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A European Alternative? Active labour market policies and “insider” corporate governance

Tony Cutler
p. 83-101


The object of this paper is to discuss the relationship between two areas which are rarely, if ever, connected, active labour market policy and corporate governance. The ‘European’ alternative referred to in the title relates to the possibility of discerning an ‘Anglo-Saxon’ and at least a continental ‘European’ variant in both areas. The thesis advanced in the paper is that there is an apparent consistency between ‘human capital development’ approaches to ALPM and ‘insider’ corporate governance as a ‘European’ alternative to ‘labour force attachment’ approaches to ALPM and ‘outsider’ corporate governance.

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1The object of this paper is to discuss the relationship between two areas which are rarely, if ever, connected, active labour market policy (henceforth ALPM) and corporate governance. The ‘European’ alternative referred to in the title relates to the possibility of discerning an ‘Anglo-Saxon’ and at least a continental ‘European’ variant in both areas. The thesis advanced in the paper is that there is an apparent consistency between ‘human capital development’ approaches to ALPM and ‘insider’ corporate governance as a ‘European’ alternative to ‘labour force attachment’ approaches to ALPM and ‘outsider’ corporate governance. However, the question mark in the title relates to problems and tensions in insider forms of corporate governance which may undermine more optimistic expectations from this ‘alternative’.

2The paper is divided into five parts; the first discusses the distinction between the two forms of ALPM referred to above and relates them to ‘Anglo-Saxon’ and (continental) ‘European’ approaches to this policy area; the second discusses the distinction between insider and outsider forms of corporate governance and contrasts, in particular, France and Germany as examples of the former with the USA and the UK as examples of the latter. The third section discuses the theoretical basis for connecting corporate governance and labour markets and explores the implications for ALMP; the fourth section points to some of the problems of anticipating ‘progressive’ effects for labour from ‘insider’ corporate governance; and a conclusion draws together the arguments to suggest limits on the impact of insider corporate governance on labour market policy generally and ALMP in particular.

Variants of Active Labour Market Policy

3 The literature on ALMP includes a broad distinction between two variants. Thus (Peck, 1998) points to a ‘labour force attachment’ (henceforth LFA) or ‘work first’ approach and a ‘human capital development’ (henceforth HCD) stance. As the term suggests ‘labour force attachment’ involves putting the emphasis on getting benefit claimants into the workforce with a relative (and in some cases virtually absolute) lack of concern as to the quality of this employment in terms of features such as pay levels, scope for promotion or job security. As Peck (1998) argues, with respect to a ‘classic’ example of LFA, operating in Riverside County, California in the mid 1990s, the approach is based on the idea that the benefit claimant should regard ‘any job as a good job’.

4In contrast HCD approaches are concerned to combine access to training and education with job search and job placements. Implicit in such an approach is that the quality of employment does matter and that improving education and skills will give programme participants access to not just a job but the prospect of higher pay and more secure employment.

5It might be expected that such distinctions would also be reflected in the relative cost of programmes. For example, in his study of ALMPs in California Peck (ibid.: 539) cites the following figures from the (US) Manpower Demonstration Research Corporation evaluation of ALMP initiatives in different California counties. The Riverside programme cost $1,597 per programme member whereas in  the more HCD orientated Alameda and Los Angeles programmes (see ibid.) the corresponding figures were, respectively, $5,597 and $5,789.

6The diversity of experience within a single (if very large) US state should necessarily counsel caution regarding broader international comparisons. However, the cost differences within California suggest that expenditure levels on ALMPs could serve as a rough proxy for whether national programmes have an HCD or LFA orientation. In this respect it is interesting to note the contrasts in Tables 1 and 2.

Table 1: Public Expenditure on ‘Active Labour Market’ Policies as a Percentage of Gross Domestic Product
























United Kingdom





United States





Source: OECD

Table 2: Public Expenditure on ‘Active Labour Market’ Training Policies* as a Percentage of Gross Domestic Product
























United Kingdom





United States





Source: OECD (*) : training for unemployed adults, training for employed adults, support for apprenticeship and related training forms of youth training.

