Simon Deakin

The Employment Contract: From Collective Procedures to Individual Rights

The article analyses the institutional basis and form of the employment contract in Britain using the 1998 Workplace Employee Relations Survey. It assesses the extent to which collective bargaining still regulates pay and non-pay aspects of employment. The paper shows that while collective procedures have declined in importance, there has been an increase in legal governance of the employment relationship. Logistic regression analysis establishes that both contractual formalisation and legal compliance are greater in larger organisations and where trade unions are present. Trade union activity is also associated with superior fringe benefits. Collective bargaining thus appears to facilitate both access to and improvement on statutory rights.

The Evolution of Labour Law: Calibrating and Comparing Regulatory Regimes

We present evidence on the evolution of labour law in five countries (the UK, USA, Germany, France and India) using a newly-created dataset which measures legal change over time. The results cast light on the claim that legal origin, or the influence of common law and civil law regulatory styles, affects the content of labour law regimes. We find some divergence between common law and civil law countries at the aggregate level but a more complex picture when the index is decomposed so as to identify changes in specific areas of labour law. We discuss the potential significance of this relatively new approach to the measurement of law for understanding the forces at work in the evolution of labour law.

How Do Legal Rules Evolve? Evidence from a Cross-Country Comparison of Shareholder, Creditor and Worker Protection

Much attention has been devoted in recent literature to the claim that a country’s ‘legal origin’ may make a difference to its pattern of fi nancial development and more generally to its economic growth path. Proponents of this view assert that the ‘family’ within which a country’s legal system originated—be it common law, or one of the varieties of civil law—has a signifi cant impact upon the quality of its legal protection of shareholders, which in turn impacts upon economic growth, through the channel of fi rms’ access to external fi nance. Complementary studies of creditors’ rights and labour regulation have buttressed the core claim that different legal families have different dynamic properties. Specifi cally, common law systems are thought to be better able to respond to the changing needs of a market economy than are civilian systems. This literature has, however, largely been based upon cross-sectional studies of the quality of corporate, insolvency and labour law at particular points in the late 1990s. In this paper, we report fi ndings based on newly constructed indices which track legal change over time in the areas of shareholder, creditor and worker protection. The indices cover fi ve systems for the period 1970-2005: three ‘parent’ systems, the UK, France and Germany; the world’s most developed economy, the US; and its largest democracy, India. The results cast doubt on the legal origin hypothesis in so far as they show that civil law systems have seen substantial increases in shareholder protection over the period in question. The pattern of change differs depending on the area which is being examined, with the law on creditor and worker protection demonstrating more divergence and heterogeneity than that relationg to shareholders. The results for worker protection are more consistent with the legal origin claim than in the other two cases, but this overall result conceals signifi cant diversity within the two ‘legal families’, with different countries relying on different institutional mechanisms to regulate labour. Until the late 1980s the law of the fi ve countries was diverging, but in the last 10-15 years there has been some convergence, particularly in relation to shareholder protection.

The Effects of British Industrial Relations Legislation 1979-97:

The recent change of government brings to an end a sustained attempt to transform British industrial relations by legislative action. This article explores the consequences. It explains the cumulative effect of the legal changes since 1979, including the growing influence of the European Community, and examines the economic and social results. While legal intervention has had an impact on the institutions of industrial relations, most notably in reducing the power of organised labour, this cannot be isolated from wider structural changes in labour and product markets. A review of research on economic outcomes suggests an uneven and tenuous link between institutional change and economic performance.

Comparative Law and Finance: Past, Present and Future Research

Comparative law and finance quantifies differences in the laws governing the business enterprise in various countries. The resulting data can be used to test which legal institutions (if any) matter for financial development. Until recently only cross-sectional data were available. We report the results of a new approach to coding which has produced longitudinal data sets on shareholder, creditor, and worker protection.

After Enron: An Age of Enlightenment?

