Labour Relations in Central Europe

The Impact of Multinationals' Money

Jochen Tholen

• Publisher: Routledge
• Year: 2017
• Topic: Business
• eBook ISBN:
  9781351154420
• Subtopic: Business General
• Index: Business

Since 1990, foreign direct investment (FDI) has quickened economic modernization in Central Europe. State of the art management techniques and cutting edge technology have been introduced in many cases. Labour Relations is an essential factor in the organization of labour and production. At the start of the process industrial relations were characterized by the conditions existing under the previous planned economies or - as with "greenfield" investments - had to be entirely reconfigured. In the case of investments by West European companies, this book reveals various emerging models of industrial relations but also a clear tendency towards company centralization. For the time being the European Works Council still plays a subordinate role despite its potential fundamental role as mediator between East and West. Empirically nine corporations from the metal/automotive industry, the chemical, energy and food processing industries (with their subsidiaries in Poland, Czech Republic and Slovakia) are considered.

Chapter 1
Study Concept, Hypotheses and Approach

Since 1990, Foreign Direct Investments (called FDI in the following) have brought about a modernization jump amongst the respective Central and Eastern Europe (CEE) national economies. This is only incompletely illustrated through the FDI portion of 10 per cent of the overall investment amounts in Central and Eastern Europe in the period 1993–2003.

New management concepts, corporate organizations and technology on a global scale have been implemented in many cases.

But how does the situation look like with regard to the so-called 'soft factors', and in this context, particularly in the realm of relations between corporate/site management and the workforce?

The vocational/technical qualifications of the workforce in Central and Eastern Europe were – at least in the technical/natural science professions – already available. The foreign investors were able to develop their investments quite well on this basis. However, industrial relations as an essential creative factor within a company were at the commencement of the investments either characterized by the conditions during the communist time or otherwise – the case of Greenfield investments – were able to be/had to be entirely reconfigured.

Was there also a 'modernisation jump' in this realm? And if so, what did the West European – in particular German – investors bring with them? What did they take over? What did they redevelop?

Thus said, the essential starting points of a research project are very briefly outlined, and the results will be presented in the following. In general, what does 'modernisation jump' mean?

This question leads us directly to the theoretical frame within which this survey is embedded. Since the emergence of sociology in the nineteenth century, social theory and theories of modernity have formed an inseparable unity, albeit a contradictory and often paradigm-shifting unity.

Just to mention some contradictions and shifts: from the early works of Marx’s historical materialism (1857/58); Max Weber's volumes on the role of bureaucracy (1915/18/21) and the Protestant ethic (1905); Polyani's arguments about the roots of capitalism (1944); Schumpeter's theory of the contradictory or dialectic processes of developing and self-destroying capitalism (1942); to modern authors such as Giddens with his works on the consequences of modernity (1990); Habermas' theory of communication as the process of today's modernity (1981); the criticism by Lyotard (1984) that modernity has become obsolete and society has entered a 'postmodern' condition, and last but not least counter-critics for example Baumann (1997) – all these and many other social theories of modernity were/are focused only on the Western, the 'developed' part of the world. Furthermore, they were and are narrow-minded and are describing only partially the process of modernization – they do not consider sufficiently issues like gender, environmental problems, the IT revolution, and so on.

Coming from this, our understanding is that the truly global process of modernization has just started not only because of the economic and social developments in China and other (mainly Far East) countries, but because of the growing importance of issues beyond traditional theories of modernity, such as equal opportunities in general, environmental issues (global warming, and so on), the unpredictable development of IT and its impacts not only on the economy, but on politics and daily life. This widening of our perspective, started on a broader level in the last two decades of the twentieth century, and came together with the velvet revolutions in the former Eastern Bloc and the breakdown of the Soviet Union in the years 1989–1991. The famous transformation process then started – in this form as a historically singular process. Economies, politics and social life had to be transformed from a planned economy with in principle no private property with a one party dictatorship into a market orientated, capitalistic society under democratic conditions. Foreign Direct Investment (FDI) played, and is playing, a crucial role in modernizing the national economies and thus the societies. However, the economic and social transformation as a catching-up process, assisted by FDI inflows into the Central and Eastern European Countries (CEEC), is only a part of the global, more comprehensive process of modernization which started in the outgoing twentieth century.

