Protecting employee entitlements: corporate governance and industrial democracy in Australia.

Abstract

The protection of employee entitlements has been an issue of public policy debate following several major corporate failures including HIH and Ansett. While protection remains paramount on the public policy agenda and in the campaigns of trade unions, we argue that there is an equally important, yet neglected issue associated with employee entitlements. Employees are involuntary lenders of capital to their employing organisations. They do not receive interest on their loans and importantly they are invariably denied information, monitoring and 'voice' rights within their organisations. In this article we argue that these rights should be granted to reduce risk to entitlements and in exchange for employer access to this capital.

Introduction

Australia has a social welfare model that provides for universal benefits for those not in employment--for example, age pensions, unemployment payments and disability payments. Unlike those of many OECD countries, such state welfare provisions are funded out of general revenue. No designated social security contribution is directly linked to employment. Instead, individuals self-fund a whole range of different types of benefits that are linked to work (Jefferson and Preston 2003). It is these provisions, or employee entitlements, that we wish to examine. In particular, the article considers three themes. First, mechanisms designed to protect these entitlements; second, the linkage between entitlements and corporate governance; and, third, the case we contend that accrued entitlements provide for enhanced industrial democracy.

Employee entitlements are benefits accrued through continuity of employment. They include, holiday leave, long service leave, wages (when paid in arrears) and sick leave. Many workers' entitlements can accumulate into a considerable sum after lengthy continuous service with the one organization. For employers, these entitlements are contingent liabilities which are typically paid from current funds as and when the employee exercises their right to the entitlement. Hence, entitlement funds are typically accessed by employers for business operations rather than being quarantined for the express purpose of meeting employment obligations. Consequently, where an organisation enters into liquidation there is the possibility that the accrued entitlements of employees will be lost, since they have a rank ordering below other secured creditors. In theoretical terms, this is an agency problem where management are not discouraged from externalising the costs resulting from using (and possibly) losing employee entitlements. Commercial advantage is derived from placing employment entitlements at risk, but there is no corresponding return to employees in consideration of this risk as there would be for bank loans and other debt instruments.

In the absence of any debate over employers providing a dividend to employees for assuming this risk, and in the context of large corporate collapses, most discussion has focused on the Australian government's role in offering better protection for employee entitlements. Many of the corporate failures were well publicised--HIH, One Tel and Ansett--and involved tens of thousands of workers (over sixteen thousand in Ansett airlines alone). Other closures involved smaller job losses but had a severe impact on local economies in which there were few alternative sources of employment--National Textiles, Oakdale Collieries, Grafton Meatworks and Cobar Mines. While this discussion and pressure has resulted in some amendments to corporate law and the introduction of a safety net protection program, the issue of protection is far from resolved. Indeed, some trade unions have actively campaigned for improved entitlement security from employers, especially in the motor vehicle, metals and transport industries (ACTU 2002; Cooper 2002). But while protection of entitlements remains an important policy issue, it is a post-hoc remedy designed to deliver equity to employees in the event of corporate failure. We contend that while the focus on protection schemes is important, it has tended to result in little to no discussion of the merits of providing employees with monitoring and 'voice' rights which may prevent the loss of entitlements. In this article we focus on two important but overlooked aspects of employee entitlements which, we argue, provide a basis for employee monitoring and influence over the use of these funds.

The first is the governance of Australian organisations. While concern over corporate governance has heightened, especially following the adverse publicity associated with executive salaries and corporate mismanagement, this has not been matched by a debate regarding the governance responsibilities of organisations over employees' benefits. We argue that the issue of accrued entitlements places a strong fiduciary responsibility on company boards to take into account the interests of employees. Our argument is based on the notion that employees are a significant class of creditor but are generally excluded from board representation, investment decisions and financial information in Australia.

The second issue is the legitimacy provided through accrued entitlements for more extensive forms of employee participation in Australian businesses. This extends beyond governance and concerns industrial democracy. Emploees' role as creditors (and unpaid lenders to the business) is a strong case for enhanced industrial democracy.

