The Influence of Co-Determination on
Corporate Social Responsibility in
Different Varieties of Capitalism
Julia Bartosch/ Gregory Jackson / Nikolas Rathert
What Does Co-Determination Do? What Can We Learn from Research?
WZB and Hans Böckler Stiftung
May 12, 2016
Outline
1.
Relevance and theoretical background of Corporate Responsibility
2.
Data & methods
3.
Results: Effects of codetermination and works councils
4.
Outlook
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52
55
53
52
47
42
44
42
37
45
41
35
39
39
39
41
33
33
34
33
34
30
32
United Kingdom
Spain
Netherlands
Portugal
Germany
Finland
Italy
Sweden
Denmark
Norway
Australia
Austria
United States
Japan
Switzerland
South Korea
Belgium
Canada
Turkey
Mexico
Greece
Ireland
New Zealand
0
51
Average in 2008
What Does Co-Determination do? What Can We Learn from Research?
30
35
37
40
41
42
42
43
44
44
44
46
46
53
54
55
53
50
49
47
50
55
57
57
60
60
61
60
France
CSR Index in 2008 and 2013
70
20
10
Average in 2013
Own calculations based on ASSET4
Source: Jackson/Bartosch forthcoming
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Is CSR relevant for organized labor?
• For trade unions, Corporate Social Responsibility remains a controversial phenomenon
• Often CSR is associated with erosion of social partnership in favor of more managerial,
private forms of governance
• CSR is sometimes also associated with new forms of voice for organized labor (alongside
NGOs and consumer movements) that may prove effective within globalized corporate
structures and value chains
• Yes, corporate responsibility is relevant. CSR is both a risk and an opportunity. Therefore
union action regarding CSR needs to be informed by better research on its problems and
potentials…
What Does Co-Determination do? What Can We Learn from Research?
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Theoretical background
• CSR as a private governance mechanism substituting for institutionalized forms
of coordination or state regulation (Brammer et al. 2012; Jackson and
Apostolakou 2010).
• CSR as a mirror or complement institutionalized forms of stakeholder
coordination or strong regulatory institutions (Locke 2013; Matten & Moon
2008).
• Thus it is still a question how the institutional background matters and what role
particular institutions play…
What Does Co-Determination do? What Can We Learn from Research?
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Recent results: state of the art
• Within OECD countries, Jackson/Bartosch (forthcoming) find both substitution
or mirroring effects depending on the specific institutional domain. In general,
mirroring effects have greater magnitude in explaining cross-country differences
in CSR activities
• Substitution: CSR increases with more liberal forms of interfirm relations and
corporate governance.
• Mirroring: CSR also increases with more coordinated employment relations and
higher government social spending. In particular, CSR is higher in countries with
works councils, codetermination, and employment protection law.
• This also holds true for MNEs (see also Rathert 2016 and Jackson/Rathert
forthcoming).
What Does Co-Determination do? What Can We Learn from Research?
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Challenges for research
• Substance or smokescreen?
• CSR is often seen as a symbolic means to satisfy stakeholder demands
• It may even be used as a tool to shield the firm from in cases of controversial action
• Nonetheless, CSR activities may be more substantive if stakeholders are genuinely
involved
• Measuring CSR
• Most data on CSR looks only at formal adoption of policies or standards
• Less information on implementation
• Even less information on outcomes
• In this project, we ask how does institutionalized employee representation influence
CSR activities, and specifically the relationship between CSR policies and
employment outcomes?
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CSR policies, outcomes, and employment relations
• ASSET4 ESG database, WorldScope, separate Indices for positive (CSR) and negative (CSiR)
activities as well as for policies and outcomes
• OECD countries with more than 10 companies each year between 2008-2014
• Random effects panel model, controlling for company size, sector, financial performance,
R&D activity, year, country
Codetermination at country level:
• Board representation (ETUI)
• Works council rights (ICTWSS)
CSR policies:
8 items
(ASSET4)
What Does Co-Determination do? What Can We Learn from Research?
Employment outcomes:
7 items e.g. salaries, employment,
unionization (ASSET4)
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Effects on firm-level outcomes
Outcomes
Salaries
Average salaries and benefits
Total salaries and benefits
divided by net sales or revenue.
CEO's total salary divided by average
wage
Employment
Employment growth over the last year.
Percentage of employee turnover.
CSR Policy
Works council
Codetermination
No effect
No effect
Positive
Positive
Positive
Positive
No effect
Positive
Positive
Negative
No effect
Number of announced lay-offs
divided by the total number of
employees.
Unionization
Union
Negative
No effect
No effect
Negative if only information Positive
rights, positive if co-decision
rights
Positive
Positive
Negative
Positive
What Does Co-Determination do? What Can We Learn from Research?
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Positive
9
Interaction of CSR and works councils
What Does Co-Determination do? What Can We Learn from Research?
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Interaction of CSR and codetermination
What Does Co-Determination do? What Can We Learn from Research?
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Extension: Interaction of CSiR and codetermination
Labor Rights Irresponsibility
.02
.015
.01
0
0
.005
.005
.01
Linear Prediction
.015
Labor Rights Irresponsibility
0
.3
change in CSR policy adoption from -1sd to +1sd
Codetermination=0
.6
0
.3
change in CSR policy adoption from -1sd to +1sd
works_councils_rights=0
Codetermination=1
.6
works_councils_rights=2
• Similar to existing studies we find a positive correlation between CSR and irresponsible
behavior
• Irresponsible behavior is measured here as using media data on human and labor rights
controversies
• But, again codetermination moderates the relationship
What Does Co-Determination do? What Can We Learn from Research?
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Outlook
• No evidence that CSR policies improve employment outcomes. In fact, CSR policies
are sometimes associated with negative employment outcomes and more CSiR.
• However, codetermination counteracts most of these negative effects and thus
makes CSR less symbolic by involving employee representatives in its formulation
and implementation.
• Is CSR an opportunity for organized labor? Further research is needed to better
understand the conditions under which labor can use CSR to improve outcomes.
For example CSR may decrease layoffs in countries with stronger works councils.
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Thank you very much!
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