When I was at university, I had a job at a local supermarket and as anyone who has worked in retail will tell you: weird things happen. One customer complained about the quality of his ready meal. It turned out that he had actually purchased it from the other supermarket, across the road. Another complained that their roast chicken had no breasts; unfortunately they were carving it upside down. These examples are silly (and true!) but they remind me that a job I had previously thought would be simple actually required a lot of time and patience. If people felt that wasn’t appreciated, or that their voices weren't being heard, then they left the company and took their skills and experience with them.
Building on workers’ rights in the UK was number 7 in the Government’s 12 point “Plan for Britain”, announced recently. Though light on detail, it would be fair to speculate that this may include worker representation in companies at the board level. Popular in a number of other European countries, the Prime Minister has championed this policy previously, although she has indicated more recently that it would not be mandatory.
The rationale for worker representation at the board level is broad. Its proponents claim that workers have an interest in long term success of companies, which could provide balance to short termism. With many communities in the UK feeling the loss of long standing industries, this could be attractive. It can help to diffuse workplace disputes at an early stage, possibly avoiding industrial action and saving businesses time, money and avoiding bad publicity. It’s also argued that worker representation can lead to greater diversity at the top levels of big business.
Sir John Parker’s 2016 diversity review found that just 8% of FTSE 100 directors are people of colour, and that seven companies accounted for a third of this amount. 53 FTSE 100 companies have no people of colour. This is in contrast with the UK workforce generally, where 14% of workers are from BAME backgrounds. Women fare slightly better, comprising 26% of FTSE 100 directors in 2016. Worker representation at this level is seen by some as a much needed shot of adrenaline to companies stuck in the past.
This type of participation isn’t new, and many other European countries require businesses to incorporate it in some way. In Germany, affected companies have two separate boards; a management board which is responsible for the day to day running of the company, and a supervisory board which monitors the management board and, in particular, levels of executive pay. Arguably the biggest obstacle to a similar arrangement in the UK is resistance to such a significant change of the established corporate structure.
The Dutch system may offer an alternative; this allows businesses for whom worker participation is mandatory to choose between single or dual board systems. An important feature of “worker” participation in the Netherlands is that employees of the company and unions involved in collective bargaining with it are excluded from sitting on any supervisory board or be non-executive directors. The reasoning for this is that directors should represent the interests of the company as a whole. The result is that worker participation takes place through academics, HR professionals or those from the voluntary sector. This may be preferable for businesses, but the approach is often criticised for being a “watered down” version of worker participation.
At this stage, there are more questions than answers on the issue of worker representation. Would the policy apply to companies of all sizes, or does the Prime Minister only have “big business” in her sights? What would the role of worker representatives be, and what kind of power would they have? Would these directors have to comply with the relevant provisions of the Companies Act 2006? How would worker representatives be elected?
For the moment, it appears that worker participation in the boardroom won’t be mandatory in the immediate future. The Prime Minister's keynote speech at Davos demonstrates that the government still want to be seen as taking aim at big business. In light of this, worker representation may be repackaged as a tool to prevent scandals similar to those at BHS with “soft pressure” used to encourage uptake. If nothing else, I’m sure that the anecdotes could liven up dull board meetings.