate gover-nance The role of the banks in owning and controlling firms is one distinctive elementThe big national banks have a significant stake in many big German firms whileregional banks have important roles to play in the development of small and medium-sized firms The role of the banks is not confined to their role as shareholders orlenders however as many small shareholders sign over their voting rights to the bankswho exercise them by proxy In addition there is a high degree of ownership byfounding families and agencies of the state Cross-shareholdings between companiesare also a key element of the German system (Jurgens

et al

2000)There are however signs of quite major change Lane (2003) points to a number

of significant developments such as a rise in the proportion of shares held by foreigninstitutional investors from four per cent in 1990 to 13 per cent in 1998 Moreovershare-related bonuses have become common for senior managers in large firms therhetoric of lsquoshareholder valuersquo is now widely used and many large firms have set uplsquoinvestor relationsrsquo departments along Anglo-Saxon lines and adopted international(normally American) accounting standards (Ferner and Varul 1999) Significantlyfirms have increased the proportion of net value added they devote to dividends andreduced that devoted to labour (Beyer and Hassel 2002)



Some observers have linked these changes to associated developments in the indus-trial relations field Lane (2003) has expressed this in strong terms arguing that thecollapse of the key aspects of the German system of corporate governance has under-mined the system of codetermination leaving works councils as little more thanlsquoempty shellsrsquo Certainly there is evidence that works councils cover a lower propor-tion of workplaces than hitherto (Hassel 1999) These trends will be further strength-ened Lane argues by domestic players aligning themselves more closely with externalpressures and that further change in this direction will be driven by the growth ofprivate pension funds

However other sources of evidence point to important continuities in the Germansystem and some resistance to change For instance the Takeover Law of 2002 allowsmanagers to put in place anti-takeover defences in certain circumstances Given thismeasure and the fact that hostile takeovers are still extremely rare there is not amarket for corporate control along Anglo-Saxon lines in operation in Germany (seeTable 1) Moreover the dispersion of share ownership has risen only slightly and thenumber of listed companies has remained low by international standards Althoughthere has been a gradual weakening of the structures of cross-shareholdings andinterlocking directorates there has not been a headlong rush out of these AccordinglyJurgens

et al

(2000) argue that lsquothere is a very narrow base for a shareholder valueeconomy in Germanyrsquo and claim that the lsquocentral pillars of German corporate gover-nancemdashthe dominating role of banks the system of co-determination and the com-pany-centred management systemmdashare not crumblingrsquo (Jurgens

et al

2000 54)A third view is to accept that there has been some considerable change in Germany

particularly in the corporate governance system but deny that the system has under-gone a transformation (Jackson

et al

2004) The corporate governance system isexperiencing significant changes collective bargaining is contracting and works coun-cils are more willing to accept management proposals than they once would have beenHowever there remain many distinctive aspects of the German system that conditionthe nature of restructuring patterns of corporate ownership are still concentrated(Table 2) and collective bargaining and codetermination continue to cover the major-ity of the workforce The changes are also uneven across the economy being muchmore pronounced in large firms in internationalised sectors but much less in evidenceamong small and medium enterprises (SMEs) Thus there appears to be a process oflsquohybridisationrsquo of the German model

Table 1 The prevalence of hostile takeovers 1980ndash98

Country

Value of hostile takeovers as percentage of world total

1980ndash89 1990ndash98

Germany 02 18The Netherlands 01 00France 19 54UK 184 182

Source Guillen (1999)


522 Tony Edwards

The Netherlands

The Netherlands is another instance of an insider system of corporate governancewith a strong tradition of social partnership While corporate ownership in the Neth-erlands is generally quite concentrated (see Table 2) the form and nature of theownership of Dutch companies varies greatly according to their size Among largefirms there has been a very significant rise in foreign shareholdings recent estimatessuggest that over half of the shares in quoted Dutch firms lie in foreign handsHowever among small and medium-sized firms research shows that the majorityremain family owned Even when the very smallest firms are excluded from theanalysis this holds true 50 per cent of firms with more than 100 employees are familyowned (EIRO 2002a) Thus the changes in ownership have mainly occurred in largefirms Many of these companies have embraced the concept of lsquoshareholder valuersquo andhave increasingly linked managerial pay to the performance of the shares (Poutsmaand Braam 2004)

As is the case in Germany takeovers have not been a common feature of the Dutcheconomy (see Table 1) The first hostile takeover attempt took place as recently as1988 and almost all stock market listed companies are well protected against hostiletakeovers through statutory measures such as issuing lsquopriorityrsquo shares to entrustedofficials However in the past 10 years the positive attitude towards these protectivemeasures has changed and some investors such as pension funds have started to presslisted companies to lower their barriers to hostile takeovers

One check on the influence of shareholder value in the Netherlands has been thelegal basis for employee representation Works councils have the right to discuss andgive advice on all major decisions including investments and restructuring In casethe company does not follow this advice the works council can challenge the decisionin court The system of collective bargaining involving sector-level negotiations hasbeen largely preserved in the face of some pressures towards decentralisation Whilethe system of representation appears to have been fairly resilient in form there aresome signs of practices being implemented that reflect an Anglo-American influenceUppermost amongst these are the growing trend towards employee financial partici-pation a greater prevalence of performance-related pay and more extensive use byemployers of lsquoflexiblersquo working (Poutsma and Braam 2004)

Clearly there have been important changes in the Netherlands that have increasedthe pressure on management to carry out restructuring in order to deliver greatershareholder value The erosion of the lsquoPolderrsquo model of long-term stable relationsbetween shareholders and firms and the lsquostakeholderrsquo tradition that was synonymous

Table 2 The level of concentration of shareholdings in publicly quoted companies 1997

Country of largest outside voting block

Germany 521The Netherlands 435France 200UK 99

Source Becht and Roell (1999)



with this has been notable amongst highly internationalised Dutch multinationals andwas never as strong in foreign multinationals in the Netherlands There appears to begrowing internal diversity within the country therefore as the majority of small andmedium-sized family-owned businesses do not exhibit these traits In industrial rela-tions terms the continuing tradition of social partnership provides employees withsignificant rights to influence the nature of corporate restructuring Thus the Dutchsystem is characterised not only by some considerable change causing growing internaldiversity but also by important signs of continuity

