A Battle Over Worker Protections
As the EU Inc proposal makes its way through the legislative process, it has encountered its most formidable opposition from an unexpected quarter: Europe's trade unions. The European Trade Union Confederation (ETUC), representing 45 million workers across 39 countries, has launched a coordinated campaign to reshape key elements of the proposal — and in some cases, to oppose it outright.
The debate strikes at the heart of a fundamental tension in European integration: how to promote business competitiveness without eroding the social protections that define the European model.
The Core Concerns### Codetermination Under Threat
The most contentious issue is codetermination — the system, most strongly established in Germany and the Nordic countries, that gives employees representation on corporate boards. Under German law, companies with more than 500 employees must reserve one-third of supervisory board seats for employee representatives; above 2,000 employees, this rises to half.
The EU Inc proposal, as currently drafted, allows companies to choose between a one-tier board (a single board of directors, common in Anglo-Saxon countries) and a two-tier board (management board plus supervisory board, common in Germany and the Netherlands). Crucially, the proposal does not mandate employee board representation for either structure.
"The EU Inc could become a vehicle for companies to escape codetermination simply by re-incorporating as a European entity. This would be a devastating blow to industrial democracy in Europe." — ETUC General Secretary
German trade unions are particularly alarmed. The DGB (German Trade Union Federation) has called the proposal "a direct attack on the German social model" and warned that large German companies could convert to EU Inc status specifically to shed codetermination obligations.The Race to the Bottom Fear
Trade unions fear that the EU Inc's flexibility in choosing a registration country could trigger a regulatory race to the bottom. If companies can register in the member state with the weakest labor protections while operating across the entire EU, the competitive pressure could force other countries to weaken their own standards.
This concern echoes historical debates about the Societas Europaea (SE), which was ultimately designed with provisions to prevent exactly this kind of social dumping. The SE requires that employee participation rights are negotiated before the company can be formed, effectively preserving the strongest national standards. Trade unions want similar or stronger provisions in the EU Inc.
Stock Options vs. Fair Wages
The EU-ESOP framework has also drawn criticism. While proponents see harmonized stock options as essential for competing with Silicon Valley, trade unions worry about a different dynamic:
- Wage substitution: Companies could offer equity compensation instead of competitive salaries, transferring financial risk to employees- Unequal access: Stock options disproportionately benefit senior management and executives rather than all workers- Speculative compensation: Employees bear the risk of company failure — stock options in a failed startup are worth nothing
The ETUC has called for mandatory safeguards ensuring that stock option plans supplement rather than replace fair cash compensation, and that all employees — not just executives — are eligible to participate.
The Commission's Response
The European Commission has responded to these concerns with a mix of reassurance and pragmatism. In its impact assessment, the Commission argues that:
- The EU Inc includes anti-abuse provisions that prevent companies from using the new form solely to escape national labor protections- Employment law remains national: Workers are always protected by the labor law of the country where they work, regardless of where the EU Inc is registered- The proposal includes a negotiation mechanism for employee participation, modeled on the SE provisions
However, critics point out that the negotiation mechanism in the current draft is weaker than the SE model. Under the SE framework, if negotiations fail, the strongest existing standard applies by default. Under the EU Inc proposal, the default is the standard of the registration country — which may have no codetermination requirements at all.
Country-by-Country Positions### Germany: The Key Battleground
Germany's position is critical. As the EU's largest economy, German opposition could effectively block the proposal in the Council. The German government has signaled support for the EU Inc concept while insisting on robust codetermination provisions. The exact formulation is the subject of intense negotiation between the German economics ministry (generally pro-business) and the labor ministry (aligned with trade union concerns).
Nordic Countries: Seeking Balance
Sweden, Denmark, and Finland have strong traditions of employee participation, though organized differently from the German model. Nordic governments generally support the EU Inc but want guarantees that their collective bargaining systems are not undermined.
France: Workers' Councils and Beyond
France's system of comités sociaux et économiques (social and economic committees) provides employee information and consultation rights. French trade unions, notably the CFDT and CGT, have called for the EU Inc to include mandatory information and consultation mechanisms at least equivalent to existing French standards.
Southern and Eastern Europe
In countries with weaker codetermination traditions, trade unions are equally concerned but for different reasons. They worry that the EU Inc could attract companies that specifically seek to operate in low-regulation environments, potentially undermining efforts to strengthen worker protections in these countries.
Proposed Compromises
Several compromise proposals have emerged in the legislative discussions:
- Threshold-based codetermination: Mandatory employee board representation for EU Inc companies above certain size thresholds (e.g., 250 or 500 employees), regardless of registration country- Non-regression clause: A provision ensuring that converting an existing national company to EU Inc form cannot result in reduced employee participation rights- Mandatory negotiation: A requirement for good-faith negotiation on employee participation before an EU Inc can be formed, similar to the SE process- EU-ESOP safeguards: Minimum cash compensation requirements alongside any stock option plan ## The Broader Context This debate unfolds against a broader European conversation about the social dimension of economic integration. The European Pillar of Social Rights, proclaimed in 2017, established principles including workers' right to information and consultation. Trade unions argue that the EU Inc must be consistent with these principles.
The outcome of this debate will significantly shape the final EU Inc legislation. A proposal that fails to adequately address worker rights concerns risks being blocked in the Council or significantly amended in the European Parliament. But overly restrictive provisions could undermine the flexibility and simplicity that make the EU Inc attractive to entrepreneurs.
Finding the right balance between business dynamism and worker protection is perhaps the defining challenge of the EU Inc legislative process — and one that will determine whether the final product lives up to its transformative promise.
Originally published on EU Inc News
