Employee influence through board representation

Published 22 September 2016

The Co-Determination Act is based on the position that the employees’organisations are counterparts to the employer. The key principle is that differences of opinion between the employer and an employees’ organisation should be resolved through negotiation. Another way of achieving co-determination in the workplace is through representation on the company board of directors.

The Board Representation (Private Sector Employees) Act empowers employees to appoint board members. The main purpose is to give employees, through the employees' organisation, a better view of and influence over the management of the company. It should be seen as a complement to the Co-Determination Act.

Employees of companies with at least 25 employees are entitled to appoint two members and two deputy members to the board. However, this only applies to companies bound by collective bargaining agreements. In companies which are engaged in different branches of industry and have more than 1 000 employees, the employees are entitled to appoint three members and three deputy members to the board.

The employee representatives are appointed by the employees' organisations. They should be employed by the company, but this is not a requirement.

If there is an executive committee, employee representatives are entitled to participate in its work. This also applies to other planning bodies within the company, where such bodies deal with issues which are to be decided on later by the board of directors.

If the business consists of a group of companies, the employee representatives on the board of the parent company may be appointed by employees' organisations which represent all the employees within the group.

Employee representatives have the same standing and responsibilities as other board members, except in exceptional circumstances where there may be a conflict of interest, such as issues regarding collective bargaining agreements and industrial action or similar issues where the interests of an employees' organisation in the workplace differ strongly from those of the employer. In these cases the employee representatives are not allowed to participate. The employee representatives are always assumed to constitute a minority on the board.

Contravening the Act may render the employer or the employees' organisation liable to pay damages.

The employee representatives on the board of directors have to be careful how they treat information that could influence financial instruments markets. As all members of the board, they are insiders and must not disclose sensitive information that could influence financial instruments markets.