France

Until recently France could also be characterised as having an insider system ofcorporate governance In France the principal insider in large firms was the stateeither directly through ownership of a controlling stake or indirectly through the closelinks between senior figures in government the civil service and major French firms

Table 3 Systems of corporate governance in the four countries

Country Key features of the system

Germany One distinct feature of the corporate governance system is the way it incorporates rights for a range of lsquostakeholdersrsquo This is reliant upon the highly concentrated ownership patterns particularly among banks while networks of cross-shareholdings and interlocking directorships are common There are some modest signs of change however in the direction of the outsider system

The Netherlands The system is notable for the vast differences between small and medium enterprises which are often controlled by families and large firms which are characterised by very high ownership by foreign institutions and individuals Among the latter there are some moves towards a lsquoshareholder valuersquo orientation However this is normally exercised by lsquovoicersquo rather than lsquoexitrsquo

France The role of the state in owning and controlling large French firms has been greatly reduced by privatisation Managers are increasingly influenced by the demands of institutional investors paying out a rising proportion of profits in dividends and having their own pay tied explicitly to share prices There has also been a growth in mergers and acquisitions though in the 1990s only two a year on average were hostile in nature

UK Shareholdings tend to be highly dispersed with pension funds holding relatively small stakes in a range of firms There is a well-developed market for corporate control with very weak barriers to hostile takeovers Shareholding tends to be fluid exemplified by the rush out of firms undergoing restructuring Managerial remuneration is very strongly tied to measures of lsquoshareholder valuersquo

Source adapted from EIRO (2002a)


524 Tony Edwards

However a number of changes are evident One is the significant reduction in stateownership of large French companies the governmentrsquos privatisation programme inthe mid-1990s eroded the central role of the state in the running of large French firms(Goyer and Hanckeacute 2004) A further key indicator of change relates to the ownershippattern Until recently cross-shareholdings between firms dominated the pattern ofownership with the shareholders of many big industrial firms being themselves theowners of other big industrial firms but this has declined from more than 30 per centin 1990 to closer to 20 per cent by 2000 In the place of cross-shareholdings foreigninvestors are now the key owners of large French firms quoted on the stock marketwith American pension funds particularly influential (Morin 2000) A third aspect ofthe changes has been the growth in the number of MampAs in France TraditionallyMampAs were extremely rare but a number of foreign firms have acquired French onesand there has also been a significant growth in takeover bids on the stock marketAlthough it is difficult to speak of a genuine lsquomarket for corporate controlrsquo in Francecomparable to the prevailing situation in the American and British stock exchangesthere has clearly been a major change over the last decade (see Table 1)

The rights of employees to be consulted about restructuring are significant inFrance Employee representatives must be informed if restructuring is to take placeas a result of a merger or a takeover and consultation with the

comiteacute drsquoentreprise

must occur prior to shareholders and the public being informed However the

comiteacutedrsquoentreprise

opinion does not have to be taken on board by the company and anysubstantive influence on how firms actually restructure tends to come from unionsThere is increasing evidence that firms have marginalised unions and other forms ofemployee voice as far as possible (Goyer and Hancke 2004 Jefferys 2003) Thus inthose few sectors and firms where unions are strong employee representatives are ableto shape the way in which restructuring takes place but in the majority they are notable to do so

These changes have meant that many French firms are undergoing significantchange with greater pressure to deliver shareholder value An example of the mantraof creating lsquoshareholder valuersquo being put into practice is the increase in the percentageof corporate gross income paid out to shareholders as dividends This ratio rose from228 per cent in 1994 to 41 per cent in 2000 for non-finance companies (EIRO 2002a)Morin (2000) argues that France has witnessed a rapid change from a lsquofinancialnetwork economyrsquo to a lsquofinancial market economyrsquo (p 36) and goes on to argue thatlsquothe shareholding model of the largest French groups is today rapidly disintegratingrsquo(p 37) He charts the rise of Anglo-Saxon management norms particularly the pres-sure to deliver shareholder value and claims that lsquothe speed of this development isnow a verifiable fact the largest French firms are subject to Anglo-Saxon managementand return on capital normsrsquo (p 45) In sum the French system has undergone rapidchange in the institutions that shape corporate restructuring

The UK

The UK differs from the other three key countries in that it is clearly an outsidersystem One of the key features of corporate ownership in the UK is that sharehold-ings tend to be highly dispersed across a range of financial institutions and individualsand it is quite rare for any one shareholder to own a controlling stake (Table 2)Overall 70 per cent of the holdings in UK listed companies are held by financialinstitutions with each one tending to hold a very small proportion of the stock of a



Table 4 Systems of employee representation in restructuring in the four countries


Germany Employee rights stem partly from the system of plant-based works councils Employers are obliged to inform works councils in advance of any restructuring plans that affect employees and must negotiate an lsquoInteressenausgleichrsquo (lsquoreconcilement of interestsrsquo) that sets out the process of change and spells out the implications for employees Employee rights also stem from their representation on supervisory boards in large firms However the practical impact of these formal rights varies from firm to firm and the coverage of works councils has fallen in recent years

The Netherlands Works councils have the right to lsquogive advicersquo on all major decisions and if management does not follow this advice employee representatives can take the case to a court In addition on social issues such as occupational categories skill requirements and working conditions the works council has the right of veto Supervisory boards also have to approve major instances of restructuring and employee representation on these boards providing a further channel of employee influence Recent revisions to the Merger Code have not significantly affected the strength of employee rights

France

Comiteacute drsquoentreprises

have the right to be informed and consulted three months prior to any restructuring and since 2001 have been afforded a share in the company as of right This means that works councils have the same prerogatives as other minority shareholders However employee representatives appear to have only a limited effect on changing managementrsquos plans in practice Some instances of unions appealing to politicians for support and works councils have had some success in the courts in arguing that the process of consultation was not followed fully