7Table 1 gives the OECD’s estimate of overall public expenditure on ALMPs as a percentage of Gross Domestic Product (GDP). For the last year in which a full comparison can be made (2000) for the selected countries there are marked differences between France, Germany and Sweden and the UK and the USA. Overall ALMP expenditure as a share of GDP in the former group is around three and a half times the UK and eight times the US level. A second broad financial indicator is shown in Table 2. This shows expenditure on training (of employed and unemployed adults and support for various kinds of youth training) in ALMPs Again there are marked differences with the continental European countries registering expenditure levels at least double the UK and eight to ten times the US level. Thus it is possible to see an apparent divergence with respect to the extent to which national programmes exhibit an HCD or LFA orientation.

8These contrasts also relate to an important dimension of the debate on ALMPs. Critics of LFA approaches have argued that even if they succeed in one dimension, namely moving claimants into work they are unlikely to move such claimants out of poverty. A theoretical basis for this argument is given by Solow (1998). He argues that LFA programmes run the risk of creating sharp downward pressure on wages through significant increases in competition for ‘entry level’ jobs. Thus, even if increased labour supply has some positive effect on the demand for labour (i.e. employers are encouraged to expand on the basis of a supply of low paid labour), Solow takes the view that this effect is likely to be overwhelmed by the increased labour supply for such jobs. Peck’s work on Riverside supports such a view. He points out that, even in relatively favourable conditions for the creation of entry level jobs, the Riverside programme did not consistently lift claimants out of poverty. The favourable conditions included strong population growth in the first half of the 1990s and an influx of a large number of small manufacturing and service firms giving ‘a buoyant supply of contingent work’ (Peck, 1998). Nevertheless Peck notes (ibid.) that participants in the Riverside ‘experimental’ programme were only (on average)  $52 per month better off than the control group and that two thirds of experimental group members were not working at the time of the third year interview and a half had never worked in the three years of the evaluation study. In this respect he quotes (ibid.) the MDRC President, Judith Gueron’s estimate that ‘the downside to Riverside is that families weren’t moved out of poverty’.

9Arguably these results are both congruent with the narrow character of LFA programmes and the consequent limit on access to lower quality employment. Advocates of HCD variants thus argue that they improve not just the capacity to find work but also work of higher quality. In turn given that HCD approaches are more prevalent in countries such as France, Germany and Sweden they constitute a ‘European’ alternative to more neo-liberal base LFA programmes. In the next section the aim is to examine a parallel distinction that between ‘insider’ and ‘outsider’ corporate governance.

Variants of Corporate Governance

10 In this section the aim is to examine a further dimension of the ‘European’/’Anglo-Saxon contrast, that in corporate governance. A generic definition of this area is that ‘corporate governance is the system by which companies are controlled’ (Cadbury, 2002). However if this implies a structure of accountability it is not clear how this structure should operate. One view is that that ‘boards owe their duty to their shareholders’ (ibid). However, an alternative view is that corporate governance is ‘the process by which corporations are made responsible to the rights and wishes of stakeholders’ (cited in ibid.).

11Stakeholding reflects a broader view of corporate accountability; for example Freeman, (1997) argues that ‘stakeholders are those groups who have a stake or claim on the firm’ and he lists suppliers, customers, employees and local communities and shareholders in this category.

12These different views regarding patterns of corporate accountability can also be connected to theory and evidence on international variants of corporate governance.

13In characterising differences between forms of corporate governance a frequently used distinction is between ‘outsider’ and ‘insider’ structures. In turn particular national economies have been seen as exemplars of such forms with the UK and the USA instances of ‘outsider’ structures; and Germany and France ‘insider’. In outsider structures ultimate control over corporate policy is exercised by groups distanced not only from the day to day management of the enterprise but also from the determination of strategic policy. In contrast, in ‘insider’ structures influence over strategic policy lie with groups which have a broad business and/or employment relationships with the enterprise. In outsider structures it is a norm that ultimate control should lie with shareholders who, since they have no close business or employment relationship with the enterprise, are assumed to focus predominantly on the financial return on their investment (Vitols, 2001). In contrast the more diffuse business and/or employment relationship of insiders is seen as operating to locate financial returns as one of a set of corporate objectives which may include maintenance of employment, of relationships with suppliers of good or services or of credit.

14An important aspect of this difference is in the forms of both shareholders and of shareholding. ‘Outsider’ shareholders are usually financial institutions which hold equity but are not engaged in the provision of long term credit to the enterprise; and individual shareholders who are not employees. Institutional shareholders characteristically hold relatively small stakes in any single enterprise with their total shareholding held in a diversified portfolio (ibid.).

