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Workers on boards or shareholder revolts? 13 ideas for holding bosses to account

The Department for Business, Energy and Industrial Strategy has outlined its plans. 

When Theresa May became Prime Minister in the turbulent summer of 2016, she made a pledge that surprised many in her own party and took the wind out of Labour's sails. She pledged more employee representation at the top of companies - in short, "workers on boards".

Now, the Department for Business, Energy and Industrial Strategy has published its plans for consultation. And, yes, they do include "stakeholders" on boards, but also some flabby talk about strengthening corporate guidance. Depending on what the government hears from businesses, employee groups and other interested parties, we could see a revolution in the boardroom - or more of the same. 

Here are the main ideas on the table:

1. Give shareholders a veto on pay

Public companies already have to subject their pay policy to a binding vote every three years, but the annual vote is simply advisory. Instead, shareholders would get the final say ever year. If enough voted against the pay package, they would effectively veto it. 

Another version of this would keep the binding vote as something that happens once every three years, but allow shareholders to ask for an earlier vote in exceptional times. For example, if a company's top team resigned en masse, shareholders could have a say on pay. 

2. Penalise companies that ignore shareholders

Shareholders would not have the power to veto the annual salary, but if they did vote against it, the company could face a bigger hurdle to passing such a pay packet in future. So, for example, if the company decided to ignore its shareholders and pay the CEO gazillions in 2017, the next year it would have to find a deal that a "super majority" i.e. 75 per cent of shareholders agreed with. 

3. Set an upper limit for pay

Shareholders could agree on an upper level of company pay. If the company wanted to reward the boss with a salary that was extraordinarily humungous and crossed the threshold, it would have to put this to a binding sharehold vote.

4. Toughen the existing rules

This option would simply elaborate on existing rules for public companies, but with the encouragement to listen more to shareholders before and after a vote. 

5. Create shareholder committees

Many shareholders don't take advantage of their existing powers. Establishing a shareholder committee would allow representatives to focus on the company's strategy and directors. 

Many investors no longer buy shares directly, but invest through a stockbrokers. Brokers could be asked to do more to make sure individuals know they can make their voices heard. 

6. Empower remuneration committees

Big listed companies already have reumuneration committees which are staffed by independent, non-executive directors. The government wants these committees to spend more time listening to shareholders, and to be led by more experienced people. 

7. Publish a pay ratio

Big companies could be asked to publish the ratio of CEO pay to wages elsewhere in the workforce (this is already becoming mandatory in the United States from 2017). This would make it easier for shareholders (and the media) to see whether the CEO's pay was out of proportion.

8. More transparent pay

A chief executive's pay is like an iceberg - the salary is only one part, and much of the value is discreetly buried in shares, a bonus and a pension. Companies could be asked to make it clearer what the boss has to do to get a bonus, and to make long-term pay plans easier to understand. 

9. Workers on committees

Companies could be asked to create "stakeholder advisory panels" to provide a different set of perspectives to those usually heard in the boardroom. This committee wouldn't necessarily get a say in the final decision a company made, but it could influence the discussion. 

10. Ask certain directors to represent employees

This plan would ask existing non-executive directors to represent the voices of others, such as employees, in the boardroom. 

11. Workers on boards

This is the plan the Prome Minister originally floated, phrased in the report as "appoint individual stakeholder representatives to company boards". Other stakeholders, such as consumers, could also be represented. Employees could be elected, and once sitting at the boardroom table, would be expected to comply with the same rules as other company directors.

12. Ask companies to report back about employees' interests

Large companies already have to describe how they have considered employees' welfare. This requirement could be expanded to include other groups or be more specific. 

13. Make private companies follow the same rules

At the moment, private companies don't have to comply with the same levels of regulation as listed companies. The government is considering drawing up a new code for private companies and encouraging them to comply voluntarily (under significant pressure). 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

Photo: Getty
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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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