National Labour Markets Regimes and Company-Level Restructuring
Company Restructuring in Europe and Local Union Influence
on the Management of Change.
Valeria Pulignano
Katholieke University Leuven (Belgium)
Paul Stewart
StrathclydeUniversity (Glasgow-Scotland)
Paper prepared for the Special Stream “Jobs and Joblessness in the Crisis”
International Labour Process Conference - LeedsUniversity
5-7 April 2011
Organizers: Prof. Klaus Doerre (Jena), Dr. Ian Greer (Leeds), Prof. Matthias Knuth (Duisburg-Essen), Prof. Paul Stewart (Strathclyde)
ILPC Conference 2010 – 5-7 April Leeds (UK)
WORK IN PROGRESS: PLEASE DO NOT USE WITHOUT AUTHORS’ PERMISSION
In Europeinternational companies are facing growing pressure to restructure their operations. By contrasting pressures towards convergence associated with globalisation and regional economic integration (Mueller, 1992; Sklair, 2001; Lane, 2003), a growing body of international literature in the employment and industrial relations fieldhas addressed continued national distinctiveness among national business systems (Whitley, 1999) while looking at the ways firms and trade unions respond to restructuring.This distinctiveness is related to the fact institutions are seen as embedded in distinct legal and institutional frameworks that continue to differ markedly across countries and are only being reformed gradually.There is much empirical evidence that national institutions restrain the behaviour of firms. FollowingRosenzweig and Nohria (1994), for example, national distinctive laws, regulations and customs lead international firms to adapt their approach to managing labour to national contexts. Accordingly, some commentators have started to identify a number of ‘national-level factors’ (Edwards, 2004) which condition firm-based restructuring processes. In particular, it is argued that the rules and norms that characterize both national labour and business systems are the basis of enduring national differences in the restructuring processes of international businesses within (and across) national contexts (Ferner et al., 2006). For example, national systems of corporate governance,the structures of employee representation, national employment policy and regulationare identified as important factors explaining the degree of persistent cross-national diversity in patterns of corporate restructuring (Ruigrok and Van Tulder, 1995; Andersen, 1997; Meyer et al., 2001; Edwards, 2004).
On the other hand, it can be also argued that local actors participate in the gradual redefining of institutional settings by actively engaging in the transformations of workplaces. Examples of this type of approach are Frost’s (2000) analysis of social partnership as a means to confront company restructuring in the North American steel industry and Levesque and Murray’s (2002; 2005) and Levesque’s (2007) analysis of the major patterns of union involvement in workplace change in Canada and Mexico. In addition, earlier studies also illustrate how organisational change does not always have the same significance in different national settings and how the latter lead to varied union responses to work organisation issues (Ortiz, 1999; Thompson et al., 1994; Locke and Thelen, 1995). Ganz’s (2002) also looked at the organising efforts of California unions in the agricultural sector, heavily relying on community organisations to bring immigrant labour into the union, in order to point out the variety which characterises labour’s responses to globalisation.Overall, this type of actor-centred research does not deny the possibility that path dependency constrains the number of strategic options available to local actors. More specifically, it seeks to understand thepersistence of diversity of strategic responses given by the social actors within a given socio-economic model or business sector.
This paper uses an actor-centred explanation in order to address the reasons for the variation in local union responses to company-level restructuring. Through in-depth matched empirical comparisons in Europe, the paper looks at the causal factors explaining this variation. It sheds light on the factors driving the enhancement of the local union’s capacity’s involvement in company change while shaping diversity in their response to company restructuring.These factors are identified in contextual and social factors. Contextual factors refer to both the institutional features, including labour markets, the structures of collective representations and social dialogue, and the organisational features of the plant, such as the financial situation of the company and its external attractiveness to investors, the nature and composition of the workforce, the level of centralisation and the nature of local management. The social factors refer to the extensive internal and external resources which enhance the capacity of the local union to be involved in shaping the process and the outcomes of restructuring. This includes, for example, the link with the local community, the existence of coordination policy for trade unions’ and employees’ engagement in cross-border activity within the sector at both national and/or European level. Both contextual and social factors are used not in isolation and are mutually reinforcing.Nine case studies of multinational companies that have undertaken processes of change in the Netherlands, Italy, France, Ireland and Sweden are used to illustrate the extent to which national institutions still matter when accounting for divergence across different patterns of corporate restructuring. In particular, comparison of company cases of restructuring across (and within) countries illustrates that differences in the processes and outcomes of change canto some extent be explained by national industrial relations systems, namely the different systems of workplace representation together with diverselabour market structures and policies. More specifically, the paper points out that restructuring does not always take countries in precisely the same direction, and a high degree of diversity within and between countries needs to be highlighted and explained by referring also to the capacity of the local actors to influence the outcomes and the processes of restructuring. The different local union’s response reflects such variety in the extent to which they have been involved in negotiating with management on the social consequences of company change. This illustrates the ability of the local unions as social agent to strategically use a complex array of diverse factors, at different levels, in order to negotiate against forced redundancies.