The article is organized into three sections. The next section reviews the issue of employment entitlements, the various attempts to vouchsafe benefits and the differing positions of the federal government and trade unions. Following this, the discussion explores what we contend are two typically overlooked aspects of the employee entitlements debate--corporate governance and industrial democracy. The final section offers concluding thoughts on the importance of employee monitoring, voice and information rights in the governance of the firm.

The Protection of Employee Entitlements

To date the protection of employee entitlements has followed a path of crisis management. Business failure and loss of employee entitlements have occurred since limited liability companies were formed. The ACTU estimates that $500 million in employee entitlements are lost every year (ACTU 2003). Bickerdyke, Lattimore and Madge (2001) put the figure at around $60 million based on an average entitlement loss of $7,200; they do claim, however, that business failure is very cyclical, with (for example) close to 60 thousand job losses attributed to business failure in 1991-92 (p. 156). Australian Bureau of Statistics data indicate that around 18 per cent of the 596,400 employees made redundant in the three years prior to July 2001 were made redundant by reason of business closure, but the data do not reveal the extent of entitlement loss for this cohort (ABS, 2002). Estimates are further confounded by the extent of contract and self-employed workers associated with the failed businesses. Also, many businesses cease trading and do not go into liquidation, so that the extent of actual business failure is likely to be greater than that provided through the data on official business closures.

Most businesses do not fail and most employees are paid their entitlements. The attention of public policy has been focused, however, on employee entitlements by the sheer size of recent corporate collapses. Also, the media have adroitly highlighted the double standard--extensive executive remuneration packages while the lowest paid workers lose not only their jobs but also their entitlements as corporations law privileges payments to secured creditors such as banks and other institutional lenders over employees.

This pressure from the media, together with public opinion, galvanized the Federal government to institute safety net policies for the employees of failed businesses whose entitlements were not covered through business liquidation. The first such entitlement protection scheme, introduced by the Howard government, was the Employee Entitlements Support Scheme (EES) (2000). The scheme was short lived and roundly criticised, however, (Riley, 2003a). It placed limits on the forms of entitlements that would be covered and capped the payments employees could receive. It was funded on the assumption of matching contributions from the State governments--which did not eventuate. Its limitations were highlighted by the scale of employee entitlement loss associated with the liquidation of Ansett--indeed the government was forced to levy air travellers in order to generate a fund that could provide for the payment of accrued entitlements.

After the difficult experience with EES, the Federal government developed the General Employee Entitlements Redundancy Scheme (GEERS) in 2002. Operationally the scheme covers all employees who have awards, certified agreements or Australian Workplace Agreements (AWA). The entitlement coverage includes unpaid wages, unpaid annual leave, pay in lieu of notice, accrued long service leave and up to 8 weeks redundancy pay. A cap of $81,850 (indexed) is in place on individual payments. Riley (2003a) has examined its operation and identified a number of weaknesses of the scheme. GEERS does not apply to all business failures, it has no legislative standing (it is purely an administrative arrangement) and there are questions over who is covered exactly. Moreover, the problem with GEERS narrow coverage may be exacerbated by the exemption of small business from redundancy payments law, since GEERS only operates where there is a legal entitlement (see O'Neil 2005).

In essence GEERs is a safety net program that applies in the case of business failure. In the process of liquidation, the federal government takes the place of employees, so that there is the expectation of some 'claw-back' of spending on the program, estimated as $20million in 2001-02. In association with this initiative, the federal government also amended the Corporations Act to subject directors of companies to civil action for uncommercial activities and to allow for criminal prosecution of individuals who actively prevent the recovery of employee entitlements (Riley, 2003a). The Corporations Law Amendment (Employee Entitlements) Act 2000, inter alia, makes it an offence for corporate officers who deliberately enter into agreements to avoid payment of employee entitlements and extends the duty on company directors not to engage in insolvent trading (O'Neil and Shepherd 2002). These changes, however, are rather mild reforms to governance and it will be difficult for workers and their unions to secure successful prosecutions due to the challenge of proving intent.