UK There is a minimalist legal framework Such rights as exist stem from European Union Directives on transfer of undertakings (implemented through the TUPE regulation) collective redundancies and the forthcoming implementation of the information and consultation directive Therefore the ability of employee representatives to influence restructuring stems from unionsrsquo strength at firm and plant level This results in considerable variation in this respect Recently the limited growth of lsquopartnershiprsquo deals at firm level has afforded employee representatives a modest increase in influence over restructuring

Source adapted from EIRO (2002a)Note Transfer of Undertakings (Protection of Employment)


526 Tony Edwards

particular company (Armour

et al

2003) The high level of dispersion of ownershipis related to the well-developed lsquomarket for corporate controlrsquo in Britain (Table 1) Incomparison with other European countries the barriers to takeovers particularlyhostile ones are weak

In general the relationship between the senior management team and shareholdersis often characterised as armrsquos length In part this is a consequence of the highlydispersed nature of shareholdings because no one small shareholder has a strongincentive to closely monitor management Thus the lsquovoicersquo of particular shareholderswithin the company tends to be weak (Gospel and Pendleton 2003) This is not tosay that shareholdersrsquo demands are not influential over management indeed theweakness of employee rights in the British system means that shareholder concernsdominate managerial actions in general and the nature of restructuring in particularIt can be argued that the fluidity of shareholdings in general and the threat of exit inparticular has made it difficult for British firms to build lsquopartnership arrangementsrsquowith their workforces Deakin

et al

(2002) argue that while some British firms havebeen able to reconcile shareholder pressure with a lsquopartnershiprsquo approach in a largenumber of other firms shareholder pressure has lsquoundermined partnership relationsrsquo ofthe type that are easier to maintain where corporate ownership is concentrated

Recently employee influence in general and their ability to shape the nature ofrestructuring in particular appears to have grown modestly The rights that employeeshave in cases of insolvency stemming partly from European directives allow lsquovoiceby nonshareholder constituenciesrsquo (Armour

et al

2003 532) particularly employeerepresentatives to be heard Moreover the role of shareholders is not always as distantand as at armrsquos length as is often portrayed some pension funds such as Hermeswhich controls 12 per cent of the UK stock market have a formal policy of engagingwith the management of companies over a long period Thus the picture of anoutsider system of corporate governance with little employee voice needs to bequalified

Summary

There are some indications that the pressures identified above are moving businesssystems in Europe towards a convergence on the lsquoAnglo-Saxonrsquo model of corporategovernance In turn we might expect this to lead to employers adopting a less con-sultative and participative approach to managing change and to employers being morereluctant to engage in processes of worker participation However a more carefuldetailed inspection of patterns and trends across the four countries reveals that thepace and direction of change in corporate governance systems is highly varied anduneven (see Tables 3 and 4 for a summary) Arguably therefore the multiple forms ofchange do not result in a neat process of convergence in the nature of national systemsFurther light is thrown on this picture through an examination of three case studiesof companies that have undergone processes of restructuring

RESTRUCTURING AT COMPANY LEVEL

The three case studies described in this section have been chosen to illustrate thevariety of national systems in the EU and the varying paces of change that they areexperiencing German company VW demonstrates the way that the significant



changes in the nature of the German system shapes restructuring at company levelFrench firm Vivendi exemplifies the more rapid and dramatic changes in the Frenchsystem while Anglo-Dutch company Corus illustrates the continued differencesbetween the British and Dutch systems despite the significant changes in theNetherlands

Volkswagen

Recently VW has globalised its operations to a significant degree Lane describes thecompany as lsquothe first of the Big Three [German automotive firms] to develop global-ization tendencies and still leads the field in this respect todayrsquo (Lane 2001 81)Despite these tendencies the firm has always had a close relationship with nationaland regional government in Germany Even after the federal government sold its stakein 1988 the political connections remained strong its biggest shareholder is theregional government of Lower Saxony which owns 137 per cent of the shares and182 per cent of the voting rights Given that the firm has a governance provision thatstipulates that a lsquoblocking minorityrsquo of 20 per cent is needed to prevent a hostiletakeover the regional government needs an alliance with only a very small number ofshareholders to block a takeover This provision remains in force despite being thesubject of a dispute between the company and the German government on one sideand the European Commission on the other

While the corporate governance structure described above shows that the firm isstrongly shaped by the insider system in Germany in the last 10 years it has begun todevote more attention to delivering lsquoshareholder valuersquo In 2000 the companyannounced a number of measures described as lsquoefforts to enhance communicationwith its investorsrsquo (Jurgens unpublished) such as regular meetings with the keyshareholders some of which took place in London rather than in Frankfurt It alsoannounced a share buy-back scheme in September 2000 and adopted InternationalAccounting Standards (IAS)

Under Piech the chief executive appointed in 1993 VW established more ambitiousfinancial targets such as a target return on capital of between 9 and 11 per cent by2005 A key question is what this meant for investment decisions The evidencesuggests that there has been only limited change with little evidence of the lsquoshort-termistrsquo pressures that some argue beset firms in outsider systems capital investmentsas a percentage of sales fell dramatically from 1991 to 1993 but rose and then steadiedthereafter until 2000 research and development as a percentage of sales rose in the1990s particularly sharply in the late 1990s education and training as a percentageof total labour costs rose steadily throughout the decade Moreover there was nomarked shift in acquisitions strategy nor was there a shift away from retaining thecompanyrsquos core competencies within the boundaries of the firm and the role of thestock market has not served as the basis for raising substantial new capital (althoughit has provided a disciplining effect on management because of the potential for ahostile takeover) (Jurgens unpublished)

There has been a clearer impact however in relation to the returns to variousgroups throughout the 1990s There has been a considerable fall in the proportion ofvalue added going to employees from about 90 per cent to about 70 per cent Payrises did not keep pace with the rapid increases in productivity it appears that therewas indeed some lsquoconcession bargainingrsquo going on partly under the threat of produc-