The fall of Enron has again focused attention on the failure of mechanisms of corporate governance to protect investor interests. However, financial scandals of this kind are nothing new, particularly in periods of ‘correction’ following stock market bubbles. Moreover, there is no consensus on the wider implications of the Enron affair. Three distinct positions might be taken. According to the first, Enron’s collapse simply tells us that the existing corporate governance system is working. As The Economist put it, the unraveling of the corporate scandals ‘might actually be a reason to be more confident about corporate America’.1 Enron’s share price nosedived once news of its earnings restatements surfaced: ‘what is interesting about Enron is not the fact that the energy giant collapsed, but how fast the market brought it down’.2 Market sanctions, in the form of reputational damage to its senior managerial team and to its auditors, Arthur Andersen, served as an effective disciplinary device. Enron’s bankruptcy offers an appropriate lesson: ‘in the drama of capitalism, bankruptcy plays an essential part’.3 On this basis, there is nothing to be gained and much to be lost from wider reforms to the corporate governance system. The second point of view is more skeptical. It acknowledges that the company’s corporate governance exhibited serious failures of monitoring, which can be traced back to conflicts of interest on the part of board members and its auditors. Changes are needed: ‘if corporate America cannot deliver better governance as well as better audit, it will have only itself to blame when the public backlash becomes both fierce and unpleasant’.4 This is the agenda that shaped the Sarbanes-Oxley Act, passed by the US Congress in the summer of 2002. As a result, audit partners (although not audit firms) must now be rotated every five years and audit firms may not supply services to a Volume 10(3): 583–587 Copyright

In Search of Coherence: Social Policy, the Single Market and Fundamental Rights

The tension between social policy and the free-market aims of European integration has been a constant theme since the formation of the Community in the 1950s. Previous contributions to this Annual Review have explored some of the more recent manifestations of this tension. These include the challenge posed to national welfare states and labour regimes by the ‘economic jurisprudence’ of European free movement law and competition law (Barnard and Deakin, 1998: 144–148). In the year under review here, there were two decisions of the Court of Justice which are likely to have a lasting influence on this debate. In Albany, which we discuss in the second section (below), the Court considered the most direct challenge yet to national autonomy in social policy, namely an argument that collective agreements should be subjected to routine scrutiny under the competition policy provisions of the Treaty. In rejecting this claim in its most ambitious form, the Court drew on the social policy provisions of the EC Treaty, and in particular the encouragement in the Treaty given to social dialogue. Albany therefore represents a significant, if hesitant, step on the road towards the recognition of a more central place for social rights within the European legal order. By the same token, the Court’s decision in the Centros case (discussed in the third section) was a reminder of how far there is still to go if this goal is to be achieved. Centros signals that the principle of territoriality—the right of member states to apply regulatory laws to companies operating on their territory regardless of the state in which those entities have been incorporated—is increasingly under challenge from the principle of freedom of establishment, with its overriding emphasis on the right of freedom of movement for entrepreneurs. These decisions represent, in certain respects, ‘lawyers’ law’, dealing as they do with technical and complex arguments on the scope of the legal concepts which

Legal Diversity and Regulatory Competition: Which Model for Europe?

Two models of regulatory competition are contrasted, one based on a US pattern of Ocompetitive federalismO, the other a European conception of Oreflexive harmonisationO. In the European context, harmonization of corporate and labour law, contrary to its critics, has been a force for the preservation of diversity, and of an approach to regulatory interaction based on mutual learning between nation states. It is thus paradoxical, and arguably antithetical to the goal of European integration, that this approach is in danger of being undermined by attempts, following the Centros case, to introduce a Delaware-type form of inter-jurisdictional competition into European company law.

The Stock Market, the Market for Corporate Control and the Theory of the Firm: Legal and Economic Perspectives and Implications for Public Policy

It is argued here that - contrary to current conventional wisdom - an active market for corporate control is not an essential ingredient of either company law reform or financial and economic development. The absence of such a market in coordinated market systems during their modern economic development was not an evolutionary deficit, but an effective and positive institutional arrangement. The economic and social costs associated with restructuring driven by hostile takeover bids, which are increasingly seen as prohibitive in the liberal market economies, would most likely harm the prospects for growth in developing and transition systems.

Corporate Governance and Workplace Employment Relations: The Potential of WERS 2004

The relationship between corporate governance and workplace employment relations is reviewed drawing on the Workplace Employment Relations Survey 2004. The paper reviews recent analysis and policy developments, and then considers the contribution of earlier WERS-based research on this topic. The innovations in WERS 2004 are outlined, and it is suggested these provide several opportunities for further analysis in this area. The paper then presents an illustrative example of the use of WERS 2004, and concludes with recommendations for further changes in future WERS surveys.