Safety net arrangements such as GEERS are not the only means canvassed to protect employee entitlements. Other proposals include lifting employees in the order of creditors when it comes to accessing the proceeds of liquidation, insuring employees for lost entitlements in the event of business failure, securing entitlements against corporate assets and establishing trust funds to manage entitlements (Bickerdyke, Lattimore and Madge 2001). But GEERS tends to be favoured by employers, since it does not impose costs on business and it does not directly deal with management shortcomings.

In their review of entitlement protection, Davis and Burrows (2003) favour a deferred benefit account being maintained by employers to cover reasonable aggregate provisions for entitlements. These would attract interest and be similar in their structure to cash management trusts. They also support supplementary measures including a safety net arrangement such as GEERS and a tightening of corporate legislation to improve management accountability for entitlements in the event of liquidation. Bickerdyke, Lattimore and Madge (2001) support safety net arrangements such as GEERS, since they are easy to administer, have low average costs of administration and are transparent. Riley (2003a) suggests that existing corporate arrangements could be more effectively utilised and that entitlements would be better protected if employees had secured creditor status. In turn this would have implications for corporate governance and industrial democracy (see below). What all analysts agree is that the pre-GEERS arrangements for the protection of entitlements were totally inadequate.

The Australian Council of Trade Unions (ACTU) has developed a policy on entitlements that supports the establishment of trust funds and seeks to improve security through such measures as insurance bonds, bank guarantees and charges over fixed assets. The ACTU also argues that corporations law should be amended so that employees are ranked above secured creditors, directors have the same obligations to employees as they do to shareholders, and directors are held personally responsible for the payment of entitlements (ACTU, 2003).

In addition, individual unions have carried out industrial action against employers in order to generate greater security for entitlements. The Amalgamated Manufacturing Workers Union (AMWU) ran a concerted campaign to protect entitlements through trust fund arrangements such as Manusafe, which subsequently evolved into the National Entitlement Security Trust (NEST). Industrial action took place at automotive component parts manufacturers, Tristar in Sydney and Walker auto in Adelaide (Cooper, 2002), and against Rheem in Sydney (Workers Online, 2003).

This recent history demonstrates the extent to which unions, employers and the federal government have been at odds over the most effective way to protect employee entitlements. A number of unions have placed industry trust funds on the bargaining agenda, while the ACTU has argued for more substantial reform of corporations law to elevate the status of employee entitlements. The federal government and most employers have remained opposed to these measures, preferring instead to advance a state-sponsored safety net scheme.

Two Neglected Aspects of the Employee Entitlements Debate: Corporate Governance and Industrial Democracy

Thus far, debates over employee entitlements have focused on different institutional arrangements for their protection in the event of employer insolvency. This focus has been both pragmatic and necessary in light of the scale of the problem in the Australian context. We contend, however, that these debates fail to fully appreciate the position and value of entitlements within the firm and hence neglect their critical governance and industrial democracy possibilities. The essence of our argument is that the proper construction of entitlements is to view them as workers' capital involuntarily lent to the firm. This view and its implications are more fully explicated below.

Entitlements accrue through continuity of service. In general, the longer the duration of employment with the one organisation, the larger the accrued entitlement which, in most cases, is accessed by giving the employer notice. Entitlements are an important component of the pecuniary reward system associated with employment. With the exception of casual workers (Campbell and Burgess 2001), most employees have access to one or more entitlements. Superannuation contributions constitute a special case in the entitlement regime, since they are applicable to most workers and they are subject to a strict protection and reporting regime (Jefferson and Preston 2003). Under the decentralised wage determination regime in Australia, it is possible that previously legislated entitlements could be cashed out through bargaining or that entitlements can be more flexibly accessed (eg using sick leave for family care purposes) (Burgess, Strachan and Sullivan 2002).

