Social Dialogue: Greater Transparency to Build Trust
The enabling bill authorizing the government to reform the labor code through executive orders has just been passed by the National Assembly. However, it will not be until late August that the content of the executive orders will be presented to the social partners.
Marie-Anne Verdier, University of Toulouse 3 Paul Sabatier; Christophe Godowski, University of Toulouse 1 Capitole and Emmanuelle Nègre, University of Montpellier
The new government’s stated goal is to decentralize social dialogue to the company level, reserving legislative action solely for fundamental rights. Beyond any doubts that may be raised about the the relevance of such a project, this approach faces a major obstacle: the mistrust that prevails today within many French companies.
A significant portion of employees do not trust their leaders
80% of executives surveyed as part of a recent study believe that labor-management relations are improving in their companies, but less than half of employees share this view. Only 55% of employees feel they have a relationship of trust with their executives.
“They keep telling us that business is bad. They’re asking us to tighten our belts. But can we believe them? We have no way of verifying it—we’re just being led around by the nose…”
When we surveyed works council members—as we did as part of a study conducted throughout 2016—this lack of trust was glaringly obvious.
The situation is particularly delicate when workforce reductions are on the agenda, as it quickly turns into a power struggle. Executives have mastered the art of presenting their company’s financial results in a way that justifies their labor policies. Jennifer Boutant and Marie-Anne Verdier of the University of Toulouse demonstrated in a study published last year that these executives managed to significantly underreport the company’s results (by an average of 4%) prior to announcing workforce reductions.
A study by Emmanuelle Nègre and Marie-Anne Verdier, co-authored with Charles Cho and Den Patten, highlights the frequent discrepancy between the reasons cited by executives to justify such actions and the company’s actual economic situation.
Employee representatives naturally suspect such manipulations but generally lack the ability to interpret the financial statements. The resulting mistrust is widespread and immediately undermines the prospects for constructive labor-management dialogue.
The company's situation is beyond the employees' control
Since 1945, however, the law has allowed works councils to hire a certified public accountant to gain a clear understanding of the company’s financial situation and restore the balance of power with management.
An expert may be called upon not only for specific events but also on an annual basis as part of the review of the annual financial statements. However, only about one in three works councils makes use of these financial professionals.
How can we explain this low usage of a program that is, in principle, open to everyone?
The fact that companies must (rightly) bear the cost of these assignments is a hindrance, particularly for small and medium-sized enterprises, which make up the bulk of the French economy.
Some executives are dragging their feet and are tempted to pressure elected officials. They do not hesitate to resort to a form of blackmail by arguing, for example, that the funds allocated to this expense could be put to better use by paying bonuses.
In this climate of pressure and conflict, some elected officials prefer to focus on social and cultural activities rather than on economic issues. In large companies, it is more common for certified public accountants to work with works councils.
Although management is accustomed to the arrival of such experts, it is not thrilled by this exercise in transparency. That’s a shame. In fact, when certified public accountants regularly work with employee representatives, we see that the relationship between employees and management gradually improves.
The former have a better understanding of the economic issues and have certain leverage when discussing the company’s decisions. The latter may be interested in the insights provided by an independent expert. A certain degree of trust then begins to develop, thereby contributing to the establishment of a genuine social dialogue.
Such a development is not out of reach. Viewing the involvement of financial professionals in works councils—not as a theoretical right but as a genuine necessity—requires systematically informing elected representatives of this possibility.
Our research shows that the failure to make use of an expert is sometimes simply due to a lack of awareness of the program. Building the skills of elected officials is now a major challenge in the effort to rebalance the power dynamic between management and employees.
Marie-Anne Verdier, Associate Professor, University of Toulouse 3 Paul Sabatier; Christophe Godowski, Associate Professor (HDR) in Management Sciences, IAE Toulouse, University of Toulouse 1 Capitole and Emmanuelle Nègre, Associate Professor of Management Sciences, Montpellier Research in Management, University of Montpellier
The original version This article was published on The Conversation.