Employee Representation on the Board

Maria Weilmann Schou & Line Ravn

Student thesis: Master thesis

Abstract

This thesis examinant employee representation on the board and the role the union representative can have as the employee chosen board member.
The thesis has from a principal-agent theory and behavioral agency theory point of view assessed the incentive, the employees have to choose an employee representation on the board. This shows that the principal-agent theories fundamental assumptions, about self optimizating employee, cannot stand alone. This is, among others, because the employees cannot by themselves create a majority on the board to complete decisions. Instead some of the explanation should be found in the behavioral agency theory. Since the share of firms that have employee representatives on the board only, make up 25% of the firm with the possibility to doing so. We have concluded that the provision, about employee representation, in the Danish company law selskabsloven and bekendtg√łrelsen om medarbejderrepr√¶sentation i aktie- og anpartsselskaber, cover the purpose in the right way.
From an economic point of view, we conclude that there is no reason not to include all companies, contrary to the current requirements about 35 employees over a 3-year period. From the legal analysis, we can conclude that some of the reason the proportion is not higher, is because the election process is complicated. Therefore, we assess the possibility to simplify the election process. The result is that a removal of the yes/no-voting will remove the intention that employee representation on the board has to come from an employee initiative, and make it a requirement instead of a possibility. We also look at the possibility to remove the election of the represented, by make the union representative an automatic employee represented.
Finally, we conclude that employee representation is a good thing for the Danish companies. This is due to Danish conditions such as a historical collaboration between the employee- and employer organizations as well as a recognition of the employees as a key stakeholder in the company. However, where employee representation appears to be acting as an asset to the board, a guarantee of the role of representatives to the union representative as employee-elected board member is not recommended. This is due to the social development with increased globalization as well as a balance between the interests of the trust representative himself.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2017
Number of pages136
SupervisorsThomas Poulsen