And this process is propelled by a growing corporate power in a globalizing world (Carroll, 2004), which shifted our interest to the micro – that means the companies' – level.

And this is trendy insofar as within the academic and business community there is a growing interest in the relationship between corporate governance and employment relations (Heery and Wood, 2003).

The concept of the study, its leading research hypotheses and the empirical procedure will be explained in the first chapter.

The specific analytical reference points, embedded in the general theoretical frame of 'global modernity' are of great importance for the practical arrangement of the study and the interpretation of the empirical results (including the evaluation of documents and other studies) (Chapter 2).

Subsequently, in the third chapter there are several figures pertaining to the extent and significance of foreign direct investments in Central and Eastern Europe as well as a comparative presentation of the industrial relations in Poland, Czech Republic and Slovakia (as selected host countries of foreign direct investments). These figures are intended to substantiate the essential underlying conditions for the development of industrial relations in the Central and Eastern European Countries (CEEC).

The expert interviews on the supra-company level with representatives of trade unions, employers' associations and labour/economics ministries in Poland, Czech Republic, Slovakia and Germany as well as on the EU level (Chapter 4) were an initial empirical step towards preparation of the case studies.

Nine business enterprises (seven of them from Germany, one Swiss and one German/French enterprise) from the metal and electrical industry (including car industry), the food processing industry, and the chemical and energy industry in the differing configuration of the industrial relations with respect to their CEE subsidiary enterprises will be introduced in Chapter 5.

Ultimately, the model of the arrangement of the industrial relations will be summarily discussed in Chapter 6, from which action recommendations for actors can also possibly be derived. In conclusion, the very tempting – but perhaps not sufficient in the final analysis – question will be carefully posed: in what direction could the industrial relations on site/company level in the CEEC evolve?

We point out that on account of its specific subject matter this study can only depict a partial extract of the evolution of industrial relations in Central and Eastern Europe.

Concept

The object of the study is the industrial relations on the site/corporate level. In terms of content, this focusing is substantiated through the transformation process brought into play in the new EU member states themselves in 1990; the decentralization and fragmentation of the economic structures in these nations contributed to a substantial strengthening of the corporate/site level within the scope of the respective national industrial relations. This transformation process has been more or less completed through the EU membership of the eight CEEC on 1 May 2004.

The subject matter is the influence of direct investments by West European, mostly German companies on the industrial relations on the company/site level in selected CEEC (Poland, Czech Republic, Slovakia), which all – together with five other CEEC – joined the European Union on 1 May 2004. FDI play an important role in the redefinition of industrial relations in the national economies of these countries, and the investments from Germany are first and foremost here.

An essential orientation framework in this connection is the increasing Europeanization of industrial relations in the different countries, whether it now pertains to the EU-15 (as countries of origin for the investments) or the new EU members (as host countries) in their efforts regarding practical implementation of acquis communautaire (EC acquis).

At the same time, the main weight of this study has been placed on the industrial relations in the FDI host countries.

The general objective of this research project was the analysis of the effects of direct investments – mainly from German companies – on the development of industrial relations in the CEE subsidiary enterprises, whose external conditions are characterized by a considerable change dynamism.

The project time span (December 2002 to May 2005) comprised two essential phases of the enlargement process. The first phase, up to immediately before the accession date (May 2004), was above all characterized through the implementation of acquis communautaire in the respective national law of the three CEE states ('pre-accession period'). The second phase, immediately after accession, entailed initial practical experiences in the three CEEC concerned as new EU member states.