Apart from superannuation, all other entitlements are accrued within the employing organisation. The accrued entitlements have typically been seen by business and by industrial tribunals as part of the working capital of the employing organisation (Burgess, Strachan and Sullivan 2002). Accrued entitlements are not recorded as working capital for accounting purposes, nor are they held in trust by the employing organisation on behalf of employees (Riley, 2003b). Instead, the entitlements are generally paid out as and when required by the employer. Through reference to average turnover figures and schedules for holidays and long service leave, the employer can generally ensure that there are sufficient funds available to meet access to the entitlements by its employees. Covering entitlement payments is a problem when there are large scale lay-offs or, in the extreme case, when a business is placed into liquidation. In these cases, accrued entitlement payments have to be met for all the affected employees. In addition, there are certain conditional entitlements, such as redundancy payments, that only apply in the case of individual employee termination or business closure.

Through entitlement accrual, employees are, in effect, lending funds to their employing organisation, making workers lenders and creditors. They are, however, set apart in three ways from other lenders. First, they do not receive interest on the funds they make available to the employing organisation. Second, as explained earlier, they rank below other lenders of capital in the order of creditors upon liquidation (Riley 2003a). Third, their lending is involuntary--they have no discretion whether they are to make their accrued entitlements available to the employing organisation. Davis and Burrows (2003) also contend that the transaction costs for raising this form of finance are low; there is no payment for risk and there is very little external monitoring of the protection and the application of such funds.

On comparison then, many employee shareholding schemes pale into insignificance alongside the extensive financial interest that workers already have as involuntary lenders to their employing organisations. Davis and Burrows (2003, 174) demonstrated that in 2001 the ratio of accrued employee entitlements to assets for two of Australia's largest listed companies was 5.8 per cent for Coles Myer and 5.7 per cent for Woolworths. Table 1 uses data from the published financial records of a sample of some of Australia's largest listed companies. It details the extensiveness of the firms' recorded accrued entitlements. Telstra alone has an accrued employee liability of over one billion dollars. If it had to borrow these funds from the capital market it would incur interest of $50 million per year without any consideration of transaction costs.

Conceptualising worker entitlements in this way may seem novel, but there is in fact considerable theoretical support it. In particular, we would assert that it is consistent with basic principles of contract law in that the promisor (employer) has agreed to pay consideration in exchange for the employee's services--hence the consideration (employee entitlements) is an asset of the employees. The subsequent use of this consideration by the employer can be reasonably construed to be a loan from the employee to the employer. Viewing workers' entitlements in this way also satisfies two influential though contrasting theoretical models of the firm: the 'nexus of contracts' perspective and the company as 'social institution' perspective--a theme explored in the next section.

Employee Entitlements and Models of Corporate Governance

Parkinson (2003), in a discussion of the linkages between models of the company and employment relations, contends that there are three common ways of understanding the company. First, there is the classical ownership model, where shareholders are conceived as owning the firm and hence are given rights to ensure that the firm is managed exclusively in their best interests. Second, there is the 'nexus of contracts' view of the company, which understands the company as simply a legal entity for contracting. Under this perspective, no one group owns the company; rather, the company contracts with various groups--management, employees, shareholders, banks, suppliers--and each group seeks a return on their inputs to the company. Indeed, as Fama (1980, p. 290) explains:

   Ownership of capital should not be confused with ownership of the
   firm. Each factor in a firm is owned by somebody. The firm is just
   the set of contracts covering the way inputs are joined to create
   outputs and the way receipts from outputs are shared among inputs.
   In this nexus of contracts perspective, ownership of the firm is an
   irrelevant concept.

These contracts, according to Fama and Jensen (1983, p. 64), are the 'rules of the game and specify the rights of each agent in the organization, performance criteria on which agents are evaluated and the payoff functions they face'.