15Insider groups include banks which may be providers of long term credit as well as shareholders; other industrial enterprises which may be supplier of goods and services to the enterprise; employees who, if shareholders, combine an employment interest as well as a shareholding interest; and the state (national or local) whose holding may be viewed in the context of employment or regional economic policy considerations. An illustration of national differences in this respect is provided by Vitols (ibid.) who points out that other industrial and commercial enterprises (42.1%), banks (10.3%) and the state (4.3%) accounted for 57% of shares in circulation in Germany in 1995. The corresponding figures for the UK were 4.1%, 0.2% and 2.3%. On the other hand in the UK various forms of insurance, pension and investment funds owned 50.3% of shares in circulation and households 29.6%; the respective figures for Germany were 14.6% and 2% (ibid.).

16A further contrast relates to the size of the quoted corporate sector. Outsider structures using portfolio forms require a diverse range of investment opportunities and hence a large quoted corporate sector but this is not necessary where the investment is governed by ‘strategic’ considerations. Again there is data which reflects these differences in national economies. A common if crude  measure is to take stock market capitalisation as a percentage of national income and, for example Reberioux (2002) cites data that stock market capitalisations as a percentage of Gross National Product  in 2001 were 166% for the UK, 152% USA, but 61% Germany and 103% France.

17These contrasts are seen as resulting in variations in shareholder orientation. Thus it has been argued that ‘large German banks have tended to view their shareholdings as a mechanism for protecting their loans and strengthening their business relationships with companies rather than as a direct source of income’ (Vitols, 2001). Thus variations in shareholder orientations between the UK and Germany have been characterised as being dominated, respectively, by ‘dispersed ownership by share-price-orientated financial institutions’ and ‘concentrated ownership by actors pursuing a mix of financial and strategic goals’ (ibid.).

18A further important distinction relates to the scope of shareholder power. In this respect a much discussed institutional pattern is the German system of co-determination. This works at two levels: the Works Constitution Act (1972) gives an entitlement to elect a works council with a variety of negotiating rights over, inter alia, staffing levels, introduction of new technology and policy on redundancies (Vitols 2001; Jurgens and Rupp. 2002); at the strategic level, under the 1976 Co-Determination Act, in enterprises with 2000 or more employees, half of the seats on the supervisory board are made up of employee representatives  (Vitols (2001; Jurgens and Rupp. 2002). The supervisory board is distinguished from the management board which is composed of senior corporate managers and is responsible for day to day corporate decision making (Vitols (2001). While, under this structure, the Chair of the supervisory board, with a tie breaking vote in the event of a division on policy between shareholder and employee representatives, is a shareholder nominee, there is significant worker representation on a body with strategic decision making power.

19A final effect of the insider/outsider distinction is the impact on a market for corporate control. Such a market can be argued to be both an effect of and condition of existence of an outsider structure. It is an effect since the lack of more diffuse business/employment relations on the part of shareholders means that shares are ‘for sale’. The central mechanism for outsider corporate control is ‘exit’; unsatisfactory corporate performance is expected to be punished by hostile takeovers mounted by an alternative management team. A ‘strategic’ approach to the holding can mean that shares are likely to be held in large blocks which are ‘not for sale’; and the size of the quoted corporate sector is relatively restricted. Finally co-determination can mean that post-acquisition terms and conditions of employment may have to be negotiated rather than unilaterally imposed (Vitols, 2001). Again there is data to support insider/outsider distinctions: Jurgens and Rupp (2002) cites a J.P.Morgan research report which identified 222 hostile takeover bids from 1990 in Europe (the study was published in 1999); of these 148 took place in Britain and 4 in Germany (ibid.).

20Any such broad distinctions must always admit of caveats. For example, while both French and German corporate governance have ‘insider’ characteristics there are also significant differences. The forms of co-determination in Germany mean that there is an explicit form of representation of a labour ‘stakeholder’. However, there is no equivalent in France where, as in the case of the USA and the UK, there is a strong role for the Chief Executive Officer in corporate decision making (Hancke, 2001). Nevertheless there is sufficient evidence to suggest that, in terms of forms of corporate accountability, there are significant contrasts between insider and outsider regimes. In the next section the aim is to elaborate the theoretical basis for the links between corporate governance and ALMPs and to trace the possible effects of the former on the latter.

