Vol 14 (2017) - Issue 4

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Employee Participation in Developing Countries: A Corporate Governance Perspective

1. Introduction
The concept of employee participation is a highly debated issue of corporate governance.1 Corporate governance as defined by Jensen and Meckling in 1979 refers to 'the set of mechanisms, rules, and procedures that owners and the government put in place to align the incentives between shareholders and managerial agents to effectively monitor and control the agents and their strategic decisions so that a firm’s financial and human capital will be efficiently managed in the interests of shareholders.'

Present corporate governance regimes mostly support a method of shareholder governance where the establishment is administered by shareholders and the main substitute for this has been argued to be employee participation in decision making. The board of directors (generally with decision making power), an integral structure of corporate governance, has a different size, composition, powers and functions all over the world and what system will be in place depending on a country’s socio-legal and political conditions. In the American and British one-tier-board model, the board consists of both executives and non-executives with the same responsibility, whereas in German or Dutch corporate governance model (the two-tier-board model) there are separate boards for directors and supervisors of the said directors. It is in the latter where there is a provision for directors who are representative of employees in the supervisory board, and their main function is to put forward the best interest of the employees while making important decisions. Other forms of employee participation include collective bargaining via trade unions, consultation and joint decision making. Although extensive research has been conducted about impacts of employee management in developed countries, very few research reports are available in the context of developing countries. This article will argue that properly implemented employee participation will bring a positive impact on corporate governance in labour-intensive developing country with an example of Bangladesh.
In section 2 of the article, the concept of employee participation has been explained along with the participation trends around the world with a special focus on developing countries. Section 3 makes a critical assessment and comparison between the various forms of participation, i.e. consultative participation, participation by negotiation and participation by joint decision making structures. Section 4 then moves to give economic and moral reasons behind implementing employee participation from a developing country’s point of view. Section 5 judiciously examines which of the above will be an ideal form of employee participation in a developing country. It also considers the difficulties associated with implementation of such participation. Section 6 lays out some responsibilities for both, the management and employees for getting the utmost outcome of participative management and making the incorporation of such easier.