Until 31 December 2013, certain participation of employees in a company’s supervisory board was mandatory for all Czech joint-stock companies with over 50 employees. In particular, at least one third of the supervisory board members were required to be elected by the company’s employees. The supervisory board candidates had to be employees of the company or at least members of a work union operating within the company. Currently, under the Act on Business Corporations (the “Act”) no mandatory employee participation is required for any legal form of private company. Nevertheless, the Czech Social Democrats hope to reintroduce such participation with a recently proposed draft bill amending the Act. They argue that employee participation in companies’ management bodies is an essential European right guaranteed by the EU Charter of the Fundamental Social Rights of Workers as well as by the Lisbon Treaty and that such participation is common for many of the most developed EU countries. The Czech Government has expressed a neutral opinion on the bill; however, according to a survey conducted by the Confederation of Industry of the Czech Republic almost two thirds of its surveyed members are against reintroduction of such employee participation.
The proposal is, in general, similar to the regulation which was in force until the end of 2013 yet it also contains certain drawbacks resulting from different regulation of the organisational structure of joint-stock companies under the Act which currently allows joint-stock companies to choose between a one-tier or two-tier organizational structure. Companies with a one-tier system create an administrative board instead of a supervisory board. Therefore, at first glance, it seems logical that the bill requires similar employee participation in an administrative board in companies with a one-tier system. However, under the Act, the administrative board in a one-tier system has a different position within a company’s organisational structure compared to the supervisory board in a two-tier system since the administrative board also possesses certain executive powers as it is not merely a supervisory body (unlike a supervisory board). Additionally, the position of an administrative board within a company’s structure under Czech law is still in many aspects uncertain, especially in relation to its competences towards a company’s general meeting and a company’s business management. In any case, it is hard to find it appropriate that employees elected to an administrative board would be in a stronger position within the company than employees elected to a supervisory board. Further, the proposal reintroduces a requirement for at least a three-member supervisory board; unlike the current Act, which requires a supervisory board to have at least one member. The adoption of the bill would therefore mean additional legal and personnel expenses for many joint-stock companies.
Since the Czech Government took a neutral stance towards the bill, it is at this time uncertain whether it will pass through Parliament. Should it be adopted, however, a one-year transitional period is proposed in which joint-stock companies would have to allow the employees to elect their supervisory board (or administrative board) members.