Viewing the firm as a nexus of contracts at first instance provides a conceptual basis for challenging the dominant shareholder ideology which, critics such as Lazonic and O'Sullivan (2000) argue, has proved to be counterproductive to both the generation and distribution of wealth in the Anglo-American variety of capitalism. If, for instance, shareholders are perceived as being no different to other classes of input contributors, then this raises the question as to why governance of the firm should be solely focused on shareholder interests. This question is addressed by nexus of contract theorists, who argue that while shareholders do not own corporations it is in the best interests of the firm and the economy as a whole that they be given control rights. Their reasoning suggests that as shareholders bear residual risk--their returns are not guaranteed by contract as are those of other input contributors to the corporation--they have a direct interest in ensuring the efficient allocation of resources by monitoring management. Moreover, Fama and Jensen (1983) claim that shareholders who provide capital to the firm are better able to manage firm-specific risk, since their investments are usually spread over a diversified portfolio.

Finally, under the 'social institution' perspective, the company is considered to be a social construction--composed by and dependent upon its stakeholders. The company's very legitimacy and the legal privileges it enjoys (such as limited liability), are provided by the state--hence the company should not externalise its costs onto its stakeholders. Moreover, this view suggests that each of the company's stakeholders contribute to the firm's success and hence they should be permitted to exercise 'voice' and influence the firm's decision making.

It can be argued that the (mis)use of employee entitlements for commercial gain is consistent with the assumptions of the 'ownership' model of the firm, where primacy is attached to improving shareholder value above and beyond all other stakeholder interests. The influence of the 'ownership' model, where worker's entitlements are considered to be 'working capital' by employers, can be seen in the Australian Chamber of Commerce and Industry's (ACCI) submission to a federal government discussion paper on protecting employee entitlements. In opposing a proposal for an insurance levy or compulsory contribution, the ACCI argued that 'the measure would be counter-productive and could only have the effect of tying up scarce investment capital' (O'Neil and Shepherd 2002). We would argue, however, that the assumptions guiding this view have helped to produce the crisis in entitlements that Australia has experienced.

The conceptualisation of employee entitlements as workers' involuntary lent capital is consistent with the preferred reasoning of the 'nexus of contracts' and 'social institution' models of the company, although the exact implications flowing from each theoretical perspective differ slightly. These theories of the firm are to be preferred to the ownership model because they better explain the function and operations of corporations and logically describe the role and position of shareholders. Furthermore, the nexus of contracts theory, and to a lesser extent, the social institutional model, have had a large bearing on the development of corporate governance rules and principles in liberal market economies (see Parkinson 2003).

Under the 'nexus of contracts' approach, it is theoretically consistent to view workers as providing both labour and capital (in the form of accrued entitlements) to the enterprise. Yet, while workers receive returns on their labour in the form of wages, part of their remuneration is quarantined by management and used as working capital without a corresponding return. The reality of workers' capital input to the firm might suggest that there should be some additional compensation for lent entitlements (since workers bear the risks of losing entitlements) or indeed may add force to claims that other suppliers of inputs to the firm (financiers etc) should not be privileged over employees in the event of a company insolvency. If employee entitlements are not protected by corporations law in the same fashion as those of other lenders, then perhaps monitoring and control rights--the right to govern the firm--should be shared with the workforce since they also bear residual risks.

The recognition of the value of workers' capital inputs to the firm is also consistent with the social institution or stakeholder model of the corporation. Under the 'social institution' perspective, the notion of workers' lent entitlements adds weight to the longstanding assumption that workers are key stakeholders and, as such, deserve both 'voice' and capacity to monitor and influence firm decision making.

There have been some minor steps to encouraging Australian firms to develop corporate governance in this direction, but they do not, in our view, go far enough to reflect the value of employee entitlements to the firm. There have been important developments in improving and disseminating best practice corporate governance principles that may, indirectly, have a positive influence over the question of entitlements. In March of 2003, for instance, the ASX Corporate Governance Council (a forum composed of 21 high profile interest groups ranging from the Business Council of Australia to the Law Council of Australia, Chartered Practicing Accountants and various superannuation and shareholder groups) released ten principles of good corporate governance along with advice on how they should be implemented.

