Big players, different rules? Multinational companies and

Paul Marginson
ETUI Monthly Forum, May 2010
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
‘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
‘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
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
Varying prominence of FDI across countries
Share of foreign–owned MNCs in
Small FDI-dependent countries (CZ, EE, HU, Large (>40% in manufacturing, >20% in total
private sector)
FDI-open countries of North-west and East EU Medium (20-30% in manufacturing, 10-20% in
(AT, BE, DK, FI, FR, LT, NL, NO, PL, RO, SE, total private sector)
Home investment-reliant – Germany
Southern EU (DE, EL, ES, IT, MT, PT)
and Small (<10%)
Source: OECD, UNCTAD, EIRO national centres
Collective bargaining coverage [1]
MNCs collective bargaining coverage
Higher than average
(Virtually) 100% for the whole economy AT, BE, FR, IT, RO, SI
Same as average
Lower than average
Source: EIRO national centres
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
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,
 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)
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
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
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 companyspecific 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.
Internationalisation of MNCs’ management
 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
 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
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
 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
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
 ‘constructive’ side of the coin: identification of ‘best practices’ and pressure to adopt
 ‘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
Incidence and impact of coercive comparisons
 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
 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
International and European Framework
 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
 further source of transnational agreements: SEs (eg Nordea)
 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
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
 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
 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
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
 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
 ‘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
 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