Corporate Governance and Active Labour Market Policies

21 The aim of this section is to discuss arguments which seek to trace the impact of corporate governance differences on labour markets and to relate such arguments to ALMPs. In this respect a crucial contemporary development relates to the capital market and the concept of ‘shareholder value’. In effect shareholder value represents an extension of outsider concepts of corporate governance. Such concepts see accountability for corporate performance as being to shareholders. Shareholder value conceptions stress that the corollary of this pattern of accountability is performance measures which operate as a discipline, in shareholder interests, on corporate management. An important element of such disciplines are ‘metrics’ such as ‘economic value added’ (EVA). EVA stipulates that corporate entities should be judged on the basis that they should generate ‘positive’ EVA. This is calculated by taking a measure of profit and deducting an annual capital charge derived by  multiplying capital employed by a target rate of return on capital employed (ROCE) (Froud et al, 2000a). It is common in such approaches to set a demanding ROCE target, usually in the 12-15% range to ensure that corporate managers deliver ‘shareholder value’. Such targets have significant links with employment. As Froud et al (ibid.) have shown, with reference to British data, the characteristic 12-15% ROCE targets are difficult to attain. For example an analysis of the largest 200 UK companies found that only a minority achieved ‘positive’ EVA in 1997-8 (ibic.).

22Such problems relate to structural factors. In many consumer goods markets (e.g. automobiles, consumer electronics) levels of household ownership of the products concerned are very high and sales and profit growth correspondingly low. The limits on profits in turn mean that there is a greater chance of the corporation registering ‘negative’ EVA. Such results, however, from a shareholder value standpoint, have to be corrected. Given structural constraints there is likely to be a significant effect on labour. Profit is paid from corporate value added and the largest share of value added is labour costs (for the social and economic implications of using a value added based approach to corporate financial performance see Shaoul, 1998).  In a context of limited growth ‘turning round’ EVA via a boost to profits will involve cuts in labour costs. Alternatively EVA can be improved by reducing capital employed. Both options have implications for employment levels either via the direct impact on labour costs or via reduction in capital employed (perhaps through closure of production facilities). Thus EVA as a ‘tough’ approach to outsider corporate governance would appear to carry potential negative implications for labour (Froud et al. 2000b).

23What then are the implications for ALMPs? HCD approaches to the latter suggest that improving skill and education levels will be conducive not only to enhancing employment opportunities but also quality of employment. However, some research has urged scepticism with respect to such claims. Thus a review of studies of the impact of HCD orientated programmes found, in the United States, that schemes with an  additional training element had no greater impact on the employment prospects and earnings of participants than more LFA based approaches (Robinson, 2000: 21) and broadly similar effects have been found in the UK (ibid.: 21-2).

24One way of interpreting such findings would be to suggest that the additional training was insufficient and there was some limited evidence that where scheme participants achieved notably higher qualifications there was a positive differential effect on earnings (ibid.). This might suggest that HCD aspects need to be strengthened. However, there is also the question of the demand side. Outsider corporate governance could be seen as conducive to a higher level of labour turnover in part driven by the need to accommodate pressures for shareholder value and a relative lack of concern in developing and using higher levels of workforce skills because this requires a commitment to stability of employment which it is difficult to deliver in such structures (for arguments of this type with respect to the USA see O’Sullivan, 2000).

25Conversely since insider structures both insulate corporate managers from capital market pressures (in part by decreasing the possibility of hostile takeovers) and, at least in the German case, allows for worker representation at board level then it can be argued that this produces an environment more conducive to the development and valuing of skills. If this is the case then the implication for ALMPs could be that HCD programmes could benefit from the complement provided by insider corporate governance. The policy implication would thus appear to be that to promote effective HCD programmes it would be desirable to, at the very least, defend and where feasible extend the scope of insider corporate governance and, in this respect the combination of HCD active labour market programmes and insider corporate government represents a ‘European’ alternative. However, in the next section some possibly significant problems with this approach will be discussed.

Problems of the ‘European’ Alternative?

26In this section the aim is to consider four potential problems with the ‘European’ alternative outlined in the previous section. The first is that, in effect, whatever the hypothetical virtues of insider corporate governance may be, its distinctiveness has already been eroded. There has been a convergence around outsider structures and thus the insider variant in Europe has disappeared.