Two patterns of union responses can be identified. First,local unions have bargained with management the implementation of ‘job-to-job’ transitions (‘jobs transition’). This has implied the use of job-to-job mobility programmes as well as the combined use of internal (i.e. reduction in working time, the re-organisation of work, retraining and requalification)and external (severance payments and early retirement) flexibility measuresto manage change. It is also important to note how the relevance of the company for the industrial and socio-economic development of a particular territory(or region)has been creatively used in some occasions by the local unions in order to promote the active engagement of local government and company management to define a local plan for the re-launch of the business at risk of restructuring on a solid platform. Second, local unions have attempted to negotiate on the protection of jobs at risk (‘job protection’). This isproved to be prevalentin situations ofeither absence of local agreement between local union and management orin cases where the process accompanying the achievement of the agreement was highly contested and drawn out. In the former case, local unions were innovative in taking advantage of some company-based organisational features to fulfil members’ interests. In the latter, unions used confrontation with management, including strike action, to pressurise the company a as means of avoidingcompulsory redundancies. We found evidence that the existence of active labour market policies and protective social measures for the regulation of employment, typical of ‘negotiated’ versus ‘market’ institutional regimes,as well as thepresence of a country-based tradition of employee information and consultation rights(and social dialogue)are factors which helped local unions’ jointactive engagement in the management of change. However, empirical findings also illustrate the significance ofa local union’s ability to utiliseembedded power resources within the institutional context of restructuring. This provedto be contingent on company-based features as well as the presence of horizontal external (the territory or region) and internal(other employees and trade unions) link and horizontal union coordinationpolicy (vertical articulation).
The first section of this paper evaluates current debates on the patterns of corporate restructuring and national systems of industrial relations in general. It seeks to clarify the distinction between ‘negotiated’ and ‘market’ institutional regimes. We then present our methodology together with an overview of the findings revealing a high degree of diversity between (and within) European countries with regards to restructuring processes and outcomes including the degree of local union involvement in these. The findings sectionestablishes that this diversity cannot be solely explained by national institutional systems. Conversely, it presents selected firm-based cases to account for the inter-firm differences. It illustrates thatcontextual factors as well as the existence of extensive resources account for the diversity in the local union responses to company change.
Company-level restructuring and institutional national regimes
Drawing on institutionalist analysis,we know that different industrial relations frameworks will shape the ability of local actors to operate in situations of restructuring. Accordingly, this will produce different effects regardingeconomic and industrial change. Consistent with this, for example, in a study of three international companies which have undergone process of restructuring in four European countries Edwards (2004) shows that the pace and direction of change is various and uneven. It depends on national industrial relations structures, such as the nature of consultation processes and joint regulation, as well as the diverse nature of the national corporate governance systems. More specifically, it is argued that patterns of restructuring in internationalized firms, such as the form the restructuring takes and the social effects it produces on the workforce (for example, how to manage mass dismissals)are strongly influenced by shareholder value orientation and the strength of forms of joint regulation. Both features vary in accordance with the firm’s domestic national business system.
The functioning of national labour markets reflects diversity in the way institutions operate, and therefore reflect institutional variation with regard to,for example,systems of workforce adjustments andflexibility, training policies and skill formation. A growing stream of research has increasingly qualified this proposition. For example, analysis of different national systems of labour market regulations has been used in order to help understanding diversity inthe levels oflabour market performance (Rubery and Grimshaw, 2003). Furthermore, in recent literature increasing awareness on the need to understand how labour market institutions work has been raised in order to explain, for example, differences and continuities in the distribution and the impact of training policy (Diekhoff et el.,2007;Brunello, 2001).In addition, the framework developed byIversen and Soskice (2001) and Soskice (1999) points to the importance of labour market institutions in shaping firms’ (and workers’) incentives to investing in human resources.Hence, we consider labour markets to be a necessary complement within an institutional analysisaimed at examining how far different institutional contexts contribute to distinctively shape the processes and outcomes of company-level restructuring.