Research Hypotheses

Research hypothesis 1: Differing motives of the investing companies bring about differing models of industrial relations in the CEE subsidiary enterprise

Starting point

There are a vast number of strategies from companies for conclusion of FDI. In summary, two strategies (which absolutely can be mixed in practice) can be differentiated: the first motive pertains to reasons of cost (labour costs, taxes, charges and subsidies, exchange equalization, and so on), whereas the second motive concerns market reasons (opening up new markets, proximity to major customers, presence of competition, and so on). The size of the respective company, branch affiliation and ranking in the process chain quite frequently determine the investment strategy.¹

Hypothesis

These investment strategies/reasons are an independent variable for the study. We act on the assumption of the working hypothesis, according to which there is a connection between a specific investment strategy and the characterization of industrial relations in the respective CEE subsidiaries:

1. Reasons of cost are quite frequently embedded in short-term profit maximization expectations. Here the corporate management entities indicate indifference vis-à-vis the CEE subsidiaries with respect to the configuration of industrial relations. Much is left to coincidence – or better, lopsided – on the part of the business management, which is by no means to be equated with conflict-free industrial relations.
2. Long-term expectations dominate with regard to market reasons as an overriding investment strategy. Stable and dependable industrial relations have a much greater significance here. Stronger inclusion of workforces (in any form whatsoever), solution-orientated cooperative willingness and conflict settlement mechanisms are elements of this strategy. All in all, the different investment strategies also bring about quite different characterization models of industrial relations in the CEE subsidiary enterprises.

Research hypothesis 2: The nature of investment (Brownfield or Greenfield) quite often determines the degree of involvement amongst trade unions and representatives on the site/company level

Starting point

Foreign direct investments met/meet with conditions which are frequently described as Brownfield or Greenfield investments.

Hypothesis

In relation to the industrial relations, Brownfield investments signify the existence of path-dependent (unilaterally characterized in the host country of the investments) patterns of labour relations in the workplace (mostly trade union representatives), whereas Greenfield investments signify 'union-free' zones.

In the future, such a differentiation could lose significance through the following two tendencies:

1. In the course of development many original Brownfield investments have been/will be expanded on account of subsequent technical, organizational, structural and other changes expanded around Greenfield investments. These expansions could have different causes: success of the original investment and thus increased demand, alteration of the corporate group's investment objective (from short-term to long-term strategies), and so on. As a result, different models of industrial relations can be developed. This ranges from the path dependency of the existing model in the host country of the investments to lopsided path dependencies in the country of origin of the investments up to third-nation influences such as the EU – including all mixed forms.
2. As a result of the statutory introduction of representatives in the Czech Republic, Slovakia and partially also in Poland (that is perhaps even including a 'model' of dualism), the nature and conditions of industrial relations in these countries could change on a long-term basis. A crucial question as to what extent the trade unions in the CEEC integrate these new forms of representatives on the site/company level in their strategy or whether these new forms of workforce representatives might emerge as a bad competition for the traditional trade union representatives.

Research hypothesis 3: Europeanisation of industrial relations on the corporate/company/site level – the increasing role of European Works Councils with regard to mediation between industrial relations in the host countries and those in the FDI countries of origin

Starting point

A complementary level emerges through the Europeanization of industrial relations, in which the national systems continue to exist and are additionally supplemented through elements of European industrial relations.

The European Works Councils (hereinafter referred t...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of Figures and Tables
• List of Authors
• Acknowledgements
• List of Abbreviations
• Chapter 1 Study Concept, Hypotheses and Approach
• Chapter 2 Analytical Reference Points
• Chapter 3 Investments by West European Companies and Industrial Relations in Poland, Czech Republic and Slovakia as Underlying Study Conditions
• Chapter 4 The Views of the Actors on the Supra-Company Levels: Results of the Expert Interviews in the Countries of Origin and Host Countries of Investment and on the EU Level
• Chapter 5 The Nine West European Multinationals: Different Patterns of the Impact on the Industrial Relations in their CEE Subsidiaries
• Chapter 6 Conclusions
• References
• Name Index
• Subject Index