27An issue which has been investigated in this respect is whether there has been a shift in the pattern of shareholding so that ‘outsider’ shareholders are becoming increasingly significant in erstwhile insider structures. A potentially important indicator here is whether corporate equity in insider economies is being acquired by foreign, particularly institutional, investors. An insider case which does exhibit a major change in the pattern of shareholding is France. One of the central features of French corporate governance was a structure of cross shareholding involving both major financial and industrial companies (for a discussion of the major groups see Morin, 2000) In the French case privatisations operated to reconfigure (Morin, 1996) but also to reinforce the cross shareholding in many of the largest corporations. However, a major unravelling of this pattern appears to be occurring. France is characterised by a very high level of foreign ownership of equity (35% in 1997 as against 9% in Britain, Morin, 2000). Equally the extent of cross shareholding appears to have fallen since 1990 (ibid.) and a substantial part of foreign equity is owned by particularly US or British investment funds (ibid.). However, this is not a universal pattern in insider structures. In Germany shares purchases by foreign investors have fluctuated during the 1990s (Jurgens and Rupp, 2002) and at 16% foreign ownership of corporate equity is well below the French level.

28Another dimension relates to whether institutions which previously operated according to insider norms are shifting their practices in an outsider direction. In this respect the clearest evidence of change relates to German banks and insurance companies. A number of commentators have pointed to major financial institutions such as Deutsche Bank and Dresdner Bank creating subsidiaries whose role is to ‘manage’ their holdings in a similar way to those characteristic of pension and mutual funds in outsider economies (Jurgens and Rupp, 2002; O’Sullivan, 2000: for similar trends in France see Morin, 2000). This shift to a more ‘active’ management of shareholdings appears to be reflected in data on recent patterns of share acquisition in Germany which show a declining role for banks and insurance companies in relative terms (Jurgens and Rupp, 2002). This could have the potential for significant change in German corporate governance. If large blocks of equity in major German corporations become ‘for sale’ then there ought to be scope for the development of a market for corporate control (see ibid. for major German companies which could be affected by such a trend).

29Nevertheless the situation in Germany is not entirely clear. For example, while share divestment by major financial institutions could be seen as moving the pattern of shareholding from an insider to an outsider orientation there is an alternative view that the change in the practice of financial institutions will not have this overall effect. Deeg and Perez (2000) argue that ‘…even  as banks have divested themselves of, or diluted their equity holdings in nonfinancial firms, other nonfinancial firms have been acquiring and/or building up equity stakes in each other’ thus maintaining the dominance of insider patterns of shareholding

30A further crucial area of investigation concerns the abridgement of shareholder powers. Given the significance of co-determination the focus is on Germany in this respect and here the pattern is mixed. Table 3 shows changes in the composition of employment with a larger percentage of workers employed in small enterprises has eroded the scope of co-determination in Germany.

Table 3: Coverage of Forms of Codetermination in the German Private Sector

Level of Codetermination



Supervisory Board and Works Council



Works Council Only






Source: Jurgens and Rupp (2002)

31Thus, by the mid 1990s, in the putative land of codetermination, over 60% of private sector workers were employed in organisations with neither form of codetermination. However, while codetermination could be seen as inimical of the pursuit of the financial interests of shareholders, there has been no move to either repeal or significantly modify the German codetermination legislation.

32A possible result of changes in the pattern of shareholding would be the emergence of a significant market for corporate control in previously insider economies and the takeover of Mannesmann by Vodafone might be seen as a harbinger. As Jurgens and Rupp (2002) point out, Mannesmann could be seen as a representative of ‘rhenish capitalism’ with the Chair of the supervisory board held by the CEO of Deutsche Bank and the position of first deputy on the board by a senior official of IG Metall.

33Furthermore, the takeover was notable for the lack of defence moves by ‘Deutschland Inc’ (ibid.). There was no Deutsche Bank involvement in the takeover defence nor the attempt to broker the intervention of a German ‘white knight’ (ibid.). On the other hand this case however significant as an individual mega merger cannot necessarily be seen as symptomatic of an acceptance of a significant market for corporate control in Germany.