528 Tony Edwards

tion going to other countries However it does not really indicate a move towardspaying out more to stockholders whose proportion remained low Rather it appearsthat the pressure to protect the companyrsquos independence influenced the company topay off more debt and build up its reserves (Jurgens unpublished) This hardlyconstitutes a strong lsquoshareholder valuersquo orientation

Despite these concessions made by labour the basic institutions of industrial rela-tions remain important in VW It has not embarked on a policy of radical downsizingeven in the severely adverse trading environment of the early 1990s Rather it hassought to achieve costs savings within the system of codetermination in Germany andwithout breaching the industrial relations traditions (Jurgens unpublished) Perhapsthe best illustration of this has been the expansion of employment at two plants inLower Saxony where a range of innovative working practices such as teamworkingand flexibility in working time were introduced following extensive negotiations withthe works council Other aspects of the agreements reflected the spirit of codetermi-nation and partnership It was formally noted that every employee had lsquothe right toa human-oriented organization of workrsquo and performance targets were to be agreedby management and the works council jointly with input from the work teamsMoreover the codetermination arrangements went far beyond the legal requirementsin stipulating that if the company wants to close subsidiaries or buy shares in othercompanies they would require two-thirds of the votes of the supervisory board Thedevelopmental approach characteristic of German firms also showed through prin-cipally in the guarantee that every employee should have an average of three hoursrsquotraining with half paid for by VW and half in employeesrsquo own time This training wasto be certified through the status of lsquospecialist automobile producerrsquo (EIRO 2001a)

The proposals continued the companyrsquos tradition of introducing innovative workingpractices in Germany VW is unusual in that it has not been part of

Gesamtmetall

andso conducts its own company agreements with these serving as the basis for variousinnovations One instance is the lsquoagreement between generationsrsquo which provided forolder employees to retire early when younger colleagues are ready to move betweensites In 1993 the company introduced a radical plan to avoid having to make com-pulsory redundancies by reducing working time from 40 to 30 hours a week Inaddition the company in its Corporate Social Responsibility initiative committeditself to the principle that lsquodismissals are unfairrsquo (Jurgens unpublished)

Outside Germany the consensual approach to handling restructuring is rather lessin evidence though not entirely absent For instance in November 2003 VW and theWorkersrsquo Commission at the AutoEuropa plant in Palmela in Portugal reached anagreement on a two-year pay freeze in return for no compulsory redundancies follow-ing a downturn in the market A key part of the deal was longer periods of shutdownat the plant without corresponding pay cutsndashndashsomething that is highly innovative inthe Portuguese context (EIRO 2003a) Moreover in September 2003 management atthe Spanish company SEAT reached agreement over greater working time flexibilitywith the workersrsquo committee and the three trade unions In this case the issue washow to cope with extra demand and it was agreed that employees would work 10extra Saturdays a year (EIRO 2003b) This agreement took place following therejection the previous year by the workersrsquo committee of a proposal to increaseworking time leading the company to transfer 10 per cent of its production to its sitein Slovakia (EIRO 2002b)

The grouprsquos largely consultative approach showed through in other ways In May1998 the Volkswagen group and its European Works Council (EWC) agreed on the



creation of a lsquoworld group councilrsquo an agreement that top management saw asenforcing a lsquoglobal company culture which is based on constructive cooperationrsquo(EIRO 1998) This was followed in June 2002 by the signing with the InternationalMetalworkers Federation of a global agreement on social and labour rights incorpo-rating principles such as freedom of association (EIRO 2002b) Thus it seems thatVW remains committed to using a range of social dialogue instruments to facilitatechange

In sum the VW case exemplifies a wider pattern in the German business systemnamely that changes in the corporate governance sphere have created pressure on largecompanies to pay more attention to the demands of shareholders but that thesepressures have not fundamentally challenged institutions in the field of industrialrelations This was a central part of Haipeterrsquos (2003) conclusion of the role ofcodetermination at VW he argues that in an era of lsquomarket controlrsquo codeterminationretains a key influence and checks some of its pressures Similarly Jurgens (unpub-lished) argues that union relations at VW are lsquocharacterized by a high degree ofldquojointnessrdquo between management and works councils in company policy which exceedthe formal co-determination framework of industrial relations in Germanyrsquo Jurgensconcludes that lsquoshareholder valuersquo has not become the primary goal at VW but ratherit is balanced with lsquoworkholder valuersquo

Vivendi

Vivendi is an example of a French company that has undergone a radical transforma-tion Established in 1853 as Geacuteneacuterale des Eaux the firm traded in sectors such aswater distribution and sewage treatment for the first 100 years of its history In the1960s the company moved into waste management and in the 1980s the firm acquiredoperations in energy management and transportation and began to embark on inter-national growth Therefore between the 1960s and 1980s the company diversifiedsignificantly but only into sectors that were very dependable and tended not tofluctuate greatly

The transformation began in earnest in 1996 when Jean-Marie Messier becamechairman and chief executive He oversaw enormous changes in the structure of thegroup increased its internationalisation and took the firm into new lines of businessIn 1997 a new structure for the utilities section called Global Environment wasestablished The acquisition of US Filter in 1999 significantly internationalised thisdivision In the following year the group changed its name to Vivendi a symbol thatit was keen to be seen as more than just a water company This impression was givensubstance by a string of acquisitions that took the firm into new lines of businesssuch as publishing television and film Perhaps the key acquisition came in 2000 whenVivendi secured control of Universal Studios making itself the second largest mediacompany in the world In the same year Vivendi Environment was floated on the ParisStock Exchange with Vivendi Universal holding only a minority (37 per cent) stakeThis part of the business has since been renamed Veolia Environment and is seen asmarginal to the entertainment group (Johnson and Orange 2003)

The transformation of the group now appeared to be complete Messier had createda firm with five divisions all in the entertainment and media sector and had distancedthese businesses from what had been the rump of the original company The transfor-mation was more than just a change in lines of business it also involved a shift in thegeographic centre of gravity of the firm Messier a self-confessed fan of the American