Several of these principles can be read as creating corporate governance structures that go some way to protecting the interests of employees and, concomitantly, placing further restraints on the unethical use of worker's capital. For instance, Principle 2 requires the majority of corporate boards to be composed of independent directors who are acting in the best interests of the company as a whole rather than specific shareholders or interest groups, whilst Principle 3 goes to the promotion of ethical and responsible decision making. The promotion of ethical decision making which is at arms length from management is an important concept in effective corporate governance and may act as a constraint on the unethical use of workers capital; for example, placing this capital at risk or entering commercial transactions with the knowledge that this will reduce funds available to pay entitlements. But Principle 10, 'Recognise the Legitimate Interests of Stakeholders', holds the most promise for requiring directors to safeguard employee interests. The associated commentary on this principle states that 'there is growing acceptance of the view that organisations can create value by better managing natural, human, social and other forms of capital' (ASX 2003:59). This principle calls upon boards to develop corporate codes of conduct which recognise and protect interests of stakeholders and specifically mentions employment practices as one important aspect for inclusion in a best practice code of conduct. Even though these principles are broad and ultimately voluntary, they are likely to be seriously considered by companies listed on the ASX and by analysts, institutional investors and other members of the investment community as a further means of evaluating a corporation's risk profile.

These improvements to models of corporate governance and the emerging consensus of the importance of stakeholder interests (the social institution perspective) are important, but they do not go far enough in our view. Acknowledgement that accumulated entitlements are involuntary loans to the firm provides a basis for arguing that workers should have access to the same information, monitoring and 'voice' rights that other capital providers to the firm enjoy. Further, reforms to corporate governance are required to fully recognise this.

While we believe that elevating employee's interests in governance is one consequence of acknowledging worker's capital, we also consider that this capital should strengthen claims for improved 'voice' and industrial democracy arrangements within the workplace. This is further explained below.

Entitlements as a Lever for Enhanced Industrial Democracy

As we have argued, conceiving employee entitlements as involuntarily lent capital provides employees with a secure claim as a critical stakeholder in the firm and hence adds support to claims for enhanced 'voice' or industrial democracy rights within the company. Whether guided by the assumptions of the 'nexus of contracts' or 'social institutions' models, the conclusion must be that as suppliers of capital or critical stakeholders, employees should, in return, be granted enhanced 'voice' rights within the firm.

Since the 1980s in Australia, various initiatives have sought to enhance employee participation in organisational decision-making. These have mainly taken the form of direct participation such as occupational health and safety committees, quality circles and the implementation of 'worker-empowering' team-based structures. In a small number of cases these have extended to indirect forms of participation such as joint consultative committees and, in a few exceptional cases, elected employee representation at the board level (Alexander and Lewer 2004). Most recently, some, notably Bray et al (2001), have argued for a new approach based on European-styled Works Councils. These, they claim, represent a desirable model for increasing shared management and employee decision-making in Australian organisations.

A variety of arguments has been made to support the case for enhancing employee voice. Bray et al (2001), for instance, contend, in summary, that Works Councils are required to offset the muting of employee voice which has followed from the decline in trade union membership levels and (as they argue) by the failure of human resource management practices to deliver genuine forms of participation. Most of the arguments about the benefits of industrial democracy have been seemingly unpersuasive to management, with the extent of the higher order practices limited to a small proportion of enterprises. Generally, where participation has improved, management has been convinced by the business case, that is, by tapping into employee knowledge of the organisation that will enhance the quality of its decisions. Employees' direct understanding of customer demands, or their detailed comprehension of work processes, for example, is used to improve products and services. Similarly, team-based structures sometimes facilitate downsizing and a reduction in the head count.