34A final indicator of change is the use of return on capital targets both at a corporate and business unit level in insider economies. This has particular significance in the German case. This could mean that the EVA based pressures discussed above are now manifesting themselves in previously ‘insider’ structures. There are numerous instances of major German enterprises adopting such financial targets including Daimler-Chrsyler, Metallgesellschaft and Siemens which have adopted return on capital targets for business units (Jurgens and Rupp 2002). However, it is important to bear in mind that the extent to which such targets which have all been adopted in the last five years (ibid.) shift management orientations has still to be determined by empirical research. Inter alia, two issues can be raised in this respect: the impact of the targets will depend on the response to failure to achieve them (e.g. do they result in cuts in employment costs and loss of employment); and the rigour of the targets will also relate to the way in which ‘capital’ is defined in accounting terms.

35Consequently it is reasonable to conclude that it is too early to advance the claim that continental European insider corporate governance is a thing of the past. Significant aspects of these structures remain intact and it is not yet clear that changes such as the much higher level of foreign ownership of equity in France or the apparent spread in the use of EVA techniques have yet transformed the overall pattern of corporate governance.

36A second problem is of a rather different nature. It has been a characteristic of debates that the favoured approach should be exported. An interesting example is the study of Volkswagen (VW) by Jurgens (2002). He argues VW has achieved a ‘fine balancing of stakeholder interests’ (ibid.) which has allowed both ‘investment and innovation’ which in turn has underpinned ‘long term stability of employment’ (ibid.). The logic of this position would appear to be that such a model ought to be emulated including if this were feasible in outsider structures which might be seen to fail to achieve such balancing. However, arguably such views run into a variant of a problem characterised by Keynes as the ‘fallacy of composition’.

37This argument was advanced by Keynes in the context of suggestions, advanced throughout the inter-war period, that a significant reduction in unemployment could be effected if workers agreed to take a cut in wages. Keynes commented on this approach as follows: ‘the advantages to employers of a general reduction of wages are…not so great as they look. Each employer sees the advantage to himself of a reduction of the wage which he himself pays and overlooks…the consequences of the incomes of his customers’ (Keynes, 1931, emphasis in the original). The ‘fallacy’ identified by Keynes relates to an illegitimate jump between levels. A wage cut in a particular enterprise might encourage an employer to increase employment because enterprise costs have fallen and there is no negative impact on the overall level of demand. However, a general wage cut would not have a similar affect because the negative impact on overall demand would take place. Arguably the same ‘fallacy’ can be seen with respect to the export of insidere corporate governance. Table 4 shows the sales and market share of the leading automobile companies in Western Europe.

Table 4: Passenger and Light Commercial Vehicles Registrations in Europe by Manufacturer, 2002



Market Share

Volkswagen Group



Peugeot Citroen






Ford Group



General Motors Group



Fiat Group






Toyota Group






Other Japanese Marques



Korean Marques



Other Marques



Source: Peugeot-Citroen Annual Report

38What is immediately striking is that three major EU economies are represented by at least one large enterprise (Germany, France and Italy) but a fourth the UK is not. Keynes’s argument is based on the idea that a mechanism which is effective at enterprise level will not be at an aggregate level. If this framework is applied it is possible to see that Jurgens’s approach is based on the performance of VW in the current state of the EU automobile market. While the lack of a British representative in Table 4 can arguably be related to a number of determinants it might be argued that the combination of neo-liberalism and outsider corporate governance was a factor (see Williams et al., 1987 for a discussion of the forces leading to the absence of a British ‘champion’ in automobiles ). If the UK had been  more willing to embrace ‘insider’ approaches then the survival of a major UK automobile producer might have been more likely. However, another significant feature in the Table is the fragmentation of this market, a feature which makes the survival of all the major enterprises more problematic. A hypothetical major British producers with around a market share in the 10-15% range would increase this fragmentation further. In other words like the wage cut for the individual employer insider corporate governance may work for a particular enterprise but the same policies (in the absence of means of increasing the overall size of the market) will not have a general positive impact.

39The third problem relates to a possible irony in the conditions of existence of ‘stakeholding’ corporations. In many respects the quintessence of such corporations are represented by German producers engaged in the production of top of the range manufacturing products embodying high levels of engineering skills. Such corporations, in addition to co-determination, can boast high levels of pay and relatively low working hours (for example German hourly earnings in manufacturing are over 20% higher than the UK level). However, as capitalist enterprises such corprorations have to recover these costs in the market. Here there can be interesting ironies. Table 5 shows the revenue per vehicle of the Mercedes Benz/Smart division of Daimler-Chrysler.

