The Hans-Böckler Foundation, which maintains close ties with trade unions, has strongly criticized the EU Commission’s plans for a new corporate legal structure called EU Inc. This structure is intended to facilitate cross-border growth for early-stage companies and fast-expanding firms, known as scale-ups.
According to Daniel Hay, scientific director at the Institute for Co-determination and Corporate Management (I.M.U.) at the foundation, the Commission’s draft proposal allows European companies to choose their legal domicile regardless of where their actual operational sites and employees are located. Hay pointed out that a German company could, for instance, register an EU Inc. in Malta, yet effectively bypass co-determination rights in its home market, largely because Maltese law does not mandate parity-driven supervisory boards for companies exceeding 2,000 employees.
The foundation’s grave concern stems from the EU Commission’s decision to open the EU Inc. option to businesses of all sizes, from small and medium-sized enterprises (SMEs) to large corporations. “We fear a race to the bottom towards locations with the weakest employee protections,” Hay stated. He warns that EU Inc. could enable “social dumping under a European quality seal,” masking the erosion of employee co-determination.
The director of I.M.U. demanded that the EU Inc. proposal be revised. He put forward two main solutions: first, the company’s legal domicile must be located where its primary operational focus lies. Second, the EU Inc. must be restricted solely to startups and scale-ups, suggesting a maximum employee threshold of 500.
Furthermore, he insisted that the Commission include a specific clause to prevent the disenfranchisement of employees or the denial of co-determination rights. “We expect them not just to laud co-determination in speeches, but to actively protect it now,” Hay asserted. He noted that the German Bundesrat (Federal Council) has also highlighted these specific risks in recent resolutions.