530 Tony Edwards

business system spent most of his time in the US and accepted apparently enthusi-astically the need to conduct the firmrsquos operations along American lines

One highly important example of this is in relation to the companyrsquos corporategovernance structures As the price for agreement to the acquisition of UniversalStudios American financial institutions demanded that Vivendi reform its constitutionin such a way as to make the company easier to take over Thus senior managementagreed to introduce such measures as scrapping lsquodouble voting rightsrsquomdashwhich givesome shareholders more votes than others depending on how long they have held thesharesmdashand rescinding a provision that allows management to issue new shares to afriendly party if the company becomes the subject of a takeover bid (Financial Times2000) More generally the acquisitions meant that the shareholder base was widelyspread across a range of institutions and individuals in a number of countries therewas no one shareholder with more than four per cent of the total equity In this respectthen the companyrsquos ownership structure had come to resemble that of a large Britishor American company and Vivendi was held up as an example of how Frenchmultinationals were undergoing a process of lsquoAnglo-Saxonizationrsquo (Mtar unpublished)

However during the last two years the companyrsquos fortunes have plummeted and ithas gone through a process of radical retrenchment In 2002 Vivendi revealed thelargest loss in French corporate history The acquisitions in the media and entertain-ment sector had been made at or near to the peak of the stock market boom thatended in 2000 and it became obvious that the debts that had been taken on wereuntenable Amid considerable acrimony Messier was forced to resign and to com-pound the firmrsquos problems the French police and the Securities and Exchange Com-mission in New York both launched investigations into financial irregularities at thegroup (Financial Times 2002)

Under a new senior management team the company set about paying off debt Partof the move to achieve this involved a further reduction in the grouprsquos stake in VeoliaEnvironment and a number of other divestments were made During 2003 howeverit became clear that more drastic measures were necessary and towards the end of theyear Vivendi agreed to merge its entertainment assetsmdashmainly Universal Studiosmdashwith General Electricrsquos NBC This was in effect a dramatic reversal of Messierrsquosstrategy of becoming an entertainment giant as Vivendi now owns only 20 per centof the merged entity (Johnson and Orange 2003)

The programme of divestments and cost cutting had important industrial relationsimplications Some of these effects were felt in France For example in March 2003Vivendi announced that it was to cut nearly 10 per cent (251 jobs) of the workforceat Canal Plus with a further 138 jobs to be outsourced The CFDT (French Demo-cratic Confederation of Labour) described the move as lsquounacceptablersquo and organisedprotests against these and other changes (Guardian 2003) In February 2003 between300 and 700 job losses were announced at the newspaper branch of the group inresponse to falling revenues and subscriber levels In October 2002 152 jobs out of327 were cut at the lsquoperforming arts radio and TVrsquo headquarters of the business inParis In October 2003 the music division announced that it was cutting 1350 jobsor 11 per cent of the workforce through a combination of redeployment and redun-dancy (Financial Times 2003a)

The restructuring and associated job cuts appears to have been carried out throughmanagement working within existing industrial relations structures For example thecompany agreed a lsquosocial planrsquo with the unions to deal with the consequences ofrestructuring at Canal Plus (Financial Times 2003b) as it is required to do under



French law However the speed with which the large-scale reorganisation of theentertainment businesses was implemented is testament to the weakness of jointregulation in these operations in France

The story at Vivendi is of a company engaging in a radical transformation of itsactivities in a way that is more reminiscent of the style of firms from outsider systemsthan of the more incremental consensual approach of firms originating in insidersystems As we have seen the changes to its corporate governance practicesmdashinclud-ing the reforms to its constitution the geographic nature of its shareholder base andthe increasing emphasis on meeting the expectations of American investorsmdashwere alsoindicative of a significant move towards the norms of outsider systems Having madeso much of engaging with shareholder interests the company then had little choicebut to take the radical action that shareholders demanded once the losses becamedifficult to sustain Thus the restructuring both in the expansion and in the contrac-tion phases was influenced very much by the pressures to deliver shareholder valueThe company has found that consultation processes and collective bargaining did notpresent major obstacles to change in France and it was therefore possible to carryout restructuring whilst working within existing industrial relations institutions

Corus

Corus was formed in 1999 through an Anglo-Dutch merger British Steel the largerfirm had been privatised in 1988 and then traded for 11 years prior to the mergerHoogovens the Dutch party to the merger was established in 1918 and was part state-owned part privately owned for much of its life The merger took place in the contextof overcapacity in the sector with other mergers between steel firms having alreadyoccurred notably that between Usinor of France Arbed of Luxembourg and Aceraliaof Spain The prime motive for the mergers was the opportunity to realise cost savingsby removing duplicate functions At the time of the Corus merger managers promisedshareholders that savings of pound194 million a year would result from the union of thetwo companies It was evident that this would mean large-scale redundancies (EIRO1999)

How then did the mixed heritage of the company shape the way it responded tothe adverse climate In terms of corporate governance the merged firm was evidentlysubject to a greater influence by the Anglo-Saxon outsider system than by the Dutchinsider system British Steel accounted for 61 per cent of the new group and theoutsider influence is enhanced by significant American ownership The primacy ofshareholder interests which is a key feature of these outsider systems showed up atthe time of the merger with the announcement of a lsquospecial dividendrsquo to shareholdersin order to induce them to accept the deal (EIRO 1999) This dominance of share-holder interests has had significant implications for the form that cost cutting hastaken

By early 2001 with the market for steel turning markedly down it was apparentthat Corus would be suffering very large financial losses In February of that yearmanagement announced that 6000 employees in the British operations would belosing their jobs (EIRO 2001b) The union representing most of the British workforcethe Iron and Steel Trade Confederation (ISTC) pressurized the company to amendits plans advancing counter-proposals that included buying a plant from the companyand short-time working to tide the company over until the market picked up Howeverthe weakness of employee rights in the UK meant that the union was dependent on


