DISCUSSION

The Relationship between Finance, Corporate Governance, and Labor: An International Perspective

Jacques Rojot
University of Paris

     These four very important papers raise fundamental issues : do we really matter, as a field of research and policy? Do industrial relations and human resource management have any impact on the management of firms? In a nutshell, one could say that these papers bring good news and bad news. The good news is that, yes industrial relations or employee relations matter for managerial outcomes. The bad news is that we do not yet know exactly how or why. The papers illustrate why this is the case, presenting four increasing levels of complexity.
     The Grahl and Teague paper tackles an issue raised already several years ago by Dan Mitchell. What are the consequences of the European monetary union and the subsequent national loss of control on monetary and most of budgetary policy for industrial relations? This paper shows that the impact of the European Union on the welfare state and corporatist policies was in each case an adaptation to the new constraints in order to maintain competitiveness.
     This result raises two questions. Can the moderation in pay levels and the streamlining of the welfare state go on for much longer without high levels of conflict, especially in some countries marked by a past history of bitter social conflict? On the other hand, will there really be a Europeanization of collective bargaining? The paper itself acknowledges that real and formal European-level collective bargaining is out of the question. It offers, however, some indicators towards a climate which could lead to such a scenario. Indeed, some authors have pointed to the appearance of so-called "arms-length" bargaining. However, even this remote possibility is unlikely. It is assumed by supporters that more contacts between European unions within the European Union institutional framework will quasi-automatically drive towards first informal, then formal, coordination and cooperation. But it is quite possible that the opposite will happen. There is as much room for conflict as for cooperation when you bring together individuals and organizations that have little in common and conflictual agendas in terms of goals and power.
     Besides, the paper presents a first level of complexity for the analysis of comparative trends and outcomes. It underlines that, within the same or little changing institutional frameworks, completely new policies can develop. In this case, it is within the unmodified corporatists institutions that employer driven policies appeared.
      The Frick paper adds a new level of complexity with a form vs. substance argument. This paper demonstrates that the same legal and institutional form, works councils, can recover various degrees of substance. The puzzling large difference between the manufacturing and service sectors when the link between increased efficiency and the presence of a works council is considered is then explained. Within the service sector, given the prevalence of the direct contact between employee and customer, compared with the manufacturing sector, the willful cooperation of the employee with company policies is of foremost importance. It is often impossible to order, buy, or control this cooperation. To obtain it voluntarily, management might be helped by the existence of a cooperative institution like a works council.
     The Black, Gospel, and Pendleton paper again adds a new level of complexity. This paper illustrates the impact of opposing trends issuing from any given institutional arrangement, with the example of two or more variables having contradictory effects at the same time, which can result in pushing the outcome to one side or another depending on circumstances or time. Here, an equity wage impacts both the larger industrial relations issues of financial participation and methods of payment of wages. It may produce different outcomes, because, on the one hand it shifts part of the labor costs to employees, but on the other hand, it gives them added power influence over wage levels as shareholders. An example of the unforeseeable impact of mediating and intervening variables within causal relationships is provided by shareholder-oriented financial variables that should drive towards an outsider regime, resulting in low job tenure and high turnover. However, these variables may have their effect mediated by another concurrent shareholder value such as the absence of a national health insurance coverage system which may decrease turnover, or at the least voluntary resignation because employees who quit are not sure to find the same firm-based health coverage again.
     The Jacoby, Nason, and Saguchi paper adds the final layer of complexity. This paper illustrates the dialectic of symbol vs. action. In agreement with neo-institutionalist theory, some firms may ceremonially adopt some institutional features that characterize the firm as "good," independently of the effectiveness of these measures (or lack thereof), and go on conducting business as needed, without any regard to these adopted institutional features in practice. Thus could be explained the absence of a link between the adoption of shareholder values and the power of human resource management in corporations. Good governance is being adopted, not necessarily practiced. Conversely, in corporations that have chosen the quite different strategy of including the human resource manager as a business partner in the top management team, in charge of jointly creating value, the power goes to human resource management.
     In conclusion, one could wonder if the "variety of capitalism" theory is itself sufficiently varied. Based on the results of the papers, the theory seems too limited. For instance, isn't there room for other models between the stakeholder and the shareholder model? A "Colbertist" model, characterized by narrow links between the state and business, comes to mind. Such a model could hold somewhat true for Russia, France, and, to some extent, Japan.

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