This report sets out the case for worker representation on boards, how it works in practice in other European economies, and how it could be put into practice in the UK.
The case for worker representation on boards
Enhancing the quality of board decision-making
Workers have an interest in the long-term success of their company; their participation would encourage boards to take a long-term approach to decision-making.
Worker board representation would bring people with a very different range of backgrounds and skills into the boardroom, which would help challenge ‘groupthink’.
Workers would bring the perspective of an ordinary worker to bear on boardroom discussions and decisions; evidence from countries with worker board representation shows that this is particularly valued by other board members.
Workforce relationships are central to company success, and worker board representation would help boards to manage these key stakeholder relationships more effectively.
The importance of voice
Workers’ interests are affected by the priorities and decisions of company boards and it is therefore a matter of justice that they should be represented within those discussions.
Representation in practice
Evidence from Europe
Worker board representation is in place across most of Europe; the UK is one of a minority of European countries with no rights for workers’ voice within corporate governance.
In 19 out of 28 EU Member States plus Norway (i.e., 19 out of 29 European countries) there is some provision for workers’ representation on company boards, and in 13 of these countries the rights are extensive in that they apply across much of the private sector.
There is no one model of workers’ board representation across Europe, and the way in which it operates varies from country to country.
Research shows that where worker board representation is in place, the contribution of worker representatives is valued by other board members.
Countries with strong workers’ participation rights perform better on a whole range of factors, including R&D expenditure and employment rates, while also achieving lower rates of poverty and inequality.
FirstGroup plc has had an employee director since the company’s inception in 1989.
A FirstGroup spokesperson said:
“We are proud of our long history in bringing the voice of our workforce into the boardroom through our Employee Directors.
“In our experience, the perspectives and input of Employee Directors aids decision making and demonstrates the company’s desire to hear from our workforce.
It complements the strong and positive relationship we have with trade unions, rather than being a substitute for normal industrial relations.
“Directors and workers alike find Employee Directors invaluable in providing a closer link between the depot and the boardroom.”
There are other areas in which unions and workers are well-practiced in carrying out a representative role which has parallels with board representation, including collective bargaining, health and safety representatives, Trade Union Member Nominated Trustees, Green Workplace Representatives and European Works Council representatives.
Proposals for implementation
The TUC believes that worker board representation could be on the statute book within a year. Our proposals for implementation include:
- Requirements for worker representation on boards should be enacted in primary legislation.
- Workers should have the right to board-level representation in all listed and private companies with 250 or more workers.
- Workers in companies of 100 or more workers should be able to trigger board representation rights through their unions or bodies established under statutory consultation procedures.
- Mandatory workers’ board representation could be introduced in stages according to company size, starting with the largest companies (for example, those with 1,000 or more workers).
- Workers’ representation rights should apply to a unitary or two-tier board structure.
- Worker representatives should comprise a minimum of one third of the board, with a minimum of two worker representatives per board.
- Recognised trade unions plus representative bodies established through statutory consultation machinery should be able to nominate candidates for election.
- Nomination should also be open to workers who have been nominated by a specified number of workers.
- Election should be by the entire workforce, including overseas staff.
- Worker directors would share the same legal duties with other company directors.
- A worker representative would be responsible for bringing the perspective of a worker to the boardroom, rather than for directly representing all company workers.
- All company workers (excluding company directors and senior managers) should be eligible to be nominated as a candidate for becoming a worker representative, perhaps with a minimum length of service requirement. This should include workers based overseas.
- Workers’ representatives should have the right to paid time off for training.
- The TUC would organise a network for workers’ board-level representatives, and would work with unions and other organisations to offer appropriate training.
Issued: 2 October, 2016