On 18 March, the Commission published its proposal for EU Inc., a regulation establishing a new corporate form. Part of several measures announced in response to the Draghi report — the so-called 28th regime — the proposal hopes to emulate a financial and legal landscape that might rival Silicon Valley. To be established anywhere in the EU, this new private corporate form promises easier setting up, scaling and, if needed, dissolution. In the following paragraphs, we ask what EU Inc. offers for workers, the group likely most affected by the proposal. The picture is quite bleak: from flawed economics and threatened worker participation to the recasting of labour as a mere factor of production, the proposal has little to offer and risks another era of regulatory competition that abandons democracy at work.

Notwithstanding the problems that proponents of EU Inc. have identified, the endorsement of a Silicon Valley vision of Europe’s economy is deeply flawed. The proposal contains countless references to “innovative startups” but does not indicate what they are. They are mentioned most frequently in the chapter on insolvency, presuming that “founders” or shareholders require liquidation that is as seamless as registration. However, this presents serious risks for workers given the higher proportion of failures among startups. This not only risks economic unsustainability, whilst encouraging financial speculation, but given that EU Inc. includes Employee Stock Ownership Plans (EU-ESO) — detailed below — workers risk bearing the brunt of a Silicon Valley economy. The second flaw is that EU Inc. represents a wider aversion to public investment, a structural issue of the European economy that Draghi himself called an “existential” threat. Attempts to encourage investment through harmonisation have been the EU’s go-to tactic since its first forays into industrial policy in the 1960s and 70s. Evidently, this has hardly been a success. Once again, EU Inc. ignores the problem of chronically low public investment, including in the cross-border infrastructure that private capital cannot, or will not, address.

A threat to worker participation

The real danger, however, lies in the proposal’s risks for worker rights. In an EU Inc., the worker participation rules of the country of registration apply, so inevitably a “founder” is incentivised to register in the member state with weak, or non-existent, worker participation. The proposal refers to the protections enshrined in the Company Mobility Directive to provide a safeguard against using conversion into an EU Inc. as an escape from domestic labour law but, as we have learned from the use of Societas Europaea (SE) shelf companies, these are safeguards in name only. When the SE company form was eventually created in 2001, the so-called “before and after” principle was put in place to prevent, say, a German company avoiding its worker participation requirements by re-incorporating as an SE in another member state — this principle was later included in the Company Mobility Directive. In the SE Directive, whatever participation regime was in place before the conversion into an SE would remain in place after. In effect, however, this meant that if a company wanted to freeze its participation regime before it reached the 500-employee threshold required under German law, it could move its headquarters to another member state where it had already established a “shelf SE”. This problem is not only replicated in an EU Inc. but exacerbated by the fact that company registration shall become “simple” and “cheap”.

This latest erosion is another chapter in a long demise of any real interest in empowering labour at the regional level. When the Commission first tried to create a corporate form for Europe in the 1970s with the European Company Statute, it quickly realised that industrial policy without equivalent protections for labour would not only threaten the position of the European worker but also the legitimacy of the European project. Thus, a second Commission draft proposed a German-style system of codetermination, alongside works councils and collective bargaining. This version was not successful, but its demise, as well as the failure of similar proposals in the Fifth Company Law and so-called “Vredeling” Directives, signalled the end of any real attempt to create collective participation rights. In the post-Maastricht era, when the European Works Council and the Information and Consultation Framework (ICED) Directives revisited the issue, participation was no longer a way to counteract the power imbalance between management and labour. Instead, in the ICED, information and consultation agreements served to “increase… employability” and improve company “competitiveness”. This same disinterest in effective employee intervention is found in the legacy of the SE Regulation which, far from a vehicle to protect workers against the consequences of the single market as once envisioned, has served to avoid rights to participation, information, and consultation.

From workers to ‘talent’: labour as a factor of production

In the same way that worker participation is now conceptualised as a tool of market facilitation, the proposal recasts labour as just a factor of production — merely “talent” waiting to be exploited. While the language of talent is not new, its application to corporate law marks a significant displacement. Over the past years, it has usually been relied on for work-related migration, regional, and public funding policy or to designate groups of individual talents. The commodifying displacement is evident in two key aspects: ambiguous promises and employee stock ownership plans.

The proposal outlines some measures ostensibly designed to benefit “talent”, including 100 per cent cross-border telework for startups and scaleups. These measures remain largely aspirational, except for the EU Talent Pool Regulation, and carry potentially harmful effects for workers. Cross-border telework, for instance, offers flexibility for some, particularly highly skilled workers, but challenges taxation, social security coordination, and labour law (e.g., here), notably information, consultation, and participation. Such telework or other cross-border work likely to expand in an EU Inc. also raises enforcement questions: how will workers, their representatives, or administrative authorities in a member state other than the one whose law is applicable enforce this law? Without robust legal frameworks for participation, collective bargaining, and occupational health and safety — and their enforcement — cross-border work in EU Inc. risks exacerbating power and distribution imbalances and normalising the treatment of labour as an economic input.

The proposal’s most concrete mechanism for engaging “talent” is the EU-ESO, allowing the issuing of non-transferable warrants convertible into company shares after a minimum 24-month vesting period. Established by the general assembly without mandatory worker participation, this provision gives workers “a stake in the company’s growth” — a far cry from the vision of industrial democracy that once dominated company and labour law debates. At the individual level, the proposal does not guarantee equal voting or profit rights for worker shares. Articles of association may provide otherwise, as in some Silicon Valley giants already — Alphabet Inc./Google, for example (here and here). It also remains unclear whether warrants count as part of pay, which affects income available, collective bargaining, social security contributions, and taxation. If treated as remuneration, shares may yield delayed, uncertain compensation. The experience of pay is, however, fundamental to work and social inclusion.

At the systemic level, a shift from wages to shares could reduce the tax and contribution base of Europe’s social policies and thereby undermine their contested redistributive and mutualising capacity, as the proposal seeks to harmonise only the moment at which taxation is due. Some jurisdictions tax capital gains at lower rates than income, while others exempt them from social security contributions. Germany, for instance, flat-taxes capital gains at 25 per cent (income: up to 42 per cent) and usually exempts them from social security contributions, while France applies a flat tax of 30 per cent (12.8 per cent taxes, income up to 45 per cent; 17.2 per cent social security). The shift therefore affects public tax income and social security financing. It also revisits workers’ taxation levels, social security entitlements, and cross-border pay and cost-of-living inequalities inside a company.

In our view, EU Inc. risks a systemic displacement within the legitimacy of the European project. It likely undermines collective power, risk mutualisation, and redistribution; it prioritises flexibilisation for private investment over public investment; and it can fundamentally modify the purpose of participation at work if EU Inc. becomes the dominant corporate form. With the exploitation of divergent tax regimes already threatening inequalities in Europe, EU Inc. will incentivise incorporation in less protective regimes for worker participation, taxation, and social security. In other words, it risks yet another era of — likely downward — regulatory competition. EU Inc. further abandons the twentieth century’s vision of work as a site of democracy for the sake of financial speculation, regional inequality, and damaged labour rights, leading to the kind of resentment that is the lifeblood of the modern far right.