Setting out her vision for British business, Theresa May included a somewhat unexpected proposal to put workers on company boards - what could this mean in practice?
What did Theresa May actually say?
Just before her appointment as Prime Minister, Theresa May announced:
"I want to see changes in the way that big business is governed. The people who run big businesses are supposed to be accountable to outsiders, to non-executive directors...
...In practice, they are drawn from the same, narrow social and professional circles as the executive team and...the scrutiny they provide is just not good enough...
...if I'm Prime Minister, we're going to change that system and we're going to have not just consumers represented on company boards, but employees as well."
No detail yet, and many questions
So, not much detail yet; but certainly a clear statement of intent.
Some questions that immediately spring to mind:
- Which companies will need to have workers on their boards - what is 'big business'?
- Will this be compulsory, with penalties for non-compliance?
- What rights will workers on boards have?
- How will the workers be chosen - election by the workforce, appointment by a trade union?
- What will be the relationship between worker representatives and trade unions?
Could it bring benefits for companies?
This will of course be a question for debate, but in proposing the move Theresa May must surely envisage that it will.
The TUC has cited potential benefits as including:
- Helping boards prioritise the long-term success of the company;
- Improving the quality of working life, thus boosting productivity; and
- Bringing knowledge and understanding of company operations and customer and supplier relationships, thus contributing positively to strategic and operational discussions.
How does it work in other countries?
Many other European countries have well-established systems for worker representation on company boards, including France, Denmark and Germany.
These systems vary widely in many respects, such as how representatives are elected; the companies covered; and the proportion of worker representatives per board.
If the government reaches the stage of designing a UK system, it may look abroad for ideas, but most likely will cherry pick elements from different countries to create a unique approach for the UK.
Where to now?
Time will tell whether this proposal becomes a reality, and we'll keep you posted if there are any developments.
Please get in touch with your usual Brodies' contact if you want to discuss this in the meantime.
Update - September 2016
Since we originally posted this blog in July 2016, the Business, Innovation and Skills Committee has launched an inquiry on corporate governance, including workers on boards (September 2016). It asks whether there should be worker representation on boards and / or remuneration committees and, if so, what form this should take. Written evidence should be submitted to BIS online via its Corporate Governance inquiry page. The deadline for submissions is 26 October 2016.
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