Content uploaded by Chutinon Putthiwanit
Author content
All content in this area was uploaded by Chutinon Putthiwanit on May 22, 2014
Content may be subject to copyright.
1
A Different Point of View in Collective Bargaining:
Legal Perspective versus Business Perspective
Chutinon Putthiwanit
*
Department of International Business Management, Eastern Asia University
Sawitree Santipiriyapon
†
Department of International Business Management, Eastern Asia University
Abstract
This paper aims to describe the different point of view in collective behavior between
legal context and business context. As in business context, in which collective bargaining
concerns about a monetary system, a group of farmers can use collective bargaining as a tool
to deal with injustice negotiation. Nowadays, a number of goods and services
produced/provided are discovered to be determinate; namely, higher or lower wage of the
workers, resulted from winning or losing the collective bargaining will affect to the price of
goods sold or services provided. Collective bargaining is not an obsolete idea. The way to
use it advantageously is depended on how much power bargainers realize they have. The
strategy of collective bargaining in both legal and business perspective may be similar in
some ways; but however, the format of conducting it may be different. In conclusion, to
sustain the relationship between employees and employer or buyers and seller is to maximize
both parties profit. When the needs of both parties are fulfilled, the outcomes will generate
benefit for the society and all stakeholders.
Keywords Collective Bargaining, Bargaining, Business Negotiation, Legal Negotiation,
Negotiation, Labor Law, Employment Law, Law
JEL Classification K31, M19, M51, M54, J83
Paper Type Academic Paper
Paper Status Working Paper
**
Corresponding Author
†
Head of Department of International Business Management (Thai Program)
2
The Nature of Collective Bargaining
In our daily life, we have to face the chance to bargain. No matter how good in
bargaining we are; reaching an agreement is the best way to sustain the relationship with the
antagonized party. Notwithstanding, there are various kind of bargaining depended on the
situation we cope with, such as bargaining in business perspective (haggling with the seller),
integrative bargaining, distributive bargaining, collective bargaining, and so on. It is dubious
that what the differences among these bargaining are; the function and the role they play; the
similarity in their characteristics. This is still questioning for individuals in this cradle of
humanity.
Even though, there are a number of research studying in collective bargaining, for
example, Weldon (1953) discusses about collective bargaining and its economic effects;
Jensen (1963) criticizes the process of collective bargaining and questions its obsolescence;
Alexander (1971) studies about conglomerate mergers and collective bargaining during year
1948-1968; Glassman (1972) does a research on a public sector’s collective bargaining and
attempt and to suggest some brand-new directions for future research; Craypo (1975)
explores the collective bargaining in Litton Industries and General Electric Company during
year 1969-1971; Gilson et al. (1997) explain the theory of collective bargaining and
including the use of it in USA and internationally; Matsa (2010) reports on the usage of debt
financing to improve firm’s bargaining position; De Jong (2011) studies the competition and
the innovative intentions in Dutch enterprises where intentions correlate with the bargaining
power of suppliers; Foster et al. (2011) explore the attitudes of New Zealander employers to
collective bargaining and the union agents; Katchanovski et al. (2011) investigate the
attitudes of employees towards collective bargaining in universities in USA and Canada.
However, the academic papers examining the different point of view in collective bargaining
in legal perspective and business perspective are still limited. As a result, the organization of
this be paper will be arranged from: firstly, the characteristics of collective bargaining will
explained; secondly, the collective bargaining in legal and business perspective will be
discussed; thirdly, the process and result of legal/business collective bargaining will be
explored; and, finally, the conclusion of this academic paper will be discussed.
The Characteristics and Core of Collective Bargaining
The collective bargaining emerges when both parties try to seek the maximum profit they
may earn as a monetary or non-monetary return. Raison d'être, collective bargaining always
has the opponent (Jensen 1963). In law, the collective bargaining represents the conflict in
mutual agreement between worker and employer. Its necessity is that the activity of worker
representation prevents workplace conflict as well as promotes social integration among
workers (Gilson et al. 1997). As in business context, in which collective bargaining concerns
about a monetary system (Weldon 1953), a group of farmers, or even people in community
can use collective bargaining as a tool to deal with injustice negotiation or in order to protect
the rights of the consumers.