532 Tony Edwards

convincing managers of the merits of their case and the company was adamant thatthey should press on with their original plans Meanwhile in the Netherlands redun-dancies were also taking place Only six months after the merger there had been alsquowildcatrsquo (unofficial) strike at the huge and profitable Ijmuiden plant following theannouncement that the steel-manufacturing department would be shut with the lossof 590 jobs (EIRO 2000)

During the first two years or so of the post-merger period it appeared that employeerepresentatives were liaising more closely across the two countries When the axe fellon 6000 British workers in early 2001 the Dutch Trade Union Federation (FederatieNederlandse Vakbeweging FNV) wrote to the ISTC pledging support for theircampaign of opposition to the cuts Moreover the Dutch union hinted that it mightsupport a boycott at the Ijmuiden plant of any work that was to be transferred fromthe UK to the Netherlands The EWC had served as a mechanism that brought theserepresentatives together on a regular basis and arguably made such collaboration morelikely

Even after the large scale cuts of 2001 however the companyrsquos troubles havecontinued The share price at the end of 2002 stood at less than half of its value atthe time of the merger This added to the pressure on senior managers and in responsethe company signalled a move away from its lsquomulti-metalrsquo strategy by proposing tosell its aluminium business to Pechiney of France The plan met strong resistance fromemployee representatives in the Netherlands and revealed tensions between the differ-ent parts of the business across the two countries According to press reports manyin the Dutch part of the firm had come to resent the merger seeing it as a takeoverof a profitable Dutch business by an ailing British one

In late 2002 it became evident that the Dutch supervisory board which is madeup of a mixture of managers and employee representatives was threatening to use itspower to veto the proposed sale of the aluminium business Members of the boardwere concerned that the proceeds from the sale of this part of the business whichstemmed mainly from Hoogovens were to be used to pay off group debt rather thanbe reinvested in the Dutch part of the business The implication was that further cutswould have to occur in the UK if the Dutch supervisory board was to approve thesale Press reports indicated the concern amongst some in the Dutch part of thecompany that Hoogovens could become Corusrsquos lsquocash cowrsquo The supervisory boarddid use its power to block the sale throwing the company into a fresh crisis Manage-mentrsquos response has been to seek further rationalisations in the British part of thebusiness involving yet more redundancies (EIRO 2003c)

In November 2003 Corus management put forward proposals to steady the shipHelped by rising steel prices it announced a share placement that raised pound291 millionto fund the restructuring on top of an pound837 million new loan deal with its banksannounced in August Management also gave an indication of how the company wasto be turned around This envisaged the workforce being reduced further to 49000(from 65000 in 2000 and 55000 in 2001) The restructuring would involve cutting1150 jobs at three core sites (Port Talbot Scunthorpe and Rotherham) reducingproduction at Llanwern by 35 per cent and separating the Teesside plant from therest of the group and forcing it to sell its products into world markets independentlyof Corus (and probably having to enter into a joint venture with another steelmakerin the longer term if it is to stay afloat)

In sum the story of restructuring at Corus shows how the merged firm is stronglyinfluenced by the outsider corporate governance system and that this has driven rapid



and radical restructuring in response to the companyrsquos troubles However the casealso illustrates the continuing differences between the industrial relations systems inthe UK and the Netherlands with the institutions in this sphere in the Netherlandsallowing employees to exert considerable influence on the way that restructuring takesplace

Summary of the case studies

The case study evidence has produced two main findings concerning patterns ofrestructuring in highly internationalised firms First the shareholder value orientationhas been a key factor in driving company strategies in general and their approachesto restructuring in particular This orientation has varied according to the firmsrsquodomestic business system but is notable in all three case studies However the formthe restructuring takes and the impact it has on employees is strongly conditionedboth by the strength of the shareholder value orientation and by the strength of formsof joint regulation The evidence of the impact of codetermination from VW in Germanyand of the supervisory board structure in Corus in the Netherlands is not consistentwith the notion that these forms of joint regulation are becoming lsquoempty shellsrsquo

CONCLUSION

It is evident that a great deal of change is occurring in the nature of corporategovernance and industrial relations institutions in Europe One common tendency isthat some of the characteristic features of outsider systems are becoming more evidentin insider systems This is particularly evident in France and for many commentatorsthis is the key pattern constituting a process of convergence along Anglo-Saxon linesIn contrast we have seen that the pace and direction of change differ markedly acrossborders

However to reject the convergence argument out of hand on this basis would be amistake Amongst large internationalised firms in sectors where competition is gen-uinely globalised there is extensive evidence that a degree of convergence alongAnglo-American lines is occurring In this article we have seen this tendency amongstGerman Dutch and French multinationals This is a highly significant developmentgiven the importance of large firms in setting trends throughout an economy Whilelarge internationalised firms can indeed have knock-on effects throughout a businesssystem it is also the case that small and medium-sized firms particularly those insectors sheltered from globalisation are governed and structured in distinct ways fromhighly internationalised ones A consequence of this as we have seen is growingdiversity within national systems

Overall then these changes are occurring in such a way that there is evidently nota tidy process of convergence some convergent patterns are clearly evident butdiversity across and within countries remains a key feature Moreover changes in theseinstitutional configurations are ongoing and have brought about a renegotiation ofpre-existing lsquoaccommodationsrsquo In Aguilera and Jacksonrsquos (2003) terms new lsquostake-holder coalitionsrsquo are arrived at Thus institutional configurations become lsquohybrid-isedrsquo as they evolve in response to both external challenges and actions of actors andfirms within the system

The argument of the article has important policy implications The extent of diver-sity between countries within the EU has almost certainly increased with the accession


534 Tony Edwards

of the 10 new member states in May 2004 In the context of important even growingdiversity it is not surprising that some attempts to harmonise the nature of institutionsin the field of corporate governance and industrial relations come up against signifi-cant barriers A case in point is the much delayed Takeover Directive which has metconsiderable opposition and its fate is still uncertain On the other hand the logicof common policies across the EU aimed at particular types of firms appears to bestrengthened by the conclusion of growing commonalities among multinationalsacross countries The prime example of this is the EWC Directive For those who seeit as desirable that restructuring occurs in such a way that employees are able toexercise some influence over the process the converging behaviour of multinationalcompanies can be used to argue the case for strengthening the role of EWCs

