Employees in the boardroom - can it work?

One of the first pledges made by Theresa May as leader of the Conservative Party and Prime Minister of the UK was an overhaul of corporate governance, including appointing employee representatives to company boards.

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One of the first pledges made by Theresa May as leader of the Conservative Party and Prime Minister of the UK was an overhaul of corporate governance, including appointing employee representatives to company boards.

“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” May said. “In practice, they are drawn from the same narrow social and professional circles as the executive team.”

The concept is not entirely new to British politics, the 1977 Bullock Report was in favour, in response to a European Commission directive. It also echoes themes voiced by former Labour Leader Ed Miliband during the 2015 general election campaign. The idea is already well entrenched in European industry however.

In Germany half the seats on supervisory boards are reserved for employees with the Chairman holding the deciding vote. The recent emissions scandal at Volkswagen showed that even this direction is not flawless as executives persuaded union representatives with employment guarantees.

General secretary of the TUC, Frances O'Grady, said the proposals would bring a "much-needed dose of reality into boardrooms".

"The TUC has long argued for workers to be given seats on company boards and remuneration committees. Workers have a clear interest in the long-term success of their companies and deserve a bigger say" Ms Grady said. This view was echoed by Tim Martin, the chairman and founder of pub chain JD Wetherspoon.

There may also be increasing consent from the business community as Sir Mike Rake, chairman of BT and Worldpay as well as former president of the CBI commented “it was shown in stereophonic sound in the referendum that there is a lack of trust in the establishment, politicians and business.”

Alex Fleming says:

Although these proposals and their impact on the wider business need to be carefully considered, there is no denying the potential benefits to both employees and employers. Increased employee engagement would be the most obvious and this could result in increased retention and productivity as well as access to potential innovations. These are all are outcomes that every business is constantly seeking.”

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