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21 November 2016

Theresa May just scrapped her own brilliant pro-business idea

In Germany, workers on boards are common. 

By Frances O'Grady

In October, at the Conservative Party Conference, Theresa May promised that companies would be required to put workers on their company boards.
 
Her reasons for doing so were clear:

“Too often the people who are supposed to hold big business accountable are drawn from the same, narrow social and professional circles as the executive team. A change has got to come. So later this year we will publish our plans to have not just consumers represented on company boards, but workers as well.” 

Fast forward eight weeks and her tune is very different. Speaking to business leaders at the CBI’s annual conference today, May said it now wouldn’t be mandatory for companies to have worker representatives in their boardrooms.

If this turns out to be the case, Britain will be missing a huge trick.
 
In many of Europe’s most successful economies, worker representation on company boards is an accepted and valued way of doing business. 
 
Last month Warren East, the chief executive of Rolls Royce, cited the example of Germany, where workers on boards are common:
 
“We have nearly 20 per cent of our workforce in Germany, so are well-acquainted with worker representation,” he said. “It could be an extra channel to communicating with the workforce. Gone are Victorian days of managers and workers.”
 
Mr East is spot on. It has been widely recognised that having a wide range of voices in the boardroom improves decision-making and avoids the curse of groupthink.  
 
Those working on the shop floor have a clear interest in the long-term success of their company. And their direct experience of working with customers and suppliers gives them insights and a perspective that the non-executive directors round the table do not have. 
 
Having workers on company boards is not something ministers, or UK companies for that matter, should fear. 
 
Countries with greater worker representation perform better on a whole range of measures, including research and development and employment rates. And they do better at reducing poverty and inequality.
 
There is no compelling reason for the UK not to follow suit. Having workers on company boards is not anti-business.
 
On the contrary, it helps companies function more effectively and plan better for the long term. Take the example of First Group, which has had an employee director on its board since the company was created in 1989. 
 
This is what the company has to say about its experience: “Directors and workers alike find Employee Directors invaluable in providing a closer link between the depot and the boardroom.”

The TUC believes that worker board representation should be mandatory companies with 250 or more staff. This would cover approximately two-fifths of the private sector workforce and implementation could be phased in, starting with the largest companies (as occurred, for example, with pension auto-enrolment).

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It is vital that working people are able to make a real difference to the culture, discussions and decisions of company boards, and this will be much harder to achieve if their voices are shut out of the boardroom. 

Theresa May must not jettison her signature policy to tackle greed and misbehaviour at big firms.