German and Dutch works councils: A trust theory of legal employee voice

Abstract

German and Dutch law grant works councils (WoCs) a significant role in company affairs, accompanied by the obligation to act in the organization's overall interest. However, is this sufficient to ensure meaningful WoC involvement in practical organizational decision-making? We use the well-emphasized concept of trust from the voluntary employment voice literature as a foundation for exploring how managerial goodwill translates into employment relations regimes with strict mandatory employee voice elements. We take two cases of strict employee voice systems as our litmus test: Germany and the Netherlands. Through structural equation modeling, we unravel the direct and indirect effects on employee representatives' assessment of employee voice effectiveness, considering factors such as legislation, interpersonal relationships between WoC and management team, and union involvement. Trust is positioned as a central mediator. Utilizing unique survey data from 2014 that includes responses from German and Dutch works councilors, the results indicate that legal information rights alone do not solely promote WoC involvement in both countries. Trust also plays a vital role, demonstrating a direct positive effect on having a say and acting as a mediator for timely information provision, goal sharing, organizational support, unity within the WoC (in the Netherlands), and union involvement (mainly in Germany). These cross-country differences are attributed to variations within Rhineland capitalism, where German relations are primarily characterized by a strong capital-labor divide, and Dutch relations predominantly emphasize consensus-seeking.