Corporate Democracy in Norway

An introduction to the laws, regulations and practices that give employees a say in how corporations are fun in Norway

A common misconception I have to fight online when discussing the Nordic societal model is the idea that Norway is simply yet another capitalist country with free healthcare and college. What I will discuss here is one the central themes on socialism: Democratization of the economy.

The primary objective of socialism is to give workers and ordinary citizens more power over the means of production. Norwegian corporations are not fully controlled by employees. That would imply Norway was a fully socialist society. Rather Norway is a mixed economy. Power is split between workers and capitalists. In this story I will explain exactly how that is done in Norway. Similar approach exists in other Nordic countries. But it is not limited to the Nordics. Corporate democracies exists in many countries but English speakers this will be a novelty as it is to my knowledge entirely non-existent in English speaking countries such as the US, Canada, UK and Australia.

My intention for this story is mainly to present you with a resource for those who want to dive deeper. I will use the following sources for what is discussed here:

• History of Corporate Democracy in Norway — Report produced by FAFO, a research institute for social science founded by the Norwegian Confederation of Trade Unions (LO).

• Corporate Democracy — by Store Norske Leksikon, which is a Norwegian online encyclopedia owned and operated by the major educational institutions in Norway, which provide the content.

• Lovdata — Norwegian laws online.

• Corporate Leadership in Norway

As my intention if to write for a foreign audience interested in understanding the Nordics better and Norway in particular, I will try to adapt the information in a way that makes sense to Americans primarily. Why Americans? America is probably the best known country internationally, due to its major economic and political influence as well as cultural influence through the internet, movies, books and popular media in general.

Understanding Norwegian corporate democracy requires knowing a number of different concepts:

• Norwegian Confederation of Trade Unions (LO) make binding national agreements with their counterpart The Confederation of Norwegian Enterprise (NHO). These are agreements on work conditions, pensions, work hours, wages, employee representation etc.

• Corporate Assembly (Bedriftsforsamling) — Is a unique feature of Norwegian companies which elects the company Board of Directors. ⅓ Are elected by employees. ⅔ by shareholders.

• Corporate committee (Bedriftsutvalg) — Where the corporation and employees each get half of the representatives. Here all aspects of running the company which affects employees should be discussed. Employees have a right to be informed of important expansions, closing down of business or change in how work is performed.

• collective agreement (tariffavtale) — Agreement between a union and a corporation about wages and work conditions.

• Basic Agreement (Hovedavtale) — The main agreement between employee and employer confederations. This impacts all other agreements made between local unions and individual companies. You can think of this as the “Constitution” of employee-employer relations.

Looking at a large Norwegian private enterprise such as Hydro can be instructive. Or you can look at a company such a Telenor, a Norwegian multinational telecoms company.

In both cases you see a listing of shareholder elected representatives in the corporate assembly a well as the employee selected representatives.

Elected representatives for employees in Hydro. These take part in selecting the board

Usually there will be employee representatives on the board of directors as well. Employees and companies can through their collective agreement (tariffavtale) decide on how this will work.

The main bodies running a Norwegian company

So you got a corporate assembly picking a board of directors which picks the corporate management. The Corporate management are the ones actually running the company. You can think of the board of directors as sort of like parliament or congress. The corporate management is akin to the administration of executive function of the government.

Corporate assembly is a bit harder to fit into this analogy. Perhaps you can compare it with an electoral college.

However in addition to these main structure or bodies you got various committees (utvalg) which don’t really make decisions but which are about informing and discussing with employees important changes in the workplace and industry. Anyone who has been involved with any kind of union related work, knows that knowledge is power. If you don’t know what your company is doing, what the market is like, profits etc then it is also hard to make demands. Thus this is a natural part of corporate democracy.

Parliamentary Decisions or Confederation Contractual Agreements?

LO (Norwegian Confederation of Trade Unions) and AP (the Norwegian Labour Party) are usually on the same side in their views on workers and their rights. However there is one area where LO has been more on the side of NHO (The Confederation of Norwegian Enterprise).

A division between LO and AP on corporate democracy has been about whether corporate democracy should primarily be achieved through collective agreements or through laws passed by Parliament giving specific rights to employees such as representation on corporate boards. Up until 1972 there was a lot of resistance among non-socialist parties (in Norway politics is divided primarily between socialist and non-socialist parties) against corporate democracy through law. Quite puzzling LO supported them.

This may seem strange. Why would LO oppose more power to companies? The key reason is probably that corporate democracy enacted by law gave less power to the unions and made them less relevant. With expanded rights for employees through the legal system, the unions would become less important in securing workers rights.

See page 16 of: Bedriftsdemokrati, medvirkning og medbestemmelse. Notat 1 by Eivin Falkum etc.

Regardless we got the rule from 1972 of ⅓ employee representation on corporate assemblies, but this has seen very little expansion in the decades since. Most corporate democracy developments have rather happened in agreements with between the confederations.

Interestingly Germany despite often seen as less socialist than Nordic countries is more developed in this area. For large companies half the corporate board is elected by workers. From wiki on Codetermination:

Codetermination in Germany is a concept that involves the right of workers to participate in management of the companies they work for.^[1] Known as Mitbestimmung, the modern law on codetermination is found principally in the Mitbestimmungsgesetz of 1976. The law allows workers to elect representatives (usually trade union representatives) for almost half of the supervisory board of directors.

To get a full overview of corporate democracy around the world I recommend this wiki article: Worker representation on corporate boards of directors

German is not the only country with up to 50% board representation. You can find this in former communist countries such as Slovenia, Slovakia and the Czech Republic. The Norwegian / Nordic level of ⅓ is found among a lot more countries: Austria, Poland, Hungary, and Ireland to name a few.