3
The Impact of Collective Bargaining
Nowadays, a number of goods and services produced/provided are discovered to be
determinate (Weldon 1953); namely, higher or lower wage of the workers, resulted from
winning or losing the collective bargaining will affect to the price of goods sold or services
provided somehow. Matsa (2010) also supports that manufacturers sometimes attempt to
reduce the impact of bargaining on profits; namely, firms increase the worker wage and
increase the cost of product as well. That is, at any level of wages earned among workers in
the industry, it will affect to the purchasing power (Weldon 1953). Therefore, winning or
losing collective bargaining will have the impact of both legal act and business move. Apart
from economic condition, collective bargaining also affects to the society since it is often a
source of the demonstration (Weldon 1953).
Ipso facto, if the existence of collective bargaining is gone, some employers may take
advantages of their employees such as providing pure condition workplace, using child labor,
or not providing medical insurance for their workers. In business view, department stores can
takes advantages from the farmers by asking for unreasonable price for the agricultural
products farmers produced due to their powerful power in bargaining. Thence, farmers have
to sell their products in very cheap price anyway since buyers will always buy in a big
bulking. In addition, the concept of cooperatives nowadays will never occur if the injustice
bargaining is never happened. As a result, the existence of collective bargaining affects to
individuals as a whole and it is one of the factors in progressing worker’s rights and better
consumers’ economic and social status.
Collective Bargaining in Bidimensional Perspective
Due to the collective bargaining process, the negotiation will tie with tripartite group;
namely, there are three groups of individual concerned such as workers, union, and
employer. That is, in working atmosphere, the practice of bargaining is not fixed as dyadic
haggling like collective bargaining in business perspective. In addition, even though activists
nowadays try so difficultly to make the voice of consumers heard; or, union balances any
worker's wage to equal the addition to output which the previous worker hired
contributed (Weldon 1953). The imbalance power in bargaining still occurs. It is true that
collective bargaining emerges in both legal and business form. This makes collective
bargaining distinguishable from the other type or method of bargaining. This section will
explain the process of bargaining in bipolar form.
How collective bargaining works in legal/business form
Gilson et al. (1997) mention that the duty to bargain collectively does not mean that the
agreement will be reached; because, the point of collective bargaining is that either party is
free to decide whether the proposals made to it are satisfactory (Jensen 1963). Moreover,
Jensen (1963) also supports that the unique characteristics of collective bargaining in legal
context is that collective bargaining process works because the parties have a program and
4
power not a process of reasoning, nor economic analysis and persuasion. On the other hand,
in business-related collective bargaining, unlike the legal collective bargaining, the
agreement must be made between a group of potential buyers and sellers. Sellers hardly have
the sole or dominating power. For example, by the roles of suppliers and buyers, suppliers'
power may be limited due to buyers' more powerful position (Jensen 1963). However, the
advantage position will be reversed if the sellers are a group of farmers and rice millers;
namely, farmers (as sellers) can use collective bargaining power to gain higher price of their
rice produced each ton. As a result, in business form, collective bargaining can perform in
both buyer and seller position; whereas, the position on collective bargainers in employment
condition (legal form) cannot be reversed. This is one big different between legal and
business perspective.
Collective Bargaining: The Tug of War
Collective bargaining performs a fundamental and valuable function which
cannot be fulfilled; namely, it performs that function more compatible with democratic
way of regulating employment conditions (Jensen 1963). The bargaining power of workers’
union can arise from the changes in unemployment insurance system (Matsa 2010). It is quite
difficult sometimes to determine who should be the winner or loser in this tug of war. This
section will explain the negotiation between two parties in both legal way and economic way.
