The Government has opted out of the Social Chapter of the Maastricht Treaty which contains a directive on the issue, but Mr Lang yesterday welcomed the voluntary introduction of the councils.
After a sustained period in which ministers kept their ideological distance from the whole idea, he conceded that works councils can boost commercial success.
Mr Lang's sudden endorsement of such structures comes seven weeks before a deadline which obliges some 150 British-based multinationals to set them up or be forced to enter a time-consuming and bureaucratic negotiating procedure prescribed in detail by the European Commission.
All companies with 1,000 employees in the EU and 100 in each of two countries in the union must establish a pan-European framework to consult and inform employees.
Some have ignored the directive and will have negotiations forced on them after 22 September, while others have been discussing works councils with unions and employees.
British Steel has become the latest multinational to set up a council - for consultation but not for collective bargaining or negotiation - following companies including United Biscuits, NatWest and British Telecom.
"I am keen and willing to encourage companies to set up these councils on consultation and information where it is in their interests to do so," Mr Lang said. "The important point, however, is that it should be a decision for them to take in the light of their circumstances, and not something that should be forced on them from outside, and from outside the UK," he told the BBC Radio 4's Today programme.
He stressed the Government's opposition was to the element of compulsion in establishing the councils and went on: "I am very much in favour of a mechanism which enables a company to improve the flow of information and consultation and advice across the company, particularly international companies.
"We've done a lot to encourage that sort of thing. One of the ways industrial relations have improved so dramatically in the last few years is because of better communication between management and workforce - share option schemes, wide flow of information, greater understanding of what the objectives of the company are."
The Social Chapter would burden industry and make it less competitive, he said, noting that in the UK added labour costs were just 18 per cent, compared with 34 per cent in Germany and more than 40 per cent in France and Italy.
"One of the reasons that we have closed the productivity gap with Germany, for example, is that burden of costs they have imposed on themselves."