Acknowledgements

The article builds on two commissioned research projects a comparative study for theEuropean Foundation for the Improvement of Living amp Working Conditions in 2002(EIRO 2002a) and a report that formed part of the European Commissionrsquos (2004)publication

Industrial Relations in Europe 2004

I am grateful for the financial supportof both bodies and to a number of people who commented on the findings and draftsthat led to this articlemdashAnn Branch Mark Carley Francois Eyraud Howard GospelMark Hall Jackie Morin Fernando Vasquez and Daniel Vaughan-Whitehead

References

Aguilera R and G Jackson (2003) lsquoThe Cross-National Diversity of Corporate GovernanceDimensions and Determinantsrsquo

Academy of Management Review

28

3 1ndash19Armour J S Deakin and S Konzelmann (2003) lsquoShareholder Primacy and the Trajectory of

UK Corporate Governancersquo

British Journal of Industrial Relations

41

3 531ndash555Becht M and A Roell (1999) lsquoBlockholdings in Europe An International Comparisonrsquo

European Economic Review

43

4 1049ndash1056Beyer J and A Hassel (2002) lsquoThe Market for Corporate Control and Financial Internation-

alisation of German Firmsrsquo

Economy and Society

31

3 309ndash332Deakin S R Hobbs S Konzelmann and F Wilkinson (2002) lsquoPartnership Ownership and

Control The Impact of Corporate Governance on Employment Relationsrsquo

Employee Rela-tions

24

3 335ndash352EIRO (1998) lsquoVolkswagen Sets up a World Group Councilrsquo June httpwwweiroeurofoundie

199806inbriefde9806271nhtmlEIRO (1999) lsquoThe Industrial Relations of the British SteelndashHoogovens Mergerrsquo August

httpwwweiroeurofoundie199908featureuk9908125fhtmlEIRO (2000) lsquoMultinational Reorganisation Decisions Increasingly Removed from Union

and Works Council Influencersquo January httpwwweiroeurofoundie200001featurenl0001178fhtml

EIRO (2001a) lsquoAgreements Signed on Volkswagenrsquos ldquo5000

yen

5000rdquo Projectrsquo September httpwwweiroeurofoundie200109featurede0109201fhtml

EIRO (2001b) lsquoCorus Announces Large Scale Redundanciesrsquo February httpwwweiroeurofoundie200102featureuk0102113fhtml

EIRO (2002a) lsquoCorporate Governance Systems and the Nature of Industrial Restruc-turingrsquo Comparative Study September httpwwweiroeurofoundie200209studytn0209101shtml

EIRO (2002b) lsquoSEAT Moves 10 of Ibiza Production to Slovakiarsquo October httpwwweiroeurofoundie200210featurees0210204fhtml



EIRO (2003a) lsquoAgreement at AutoEuropa Prevents 800 Redundanciesrsquo December httpwwweiroeurofoundie200312inbriefpt0312101nhtml

EIRO (2003b) lsquoMore Saturday Working Agreed at SEATrsquo October httpwwweiroeurofoundie200310inbriefes0310201nhtml

EIRO (2003c) lsquoCorusrsquos UK Workforce Faces Deep Job Cutsrsquo March httpwwweiroeurofoundie200303featureuk0303105fhtml

Ferner A and M Varul (1999)

The German Way

Report for the Anglo-German Foundation(London Anglo-German Foundation)

Financial Times (2000) lsquoVivendi to Overhaul Voting Rights Systemrsquo 2 OctoberFinancial Times (2002) lsquoSEC Probe into Vivendi Now Set to Grow Deeperrsquo 20 NovemberFinancial Times (2003a) lsquoUniversal Axes Jobsrsquo 16 OctoberFinancial Times (2003b) lsquoLoss-Making Canal Plus Plans Restructuringrsquo 9 MarchGospel H and A Pendleton (2003) lsquoFinance Corporate Governance and the Management

of Labour A Conceptual and Comparative Analysisrsquo


41

3 557ndash582Goyer M and B Hanckeacute (2004) lsquoFrancersquo in H Gospel and A Pendleton (eds)

CorporateGovernance and Labour Management An International Comparison

(Oxford Oxford Univer-sity Press)

Guardian (2003) lsquoVivendi Culls Jobs at Canal Plusrsquo 12 MarchGuillen M (1999) lsquoCorporate Governance and Globalization Arguments For and Evidence

Against Convergencersquo Reginald H Jones Center Working Paper 99-11Haipeter T (2003) lsquoThe Risks and Opportunities of Codetermination in a Post-Fordistic Era

The Example of Volkswagenrsquo Paper presented at the 13th World Congress of the IIRABerlin 8ndash12 September

Hall P and D Soskice (2001)

Varieties of Capitalism The Institutional Foundations of Com-parative Advantage

(Oxford Oxford University Press)Hassel A (1999) lsquoThe Erosion of the German System of Industrial Relationsrsquo

British Journalof Industrial Relations

37

3 483ndash505Jackson G M Hopner and A Kurdelbusch (2004) lsquoGermanyrsquo in H Gospel and A Pendle-

ton (eds)

Corporate Governance and Labour Management An International Comparison

(Oxford Oxford University Press)Jefferys S (2003)

Liberteacute Egaliteacute and Fraterniteacute at Work Changing French EmploymentRelations and Management

(Basingstoke Palgrave Macmillan)Johnson J and M Orange (2003)

The Man Who Tried to Buy the World Jean Marie Messierand Vivendi Universal

(London Penguin)Jurgens U K Naumann and J Rupp (2000) lsquoShareholder Value in an Adverse Environment

The German Casersquo

Economy and Society

29

1 54ndash79La Porta R F Lopez-de-Silanes and A Shleifer (1999) lsquoCorporate Ownership around the

Worldrsquo

Journal of Finance

54

2 471ndash517Lane C (2001) lsquoThe Emergence of German Transnational Companies A Theoretical Analysis

and Empirical Study of the Globalization Processrsquo in G Morgan P Kristensen and RWhitley (eds)

