The Corporate Law and Governance blog reports that:
The Prime Minister, the Rt Hon Theresa May MP, delivered a speech today at the CBI annual conference: see here. The Prime Minister said some more about the forthcoming green paper on corporate governance, in particular the Government's position on worker representation on boards. Worker representation - if that is taken to mean the direct appointment of a worker or trade union representative to the board - will not be mandatory. Here's an extract from the speech:
...
First, while it is important that the voices of workers and consumers should be represented, I can categorically tell you that this is not about mandating works councils, or the direct appointment of workers or trade union representatives on Boards. Some companies may find that these models work best for them – but there are other routes that use existing Board structures, complemented or supplemented by advisory councils or panels, to ensure all those with a stake in the company are properly represented. It will be a question of finding the model that works.
Second, this is not about creating German-style binary boards which separate the running of the company from the inputs of shareholders, employees, customers or suppliers. Our Unitary Board system has served us well and will continue to do so. But it is about establishing the best corporate governance of any major economy, ensuring employees’ voices are properly represented in Board deliberations, and that business maintains and – where necessary – regains the trust of the public.
There is nothing anti-business about this agenda. Better governance will help companies to take better decisions, for their own long-term benefit and that of the economy overall. So this is an important task. We will work with you to achieve it, and I know you will rise to the challenge".
Voice and representation but not necessarily board membership? How's that supposed to work?
In any case, as I discussed in my article, Privately Ordered Participatory Management: An Organizational Failures Analysis (September 1997), available at SSRN: https://ssrn.com/abstract=38600, there are significant costs to employee voice/representation while the benefits are most uncertain:
Michael Dooley opines that workers will be indifferent to most corporate decisions that do not bear directly on working conditions and benefits: “As to the majority of managerial policies concerning, for example, dividend and investment policies, product development, and the like, the typical employee has a much interest and as much to offer as the typical purchaser of light bulbs.” Dooley’s argument is supported by a number of empirical studies. John Witte’s case study, for example, found that workers who did not desire participation often cited a lack of managerial expertise as the reason. John Cotton’s review of the literature concluded that participatory management is most effective when it is directed at “one’s everyday work, not [at] deciding policy issues of the entire organization.” Sagie and Koslowsky found that “subordinate participation in tactical decisions (those dealing with working methods), as opposed to strategic decisions (those dealing with the initiation of a new product or service), was a better predictor of an increase in change acceptance, work satisfaction, effectiveness, and time allotted to work.” All of which tends to suggest that employee representatives add little except increased labor advocacy to the board.
So my advice would be to give it a miss.