Negotiation between employer and employee/ buyer and seller
There is another one different point between negotiating collectively between employer
and employee and between buyer and seller; namely, employer is not allowed to implement
his final offer of collective bargaining since it will destroy the purpose of collective
bargaining (Gilson et al. 1997). In business perspective, a buyer rejecting the offer from a
seller does not mean any harm for him unlike employee rejecting the offer from his employer
that can lead to losing jobs. For example, a research by Gilson et al. (1997) mention that half
of negotiators admitted that their employer had had impasse or implementation in the
collective bargaining; that is, employer has more plausibility to win the negotiation.
However, employees and unions still can coordinate their bargaining efforts or
consolidate their bargaining units in order to offset the collective bargaining disadvantages
(Craypo 1975). Again, there is another question arises in our mind. Could it always be win-
win outcome among the collective bargainers? In answering this question, we have to admit
that the concept of collective bargaining is not the same among countries. It seems wishful
thinking but we have to realize the facts. For example, in USA, collective bargaining law
states that worker cannot bargain with his employer since the bargaining power of employer
is too great (Gilson et al. 1997). Thence, in this case of legal perspective, the win-win
outcome will never occur. While, in Europe, Australia, and New Zealand, the collective
bargaining is allowed to relief employees’ frustrated desires for control (Gilson et al. 1997).
5
Epilogue
Collective bargaining is not an obsolete idea (Jensen 1963); and, its behavior is
influenced by the legal requirement to bargain collectively in a good faith (Foster et al.
2011). The way to use it advantageously is depended on how much power bargainers realize
they have. The strategy of collective bargaining in both legal and business perspective may
be similar in some ways; but however, the format of conducting it may be different.
Nonetheless, both legal and business collective bargaining have at least a correlation between
them. For example, Matsa (2010) states that the negotiated wage is increasing in workers’
bargaining power, it also is increasing the intermediate cash flow, and is decreasing in the
level of debt. Consequently, it affects to the whole society. Even though, there are some
differences between legal collective bargaining and business collective bargaining. But
however, the best way to sustain the relationship between employees and employer or buyers
and seller is to maximize both parties profit. When the needs of both parties are fulfilled, the
outcomes will generate benefit for the society and all stakeholders.
References
1. Alexander, K. O. (1971). Conglomerate mergers and collective bargaining. Industrial and
Labor Relations Review, 24, 354–74.
2. Craypo, C. (1975). Collective bargaining in the conglomerate, multinational firm: Litton's
shutdown of royal typewriter. Industrial and Labor Relations Review, 29, 3–25.
3. De Jong, J. P. J. (2011). Perceived competition and innovative intentions in Dutch small
and medium-sized enterprises. International Journal of Innovation Management, 15,
687–707.
4. Foster, B., Rasmussen, E., Murrie, J. & Laird, I. (2011). Supportive legislation,
unsupportive employers and collective bargaining in New Zealand. Relations
Industrielles/Industrial Relations, 66, 192–212.
5. Gilson, C., Dannin, E. & Wagar, T. (1997). Collective bargaining theory and the doctrine
of implementation of final offers collide. Labor Law Journal, 48, 587–600.
6. Glassman, A. M. (1972). Research on collective bargaining in the public sector: New
directions. Academy of Management Journal, 15, 375–78.
7. Jensen, V. H. (1963). The process of collective bargaining and the question of its
obsolence. Industrial and Labor Relations Review, 16, 546–56.
8. Katchanovski, I., Rothman, S. & Nevitte, N. (2011). Attitudes towards faculty unions and
collective bargaining in American and Canadian Universities. Relations
Industrielles/Industrial Relations, 66, 349–73.
9. Matsa, D. A. (2010). Capital structure as a strategic variable: Evidence from collective
bargaining. Journal of Finance, 65, 1197–1232.
10. Weldon, J. C. (1953). Discussion: Economic effects of collective bargaining. Industrial
and Labor Relations Review, 6, 570–8.