The extent of accrued employee entitlements presents policy makers with a strong argument for organisations to provide enhanced 'voice' rights within the workplace. Not only is this valid from a 'nexus of contracts' or 'social institutions' perspective, but, by recognising the extent of employees' lent capital, management is in effect tapping into the employees' sense of ownership of the firm. Albeit this form of ownership may be involuntary, it is analogous to the contemporary interest in employee share ownership plans (ESOP), where workers are offered shares in the company at market cost, either through low interest loans or fully-funded by the company. A 2002 Australian Parliamentary Committee conducted an inquiry into employee share ownership in Australia. Their report--Shared Endeavours--found, in summary, that ESOPs were often established as a strategic initiative designed to increase employees' stake in the company and thereby to break down perceived barriers between the business owners and its employees. By emphasising this unitarist sense of shared objectives, ESOPs were expected to deliver greater involvement and a more motivated workforce. It is difficult to differentiate between these employer-sponsored employee share holdings and the other form of capital--accrued entitlements--which is lent by employees to the business. Plainly, as voting and representation rights arise under ESOPs, they should equally arise for employees lending capital to the business.

Conclusions

The failure of corporate governance has been central to the financial scandals and corporate collapses that have plagued large American corporations in recent times. According to Tapscott and Ticholl (2003), the failure of firms such as Enron, Worldcom and Arthur Anderson has led to a multitude of corporate governance reforms in the United States and an acknowledgement of the need for increased corporate transparency and recognition of legitimate stakeholder interests.

As explained earlier, Australia has not been immune from similar failures of corporate governance, especially when they have contributed to high profile insolvencies (eg HIH). All of which serves to highlight the strong nexus between corporate governance and the protection of employee interests.

The protection of employee entitlements in the case of failed or failing companies has been the focus of considerable media and public policy attention in recent years. The Australian government has put together a reactive and ad hoc series of safety net protections in response to major corporate collapses. While debates over protection are important, we have argued that they have tended to overlook the precise conceptualisation of entitlements as capital lent involuntary to the firm. This construction of entitlements, we suggest, is theoretically consistent with the influential 'nexus of contracts' and 'social institutions' models of the company. The failure properly to conceive of entitlements in this way has meant that the policy debate has tended not to explore their wider significance and the rights and governance structures which, we say, ought to be established in acknowledgement of workers' capital inputs. These changes, in our view, should include the elevation of employees' interests in corporate governance in addition to enhanced 'voice' and industrial democracy arrangements which would place employees in a position to monitor and reduce risks to their lent entitlements. Employees as creditors who have little say, limited access to information and no interest payments are in a position to seek reforms across all these areas.

The authors wish to thank the editors and the anonymous referees for their valuable suggestions.

References

Australian Bureau of Statistics (2002), Retrenchment and Redundancy, Cat No. 6266.0.

ACTU (2002), 'ACTU Urges Car Maker To Accept Mediation Process', News Release April 30. www.actu.asn.au/public/news/1022023620_30543.html (accessed 25/11/03)

ACTU (2003), 'Future of Work: Employee Entitlements Background Paper' www.actuasn.au/congress2003/papers/entitlementsbp.html (accessed 25/11/03)

ASX Corporate Governance Council (2003), Principles of Good Corporate governance and Best Practice Recommendations, Australian Stock Exchange Ltd.

Alexander, R. and Lewer, J. (2004), Understanding Australian Industrial Relations, 6th edn, Thomson Learning, Melbourne.

Bray, M., Waring, P., Macdonald, D. and Le Queux, S. (2001), 'The "Representation Gap" in Australia', Labour and Industry, vol. 12, pp. 1-31.

Bickerdyke, I., Lattimore, R. and Madge, A. (2001), 'Safeguards for Worker Entitlements', Agenda, vol. 8, pp. 155-170.

Burgess, J. and Baird, M. (2003), 'Employment Entitlements: Development, Access, Flexibility and Protection' Australian Bulletin of Labour. vol. 29, pp. 1-13.

Burgess, J., Strachan, G. and Sullivan, A. (2002), 'Long Service Leave in Australia: Rationale, Application and Policy Issues'. Labour and Industry, vol. 13, pp. 21-38.

