European Companies and Nordea "Societas Europeae": Ancient name, new concept

After years of debate and discussion, the European Union's plan to allow multinational companies to incorporate as "European Companies" is about to become a reality. The statute, together with an accompanying directive covering worker involvement, was passed in October 2001, to come into force three years later. From October of this year, a brave new experiment in company governance will begin allowing companies to operate across the EU with one set of rules and a unified management and reporting system.

LONDON - The name is in ancient Latin, but the concept is new. Called "SEs" for "Societas Europeae", these new companies can be established in various ways - for example, by the merger of two or more EU-based companies, or by the creation of joint holding companies or subsidiaries. Individual companies may also choose to transform themselves into SEs if they already have an established presence in more than one EU member State.

The creation of the SE framework in 2001 heartened enthusiastic Europeans wanting to reinforce the Union's ability to operate more effectively across national boundaries. What nobody could predict then was how useful it would prove to be. Would many - would any - companies make the transition?

The news that the Scandinavian bank, Nordea, is to convert into an SE has more than local relevance. Resulting from recent mergers between banks in Sweden, Finland, Denmark and Norway, the new SE announced in June last year its intention to convert the four national banking groups into a one-bank structure. Nordea hopes to have completed its move to an SE by the end of next year.

The company has complained that its current legal structure, straddling four nations, has proved unhelpfully complex. "The change will lead to improved operational efficiency, reduced operational risk and enhanced capital efficiency," Nordea's Group CEO Lars G. Nordström said, in announcing the decision.

Nordea's conversion to an SE poses some fascinating questions for trade unions, who see this as a vital test case for any subsequent SEs. Unions and management have been given, in the EU's Directive on Worker Involvement in the European Company, detailed and complex procedures for negotiating how employees will participate and be consulted, differing in many respects from the well-established rules on creating European Works Councils. For example, companies planning to establish an SE must take the lead in initiating negotiations with unions, through the creation of a Special Negotiating Body. Nordea's management and unions are likely to be the first in Europe to put these procedures to the test.

Nordea has a strong tradition of social partnership already. Since 2001, Nordea has operated a Group Council, with four management and eight union representatives, who meet four times a year. The Group Council's mandate is to improve the bank's performance "by encouraging dialogue between management and labour union representatives, and thereby creating a productive working environment." Nordea has also established a series of Business Area Consultative Committees, which also operate at transnational level.

In line with Scandinavian law, union representatives currently have places in the bank's Governing Board. However, because of a quirk in the Swedish law, the places for union representatives on Nordea's Board would not necessarily be a statutory requirement under the new legal structure. The unions are naturally concerned to ensure that the provisions in Nordea SE are, at least, no worse than the present situation (a requirement under the European Directive).

The unions also know that the creation of an SE raises issues which challenge the traditional nation-state basis of trade union organization. The four main unions in Nordea are the respective national finance sector unions (Finansforbundet in Norway, Sweden and Denmark, Fackforbundet Suora in Finland), who already cooperate closely through an umbrella body, Nordic Finance Union, or NFU (Nordiska Finansanställdas Union). There is also a well-established Nordea Union Board, which brings together union representatives from the constituent unions.

Nevertheless, collective bargaining remains an activity, which is primarily carried out at the national level. For example, while the Nordea Consultative Committees have some negotiating powers, issues related to pay and bonuses, contractual matters and other subjects regulated by national collective agreements, remain the responsibility of national negotiators.

Will this remain tenable once Nordea is a European Company? The aim, as Jan-Erik Lindström, General Secretary of NFU, points out, is to ensure that the unions operate effectively together. "They want to act more and more like one union, speaking with one voice," he says.

But the way to achieve this is still being discussed. In a thought-provoking report entitled "One Company, One Union", a cross-union working party rehearsed a number of options, one of which would be the establishment of a new independently constituted multinational Nordea union. This is currently viewed only as a longer-term possibility. In the shorter term, the objective is to create organizational frameworks based on the existing unions, which are capable of acting in a unified manner to create "one union" in practice if not in law. The new union structures will also have to respond to Nordea's operations outside Scandinavia, particularly in Poland (where a minority of employees are union members) and in the Baltic states.

For Niklas Bruun, professor of European labour law at institutions in both Sweden and Finland, Nordea's process of turning itself into an SE deserves close monitoring. "This is really about a completely new institutional framework," he says. "Nordea is the first. It's a huge player in the Nordic markets; it's really the Nordic bank, and its impact is huge. That explains the importance and significance of the conversion process."

The agreement on Nordea's current Group Council specifies the areas which the Council has the power to discuss:

  • Review of the Group's quarterly report
  • Business areas, staff and service unit information on long-term plans, as well as on their possible effects on organizational structure, competence requirements and other implications for employees
  • Other collaboration matters which both parties agree to include on the agenda