With this regard the paper departs from the distinction between ‘market’ and ‘negotiated’ regimes when we look at the diversity of national institutional contexts overall. More specifically, to assess how far different national institutions lead to divergence in the local actors’ responses to corporate restructuringwe refer not only to the systems of collective representation and legal rules but also to the specificity of the different labour market settings. Typically, for example, it may be expected that diversity in the local unionresponse to company-level restructuring reflects a more general distinction between ‘negotiated’ and ‘market’ regimes. The former usually corresponds to countries where trade unions are an established part of often institutionalized social dialogue systems and recognized as important social actors in the process of decision making (such as the Nordic countries and the continental western democratic countries). Accordingly, ‘negotiated’ regimes are characterized,among other things, by reduced scope for decentralized wage flexibility and the use of severance pay as primary measures in managing restructuring. Moreover, ‘negotiated’ regimes are coherent with a relevant role for active labour market policies and income support (Mourre, 2005). When we talk about active labour market policy we are aware of the different origins and divergent shapes active labour market policy can take across different countries (Bonoli, 2010). Therefore we use here the classification introduced by Torfing (1999) who distinguishes between ‘offensive’ and ‘defensive’workfare. Offensive workfare is the term used to describe the variant of activation typical of a ‘negotiated’ regime. It relies on improving skills and empowerment rather than on sanctions and benefit reduction as in the ‘defensive’ variant typified by the Anglo-American ‘market’ system.[1]Inthe latter, active labour market policies are considered traditionally ‘defensive’ in nature (Torfing, 1999; Barbier et al., 2004). This implies that social protection in terms of both unemployment (compensatory arrangements in the case of inability to work and unemployment) and employment (public or collective regulation of labour relations) protections are limited. This corresponds to labour markets characterized by minimum employment regulation and where market adjustments may naturally lead in the longer term to high employment levels.
To assess the validity of the above hypotheses it is important to examine the extent to which local unionresponsesto company change reflect diversity in the type of labour market environment (above)together withthe flexibility arrangements associated with it.Recent studies on restructuring have increasingly drawn attention on the micro-politics that mediate macro-institutional effects, through considerations of the capacity of local actors to use power resources in the case of cross-border restructuring (Ferner et al., 2006) and through societal institutional differences (Doellgast et al., 2009).In particular, Levesque and Murray (2002) have argued the importance of three local union power resources: internal solidarity; external solidarity of network embeddedness and strategic or discursive capacity. However, what remains lacking in these studies is an analysis of the factors leading to the enhancement or reduction of these resources.As Frost (2001) argues we need to understand the conditions under which local unions respond in particular ways to workplace restructuring. The paper attempts to start filling this gap. It argues that in order to provide a valid framework for assessingdiversity in the local union responses to change itis important to examinethe internal complex dynamics and conditionsleading local actors to accommodate path-dependent institutional approaches on the one hand, or by contrast, the dynamics and conditions leading to a rejection of dependency on the other. How can we explain the union involvement in company change? What are the causal factors accounting forlocal actors’ engagement in restructuring negotiations? And what are local actors negotiating? In order to answer to these questions we need to assess the nature of the factors driving the enhancement of local union capacity to use power resources as well as their interrelations with particular institutional (including labour markets) and organizational contexts and the strategies of both employers and employees. This is at the core of the analysis in the following sections.
Methodology and research design
The data analyzed in this paper are drawn from a three-year empirical study (2006-2009) of the processes of restructuring within firms in different national contexts in Europe, which has formed part of a broader programme of research into the dynamics of restructuring and the social partners’ response to it in Europe. The broad research programme has involved collaboration between international researchers working to common objectives whileexamining different experiences of national restructuring among the EU-15 plus Romania and Bulgaria member states. The development of this research has been supported by the European social partners (i.e. ETUC, Business Europe, CEEP, UEAPME) and financed by the European Commission.
The countries selected for analysis in this paper present a consistent degree of divergence and similarity in their institutional settings. They are: the Netherlands, Italy, France, Ireland and Sweden.The study was based on a sample of 9 firms operating in different sectors (i.e. manufacturing, post and telecommunications, transport, food) which have undertaken significant processes of restructuring of a diverse nature (i.e. delocalization, internal consolidations and changes in work organisation, closures, takeovers) in the above mentionedfiveEuropean countries (see Table 1). In four out of five countries two companies in each country were selected, as a 2-by-2 comparison allows for greater generalization. The above sectors were chosen because of their high level of internationalization and growing significance for restructuring in EU countries (EMCC, 2008). Accordingly, post and telecommunications, the financial sector and the food sector are reported as accounting for a large percentage of job losses in Europe. As reported in the EMCC 2008 report, up to mid-2008 both sectors registered an increase in the number of job losses compared with the previous period. More specifically, recorded job losses for restructuring reasons in financial services and food doubled with respect to previous years. Moreover, the post and telecommunications sector reported the second highest number of job losses due to restructuring, followed by manufacturing and transport. Of the 112,883 announced job losses in our study firms during the second quarter of 2008, 81.4% were attributable to internal restructuring, closure, delocalization and mergers and acquisitions. After mapping the population of companies in the sectors which showed higher levels of job losses attributable to corporate restructuring processes and controlling for size and unionization rate, the sample was constructed according to theoretical significance rather than statistical representativeness. High quality and high technology companies, market leaders which are economically successful and not affected by the global financial crisis, were selected. The selection of successful companies, where restructuring is unlikely to have been caused by contingent business failure or affected by the current economic crisis, represents a robust test of the institutional theoretical approach.