Finance Committee (works council)

The Finance Committee or Economic Committee (Wirtschaftsausschuss) is a financial advisory body that analyses the financial situation in a company, in order to help the works council carry out its duties in a German legal entity. It has information rights and limited consultation rights.

History
The Finance Committee was first introduced in 1952 in section §68 of the Works Constitution Act. The committee consisted of an equal number of members chosen by both the works council and the employer. Initially, trade unions proposed a Finance Committee that had full co-determination rights, with decision making power on financial matters, but the employer reduced the scope of the committee to receiving information and limited consultation.

Legality
The Finance Committee is currently defined in section §106 of the Works Constitution Act. If a Works Council exists and represents more than 100 permanent employees, they must establish a Finance Committee, or else it is a breach of their Works Council duty. Works Councils in smaller workplaces can also receive economic information under §80, however the Works Council must then show the necessity of such information.

If there is a Central Works Council, the Finance Committee becomes the responsibility of the Central Works Council. There is no corresponding responsibility for the Group Works Council.

According to §118, if a company is primarily religious, charitable, educational, political or artistic in nature e.g German Red Cross or Max Planck Institute, then the Finance Committee is largely limited to financial planning during mass-layoffs as defined in §111-112.

The Finance Committee is different from other "committees" of the Works Council within the meaning of §28. The Finance Committee optionally has non Works Council members and a semi-autonomous role in discussing/negotiating with the employer, for example to select external experts (to advise the Finance Committee on more complex topics that exceed the internal knowledge of the Finance Committee). In contrast, regular Works Council committees consist of Works Council members only.

Activity
The Finance Committee must meet with a representative of management on a monthly basis per §108.

The company must also inform the Finance Committee about its financial activities. 10 areas of financial reporting are explicitly outlined in §106(3) and §108(5) including potential acquisitions, employee layoffs, expansions/downsizing, profit and loss reporting. This list is not exhaustive, and other topics that are of financial interest to the works council are included as well.

If the Finance Committee is not given adequate information, accessible documentation in good-time by management, the (Central) Works Council can call in a conciliation committee to mediate between the employer and Finance Committee, and if necessary, make a binding award on how and what financial information is furnished.

Composition
The Finance Committee should have between three and seven members (all employees), including at least one (Central) Works Council member. Regular employees as well as executive management employees are eligible to be on the Finance Committee. The Finance Committee members serve the same term as the (Central) Works Council, however they can be replaced at anytime by a majority vote of the (Central) Works Council.

The Works Council however, can delegate specific tasks of the Finance Committee to other internal Works Council committees, which has advantage of being up to 22 members instead of 7 in larger Works Councils. German legislators had a practical concern that if a committee becomes too large, the employer might be more reluctant to share financial information in full.

Like the Works Council, members of the Finance Committee serve on an honorary basis, without loss of wages from their regular work. This includes preparatory meetings in outside of mandatory monthly meetings with the employer.