Unions There Are Several Differences

Unions There are several differences in the governance of employers and unions. Among the major differences are the underlying philosophy, the structure, the financial motivations and the objectives. It is important to understand these differences because they have an impact on labor-management relations, particularly at the collective bargaining table. This paper will analyze the differences between employers and unions along these four key dimensions. Most of the differences between unions and management ultimately derive from the underlying philosophies of the two groups.

The philosophy of employers is rooted in the basic capitalist mindset, that producers of goods and services do so in order to earn a return on their invested capital. Managers therefore must take into consideration the best interests of the owners (shareholders) when making decisions, because managers act as agents to the shareholders. The sole objective of managers, therefore, is to increase shareholder wealth (Friedman, 1970). The philosophy behind unions has similar antecedents -- that workers are engaged in labor in order to earn profit for themselves.

However, this manifests differently in the labor-management relationship. Unions seek to increase union wealth and worker wealth simultaneously (there is a high correlation between the two). The unions therefore play the role of advocates for labor. Union leaders are representatives of the interests of workers. These philosophical differences result in different forms of governance between the two bodies.

The shareholders are a large and often disparate group, so they appoint boards of directors who are charged with the task of ensuring that management is acting in good faith in its role as agents of the shareholders. The boards elect the senior executives, who in turn set the direction for the company and hire the other managers. Governance generally revolves around ensuring that the different levels of agents are all working towards the common objective of increasing shareholder wealth. Union leaders also represent large and disparate groups of workers.

Most unions represent workers at a number of different facilities. Union leaders are elected by the workers. The leaders then appoint negotiators, stewards and other key personnel within the union. In many cases, the workers will have input into these selections as well. In terms of governance, however, the oversight is less direct. Workers may periodically elect new leaders, but individual workers do not have a stake in the union as a whole. Therefore, individual workers are typically less concerned with overall union performance than they are with local-level decision-making.

This results in a level of accountability within the union that is lower than the level of accountability that is built into the structure of management in a publicly-traded corporation. The objectives of union governance differ from those of management governance. Governance of managers is designed specifically to reinforce the agency role that managers play, to ensure that they are working towards enhancing shareholder wealth.

Other strategic objectives are less important, and considerable leeway is typically given with respect to those objectives, as long as the primary objective is being met. In a union situation, the governance system is weaker and there are more objectives. Individual workers have a broader set of objectives than do shareholders, and this dilutes union governance structures, because governance must cover a wider range of issues. There is a greater emphasis on written decrees or by-laws in union governance.

Such rules help to enforce the structure of the union and create a system of governance (Housden, 2010). However, these rules lack consistency and at times lack transparency. For employers, such rules are generally limited and the managers are given significant leeway with respect to achieving their singular goal. Lastly, the nature of the publicly-traded corporation means that there is more consistency and transparency in governance of employers.

The governance principles and structures do not vary significantly from one employer to the next, even if the overall effectiveness of the governance mechanisms does. In unions, governance can vary dramatically. There is far less transparency, and there is often little direct contact between union leadership and the rank-and-file. Union leadership serves the needs of multiple locals, in addition to union head office. The possibility of conflicting objectives between these groups means that governance is less consistent.

The lack of securities regulators in union affairs means that there is less transparency in union governance as a whole. Overall, this makes union governance weaker than that of public corporations, and increases the likelihood of fraud or financial malfeasance. That said, these problems still exist among employers as well, a result of shareholder disinterest in the governance process and a myopic pursuit of profit that causes shareholders to ignore malfeasance when profits are high.

In recent years, unions have begun to participate in the governance process of corporations (Banks & Metzgar, 1989). This has allowed unions to have some oversight of management activities. This situation reflects the fact that unions are active stakeholders in companies that employ their workers. Unions typically agree with the objective of increasing.