The Multinational Firm Organizing Across Institutional and National Divides

(Oxford Oxford University Press)Lane C (2003) lsquoChanges in Corporate Governance of German Corporations Convergence

to the Anglo-American Modelrsquo Centre for Business Research Working Paper no 259(Cambridge Cambridge University)

Morin F (2000) lsquoA Transformation in the French Model of Shareholding and Managementrsquo

Economy and Society

29

1 36ndash53Poutsma E and G Braam (2004) lsquoThe Netherlandsrsquo in H Gospel and A Pendleton (eds)


(OxfordOxford University Press)

Whitley R (1999)

The Social Structuring of Business Systems

(Oxford Oxford UniversityPress)



(EU) policies and rulings such as the Takeover Directive the emergence of European-wide stock exchanges and regulations concerning information and consultation pro-vision Third a shift in the nature of national models can be caused by elite groupsseeking to advance their material interests For example senior managers may use therhetoric of lsquoshareholder valuersquo to justify share options and profit-related bonusesalong Anglo-American lines Thus authors such as Lane (2003) emphasise thestrength of pressures towards convergence along the lines of the Anglo-Americanmodel

Other authors however have emphasised the likelihood of continuing divergencebetween countries in terms of the dominant institutions in the fields of corporategovernance and industrial relations These institutions are embedded in distinct legaland institutional frameworks that continue to differ markedly across countries andare only being reformed gradually Moreover while it may be the case that particulargroups stand to gain from changes in a national business system it is also the casethat others may lose from this process and would therefore look to use the resourcesthey control to block change or shape it to meet their aspirations Thus those suchas La Porta

et al

(1999) predict continued national distinctiveness among lsquonationalbusiness systemsrsquo (Whitley 1999) Thus the ways that firms respond to the pressuresto restructure their operations are conditioned by a number of national-level factorsWithin any national business system there is a degree of interdependence betweeninstitutions in various spheres of the economy with the nature of those institutionsin one sphere shaping the nature of those in the others It is these interdependenciesthat we refer to as lsquoinstitutional complementaritiesrsquo (Hall and Soskice 2001)

In relation to restructuring two key aspects of national business systems that areparticularly important are the systems of corporate governance and industrial rela-tions In relation to corporate governance one distinction that is often made isbetween lsquoinsiderrsquo and lsquooutsiderrsquo systems In the former ownership is concentratedamong a small number of shareholders and owner-management relations are stableand close Owners use this proximity to assess a range of lsquoorganizational competenciesrsquoas their basis for predicting future performance It is often argued that the stability ofownership in firms in these systems and the criteria used to assess firm performanceallow managers to respond to changed market conditions in a measured gradualmanner and hence firms tend to restructure incrementally in the main (Hall andSoskice 2001) The ownership patterns and tendency towards incremental restructur-ing are compatible with an industrial relations system that allows employee lsquovoicesrsquoto be heard through statutory rights for employees to be represented on companyboards and works councils as is the case in Germany or through the negotiation ofa lsquosocial planrsquo to deal with the consequences of restructuring for employees as isrequired in France

In outsider systems of which the UK and Ireland are examples ownership is widelydispersed across a large number of shareholders each of which holds only a smallproportion of the total equity Shareholders have fluid and distant relations withmanagers and current financial performance is used as the primary indicator of thehealth of the firm The need to convince shareholders lacking detailed inside knowl-edge of firms that market challenges are being confronted leads managers in thiscontext to undertake more rapid and radical restructuring (Hall and Soskice 2001)This preoccupation with the interests of distant and some argue fickle shareholdersmakes firms in outsider systems reluctant to engage in consultation and negotiationof their restructuring plans with employee representatives Thus outsider systems of


520 Tony Edwards





Germany


et al







et al


et al



et al



Country






522 Tony Edwards

The Netherlands












France










524 Tony Edwards








The UK








France






526 Tony Edwards


et al



et al



et al


Summary







Volkswagen






528 Tony Edwards




Gesamtmetall








Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)




520 Tony Edwards





Germany


et al







et al


et al



et al



Country






522 Tony Edwards

The Netherlands












France










524 Tony Edwards








The UK








France






526 Tony Edwards


et al



et al



et al


Summary







Volkswagen






528 Tony Edwards




Gesamtmetall








Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)







et al


et al



et al



Country






522 Tony Edwards

The Netherlands












France










524 Tony Edwards








The UK








France






526 Tony Edwards


et al



et al



et al


Summary







Volkswagen






528 Tony Edwards




Gesamtmetall








Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)




522 Tony Edwards

The Netherlands












France










524 Tony Edwards








The UK








France






526 Tony Edwards


et al



et al



et al


Summary







Volkswagen






528 Tony Edwards




Gesamtmetall








Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)






France










524 Tony Edwards








The UK








France






526 Tony Edwards


et al



et al



et al


Summary







Volkswagen






528 Tony Edwards




Gesamtmetall








Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)




524 Tony Edwards








The UK








France






526 Tony Edwards


et al



et al



et al


Summary







Volkswagen






528 Tony Edwards




Gesamtmetall








Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)









France






526 Tony Edwards


et al



et al



et al


Summary







Volkswagen






528 Tony Edwards




Gesamtmetall








Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)




526 Tony Edwards


et al



et al



et al


Summary







Volkswagen






528 Tony Edwards




Gesamtmetall








Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)






Volkswagen






528 Tony Edwards




Gesamtmetall








Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)




528 Tony Edwards




Gesamtmetall








Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)







Vivendi





530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)




530 Tony Edwards











Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)







Corus





532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)




532 Tony Edwards












CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)








CONCLUSION






534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)




534 Tony Edwards


Acknowledgements




References



28




41



43



Economy and Society

31



Employee Rela-tions

24






yen











The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)









The German Way





41











37


ton (eds)








Economy and Society

29


Worldrsquo

Journal of Finance

54







Economy and Society

29




Whitley R (1999)



Corporate governance, industrial relations and trends in company-level restructuring in Europe:...

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