Employees, Non-financial Reports and Institutional Arrangements: A Study of Accounts in the Workplace

Abstract

Non-financial reports, such as sustainability, social responsibility and ethical reports, claim to make organizations accountable to a range of stakeholders. Yet, it has been argued that such reports are of limited value in the absence of structures that enable stakeholder response to the information provided and accordingly influence decision-making. The aim of this paper is to assess the materiality of non-financial reports to employees in the light of enterprise-level arrangements where employees potentially impact decision-making. The paper draws on interviews with Danish employee representatives and archival material in organizations that claim to be accountable to a range of stakeholders, including employees, through the preparation of non-financial reports. Denmark is an interesting empirical setting for this study as arrangements such as European works councils, employee board representatives, works councils and shop stewards are widespread and regulated. This paper suggests that, from the perspective of employees, formal reports represent a limited contribution to accountability and that institutional arrangements in the workplace appear more important for this stakeholder group. The paper illustrates that these arrangements are significant vehicles for employees to demand, receive and develop accounts of organizational affairs and that non-financial reports seem insignificant as a basis for pursuing impact on management decision-making.

Acknowledgements

This paper has benefited from the helpful comments by Anne Loft, Brendan O'Dwyer, Karin Jonnergård, Kim Klarskov Jeppesen and two anonymous reviewers.

Notes

OECD uses the employment protection legislation (EPL) indicator to capture national differences in the flexibility to hire and fire. The indicator summarizes protection against individual and collective dismissals as well as the regulation of temporary forms of employment. OECD's index shows that Denmark's strictness of EPL is in the lower half of the OECD countries, slightly higher than in the UK and Ireland, but lower than in other EU countries (OECD, 2004).

It is estimated that 90% of the wage earners (blue-collar workers) and 80% of the salary earners (white-collar workers) in Denmark are unionized (Hasselbalch, 1999). Statistics of Danish employee relations show that the trade union density, for all, is 87% and the coverage of collective bargaining is 85% (Knudsen, 2004).

Five to ten employees were mentioned as the lower limit where a reasonable calculation could be made without revealing the identity of respondents.

The idea that employee knowledge can feed into corporate governance processes has also been touched upon in the corporate governance literature (see, for example, Van den Berg, 2004).

Health, Safety and Environment.

Most organizations had ongoing projects, for example, related to team organization, introduction of IT or social accounting. Project groups usually had employee representation.

This obligation to inform employees is a part of overarching cooperation agreements between the employers' and employees' organizations. The Directive on Informing and Consulting Employees (EU, 2002) also requires all member states of the European Union to implement a similar obligation to inform employees.

This does not necessarily suggest that foreign employee representatives generally have limited discretion or behave differently. Rather, this comment from the Danish representative might reflect that representatives from the home country of a transnational group might dominate the manager–employee dialogue.