CRO POV: CRO in Europe, Part 3—The Elephant in the Room

As I made my way through recent meetings with Corporate Responsibility industry leaders in London, Brussels and Paris, I noticed an elephant in the room. But nobody wanted to talk about it. Call the elephant “workforce pandering.”

Today, companies in every major EU country—the UK, France, Germany, Spain, the Netherlands, Belgium, Italy—are now involved in mud wrestling matches with new “responsible” workforce-related regulations. Truth is that these new workforce restrictions are hindering companies’ ability to serve any group of stakeholders other than employees.

But when I propose the topic of the new workforce developments for our upcoming CRO Conference in Europe, Corporate Responsibility leaders duck for cover. “We absolutely cannot bring that up anywhere, any time,” said one, who requested I not mention his name or company. Another, also making me swear secrecy, said “I would rather be locked in the Tower of London than speak at a conference about the truth of how my employee stakeholders are working at counter-purposes to other stakeholder groups, whether that means shareholders, customers, suppliers including publicly-regulated insurers and lenders, or the environment. That would be certain career death.”

A classic example is now under discussion in Germany, a socialized medicine reform popular with low-paid workers, known as ‘Wettbewerbsstarkungsgesetz,” or “the law to strengthen competition.” Today, German employers pay a whopping 15% of gross pay for health insurance. This new, tough-to-pronounce regulation would force private insurers to provide about 150,000 underinsured German employees with “basic” insurance below the carriers’ cost. To pay for this, the insurers will need to hike employer premiums by up to 12%. That will increase product and service prices for already-competitively-challenged German companies whose workforce overhead is already one of the world’s highest.

In addition to those higher prices, something else nasty will happen…something that will definitely not strengthen competitiong. By requiring that insurers offer this cheap coverage—insurers who are at government’s mercy for operating licenses and cannot avoid the new below-cost policies—cost-conscious companies will switch more employees to the cheaper policies. This will set off a run on the cheaper policies that will blow some insurers out of business. This, in turn, will lead to less competition and even higher costs.

This leaves a European lesson for the US Corporate Responsibility community during the upcoming political season when employee health insurance promises to be a hot-button issue. Beware reforms that benefit one very noisy stakeholder group—employees—only to punish several others.

Tomorrow’s CRO Point Of View: Davos-tating Views of the Future of CRO