Theresa May’s plans to overhaul UK corporate governance include the electing of employee representatives to company boards. Would this be a positive move for business?
Yes, says Stefan Stern, director of the High Pay Centre
Something is too often lacking from the conversation at board level: an eyewitness account from the shop floor. How easy it is to forget the perspective of ordinary employees, even in the middle of discussi
ons that will have a direct impact on their lives. ‘Consultation’ is, sadly, one of the most abused management terms. It makes practical sense to listen to the views of colleagues before taking decisions that affect them. So introducing the employees’ point of view into the boardroom, through employee representatives, must make sense.
The High Pay Centre’s particular focus is on executive remuneration. Even if the idea of a workers’ rep on the board feels like a step too far for some, getting that employee voice into the top pay discussion is a no-brainer. Imagine if BP had included two people from an oil rig in the discussion about Bob Dudley’s pay package. We know what their response might have been: “How much? You’re sacking thousands of us, the oil price is in the basement and the share price is down. And you want how much…?”
This conversation could have taken place in the privacy of St James’s Square [BP’s HQ], and would have avoided both the embarrassing shareholder rejection and subsequent media coverage. Boards have little to fear, and much to gain, from listening more carefully to their employees. Try it! You might like it. @stefanstern
No, says Jim Prior, CEO of The Partners and Lambie-Nairn
The proposal betrays a fundamental misunderstanding of how companies work in its failure to distinguish between leadership and governance. In most large companies it is the executive leadership team that makes the decisions which most affect employees, not the board. Yes, corporate leaders should listen to employees but the role of the board should be to identify and act on situations where leaders fail to listen, not to do the listening for them.
Who are these employee representatives to be? Does the workforce stage an election and run a kind of workers’ council, and how is this different to the idea of unions? Beyond what level of seniority does an employee cease to be representative of the workers and become part of management? What do the representatives do in a board meeting and what share of influence are they entitled to wield? Crucially, in what way will this benefit employees?
Running a business that successfully balances the needs of shareholders, employees and wider society is the right and necessary goal but to achieve it requires a far more sophisticated strategy than this proposal contains. It doesn’t need more talking at board meetings, it calls for more inclusive, dynamic, responsible working practices to be embedded in the day-to-day running of businesses in which all employees get to contribute. @Jim_Prior
Should boards include an employee representative?
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