Table 5: Mercedes Benz/Smart Cars Revenue per Vehicle Western Europe and the USA, Euros.





Western Europe










Source: Calculated by Daimler Chrysler 20-F Forms

40As can be seen from the table, average revenue per vehicle is in the range of 40-50% higher in the United States for this company than in Western Europe and in the United States accounted for  17% of Mercedes Benz/Smart sales but 22 % of sales revenue in 2002. The irony here then is that the ‘stakeholder’ employment settlement in this company is to a considerable extent underpinned by sales in the most ‘flexible’ labour market of the developed capitalist countries with some of the highest levels of wage inequalities.

41The international dimension of capitalism is also relevant to the final problem. The characteristation of companies in insider corporate governance structures as ‘stakeholding’ does not always reflect the nature of their international operations. For example one commentator has argued: ‘descriptions of German codetermination refer to the right to half the seats on the supervisory board in organisations of the relevant size’ a more accurate statement would ‘be that half of these seats…are filled by representatives of German employees’ (Cadbury, 2002). This raises the question as to whether such international operations reflect putative ‘stakeholding’ practices in the ‘home’ base but not in overseas operations. Tables 6 and 7, for example show trends in sales and employment at Chrysler Group, the American volume car division of Daimler-Chrysler.

Table 6: Chrysler Group Unit Sales (Cars and Trucks) and Employment





Unit Sales





Employment Level at December 31st





Source: Daimler Chrysler, 20F Forms

Table 7: Chrysler Group: Percentage Change in Unit Sales and in Employment 1999-2002, numbers

Percentage Change 1999-2002

Unit Sales


Employment Levels


Source: Calculated from Daimler Chrysler, 20F Forms

42Here we seem far away from the world of stakeholding. The company facing the impact of much weaker economic conditions in the US economy experienced a sharp fall in sales but it has reacted in a quintessentially flexible way, thus while unit sales have fallen by around one sixth over the period 1999-2002, employment has fallen by nearly a quarter. This reinforces the concerns in the quote above, who are the stakeholders here, workers or workers in the home base?


43The argument advanced in this paper is that HCD approaches to active labour market policy have the promise of giving those on such programmes the possibility of longer term and better paid employed. Arguably the potential for ‘stakeholding’ in insider corporate governance systems seem to complement such approaches negatively via protection from the demands of capital markets and, in some cases, positively via employee representation. However, this congruence is not unproblematic. At least at the moment a case can be made that, if not unaltered, continental European insider corporate governance is still intact. However, there are dangers in exaggerating its positive impact. The fallacy of composition problems indicates that, in cases of limited market growth the addition of a further ‘progressive’ enterprise might make it more difficult to sustain stakeholding in the existing enterprises. There is also, in some instances, the irony that the high value added products in ‘stakeholding’ companies which sustain their labour settlement and, where ideally graduates from HCD programmes might wish to work, may themselves be bought by the affluent in highly inegalitarian economies, most notably the USA. Finally is the European alternative a general alternative or an alternative for Europe? As the Daimler Chrysler example showed the high levels of labour turnover often seen as damaging to HCD based active labour market programmes would appear to be being practised in Chrysler Group while stakeholding is seemingly reserved for Germany. None of this discussion should be seen as an argument against HCD active labour market programmes or against insider corporate governance. What it is intended to convey is that the articulation of the two wings of the ‘European’ alternative are not likely to be enough. As so often the vexed issue of the overall level of demand and its impact on employment generally and active labour market policies in particular remains crucial (for a discussion of the record in Sweden in this regard see Robinson, 2000), insider governance and HCD programmes may help but even together they are not likely to  provide an ‘alternative’.

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Tony Cutler, « A European Alternative? Active labour market policies and “insider” corporate governance  », Observatoire de la société britannique, 2 | 2006, 83-101.

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Tony Cutler, « A European Alternative? Active labour market policies and “insider” corporate governance  », Observatoire de la société britannique [En ligne], 2 | 2006, mis en ligne le 01 février 2011, consulté le 24 mars 2017. URL : ; DOI : 10.4000/osb.141

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Tony Cutler

Lecturer à l'Université de Londres, Royal Holloway, School of Management

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