Employee Voice Is Good for Global Management

By César F. Rosado Marzán

Can global management trust its local, national, and regional managers everywhere, all the time? What if one of those managers is particularly incompetent or corrupt? Could the firm’s global brand be destroyed by one bad apple somewhere in the far reaches of the globe?

This is one of the questions that global corporations have to grapple with today as they expand into unknown territories. Firms try to do the most they can to ensure that their local, national, and regional managers are top-notch, trustworthy performers who are well-linked to global management. But the inevitable bad apple can sometimes fall through the cracks. This is a risk that global managers must assess, take, and attempt to reduce.

Some labor lawyers have been trying to forge ways to better manage global firms. Their attempts include incorporating employees into the global governance of the firm: employees can serve as the eyes and ears of global management, in effect becoming a “check” on local, national, and regional managers. It is a way to disperse some of the power in the sub-global segments of transnational firms and to keep global management on top of things.

One of the main institutions used to establish employee representation at the firm level—the “works council”—comes from Europe. While union members are often leaders and members of works councils, these organizations are not unions. They are bodies that are part of the corporate governance of firms. They represent employees at the plant level, for the most part, and have rights to information and consultation, among other things. Sometimes they can even veto certain management decisions. As European firms have expanded, they have also organized European-wide and global works councils.

The works council seems to be spreading to the US. As the New York Times reported on September 7, the United Auto Workers (“UAW”) just announced that it was in talks with Volkswagen to organize a union and a works council in the firm’s Chattanooga plant, which has been in operation for about two years. The idea behind this union and works council is to better integrate employees in the governance of the plant. While the details of the plan are still confidential, it is likely that if the parties pull this off—if workers approve the UAW to represent them and if the works council and union are not determined to be “company unions” in violation of Section 8(a)(2) of the National Labor Relations Act—then the firm will have eyes and ears among its ranks of employees to help it better manage their big, complex, moneymaking machine. If Volkswagen and the UAW are successful and the firm remains productive and the workers content, then we may just have a new model of corporate governance brought to you by, to a great extent, labor lawyers and industrial relations experts.

The idea that far-away managers can effectively manage complex moneymaking empires across the globe through top-down strategies seems ever more difficult to fathom. But in the US, our proposed solutions for the governance of global firms are limited by our myopia about unions and employee representation bodies. We tend to think that unions are dead. Some think that labor law is a relic of the New Deal. But the insights of contemporary labor lawyers, based on worker participation in the governance of firms, may be more necessary than ever.

The Germans, who already outpace the US in manufacturing, seem to think differently about the importance of workers in the governance of firms. Perhaps we should do the same if we don’t want to find out one day that the last American widget was sold, leaving only German and other countries’ widgets available for purchase.