Company Union - Definition and Theory

Definition and Theory

As with labor concepts like the works council, the definition of a company union is not ironclad. Economist Leo Wolman wrote in 1924: "he distinction ... between trade unions and other workmen's associations is frequently a vague and changing one. What is today a company union may tomorrow have all of the characteristics of a trade union." The International Labor Organization defines a company union as "A union limited to a single company which dominates or strongly influences it, thereby limiting its influence."

Supporters of company unions claim they are more efficient in responding to worker grievances than independent trade unions. Proponents also note that trade unions do not necessarily have the company's best interests at heart; company unions are designed to resolve disputes within the framework of maximum organizational profitability.

Opponents use this same logic to argue against company unions. The independent nature of trade unions, they argue, provides them with an outsider's perspective necessary for just resolution of conflict. Furthermore, independent unions are able to propose large-scale changes to work agreements – such as overtime rules and salary schedules – whereas company unions usually address concerns on a smaller scale.

Some opponents also claim that company unions are used as fraudulent institutions, purporting to represent workers while actually ignoring (or working against) the best interests of employees. However, at least one economist advances the idea that in the first part of the 20th century, many companies were hesitant to adopt the company union model, for fear that it might lead to support for an independent trade union.

A 2002 World Bank publication cites research from Malaysia and India which produced conflicting results as to the wage differential provided by trade unions compared to company unions. (Malaysia saw improved wages through independent unions, India did not. The authors indicate the latter "may reflect the specific circumstances that prevailed in Bombay at the time of the study.")