Campbell, I. and Burgess, J. (2001), 'Casual Employment in Australia and Temporary Employment in Europe: Developing a Cross National Comparison', Work, Employment and Society, vol. 15, pp. 171-184.

Cooper, R. (2002), 'Trade Unionism in 2001'. Journal of Industrial Relations. vol. 44, pp. 247-262.

Davis, K. and Burrows, G. (2003), 'Protecting Employee Entitlements', Australian Economic Review, vol. 36, pp. 173-180.

Fama, E. and Jensen, M (1983), 'Separation of Ownership and Control', in Clarke, T. (ed) (2004), Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance, Routledge, Great Britain, pp. 64-77.

Fama, E (1980), 'Agency Problems and the Theory of the Firm', Journal of Political Economy, vol. 88, pp. 288-307.

Fung, A, Hebb, T and Rodgers, J (eds) (2001) Working Capital: The Power of Labor's Pensions, ILR Press, Ithaca.

Gospel, H and Pendleton, A (2003), 'Finance, Corporate Governance and the Management of Labour: A Conceptual and Comparative Analysis', British Journal of Industrial Relations, vol. 43, pp. 557-582.

Heery, E and Wood, S (2003), 'Employee Relations and Corporate Governance', British Journal of Industrial Relations, vol. 43, pp. 477-479.

Jefferson, T. and Preston, A. (2003), 'Bargaining for Welfare: Gender Consequences of Australia's Dual Welfare Model', Australian Bulletin of Labour. vol. 29, pp. 76-96.

Lazonick, W. and O'Sullivan, M (2000), 'Maximising Shareholder Value: A New Ideology for Corporate Governance', in Clarke, T (ed) (2004), Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance, Routledge, Great Britain, pp. 290-303.

Lewis, C. (2003), Comment on ED 115 by the Institute of Actuaries of Australia to the Australian Accounting Standards Board.

O'Neil, S. (2005), 'Workplace Relations Amendment (Small Business Employment Protection) Bill 2004', Bills Digest no. 63 2004-05, Parliamentary Library, Canberra.

O'Neil, S. and Shepherd, B. (2002), 'Corporate Insolvencies and Workers' Entitlements', E-Brief, Department of the Parliamentary Library, Canberra.

Parkinson, J. (2003), 'Models of the Company and the Employment Relationship', British Journal of Industrial Relations, vol. 43, pp. 481-509.

Parliament of the Commonwealth of Australia (2000), Shared Endeavour: An Inquiry into Employee Share Ownership in Australian Enterprises, Canberra.

Riley, J. (2003a), 'Protection for Employment Entitlements: A Legal Perspective'. Australian Bulletin of Labour, vol. 29, pp. 31-45.

Riley, J. (2003b), 'Industrial Legislation in 2002', Journal of Industrial Relations, vol. 45, pp. 151-165.

Tapscott, D. and Ticholl, D (2003), The Naked Corporation, The Free Press, New York.

The Sydney Morning Herald (2003), Share Price Listings. November 22.

Workers Online, (2003), 'Rheem Runs Cold on Entitlements' (http//:labornet.au) accessed 25/11/03).

John Burgess, John Lewer and Peter Waring *

* Employment Studies Centre

Table 1: Provisions For Accrued Entitlements Among Selected Listed
Corporations in Australia ($m.)

                        Market      Current     Non Current
Company          Year   Capital   Entitlement   Entitlement

Telstra          2003   31,268        279           814
Coles Myers      2002    9,244        419           --
Woolworths       2003   11,488        258           142
Amcor            2003    7,108        142           80
Suncorp Metway   2003    6,692         81            9

                    Total
Company          Entitlement

Telstra             1,093
Coles Myers          419
Woolworths           400
Amcor                222
Suncorp Metway       90

Source: Market Capitalisation (The Sydney Morning Herald
22.11.03); accrued entitlements from company annual reports