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It’s time we had worker representatives on company boards

Issue date

Early this month Theresa May called for company boards to include both workers and consumer representatives. She has also called for shareholder votes on remuneration to be held annually and for votes on individual directors’ pay packages to be made binding.

The TUC has long argued that including workers on company boards would change the culture of the boardroom and help boards to focus on long-term company growth, rather than being distracted by short-term financial engineering as occurred, for example, in the financial sector in the run up to the crash. Workers have a clear interest in the long-term success of their company, as any union representative negotiating with company management knows. They also bring in-depth knowledge of the day to day running of their company and are well-placed to advise on the crucial area of employment relationships, which are critical to long-term value creation.

Company workers are also more likely to understand how the company and its practices – for example on executive pay – will be viewed by the public. There is evidence from across Europe that including workers on company boards is associated with lower levels of executive pay. There is also evidence from Denmark that worker representatives on boards are more likely than shareholder representatives to take broader stakeholder interests – including community interests and environmental impacts – into account.

The Government should legislate to provide such representation, beginning with large companies who very often already provide for workers on the board in plants in other EU countries, and ensure that time off and training is funded to ensure that such representatives are competent in that role.

All the evidence shows that where workers are genuinely consulted and engaged at work business benefits too, with reduced turnover and absenteeism and improved performance. Workers’ rights to information and consultation – including on essential issues like the future of the company, TUPE transfers and redundancies - should be based on establishments rather than undertakings and the threshold for negotiation substantially reduced.

The relationship between an employer and an individual worker is an intrinsically unequal one. Unions play an essential role not only in fairer workplaces but in providing a collective voice – as the largest democratic membership organisation in Britain.

In most European countries, worker board representation is an accepted and valued part of corporate governance: in 19 European countries workers have the right to sit on company boards, and in 13 countries these rights are extensive in that they cover private and public limited companies, as well as state-owned enterprises. And countries with stronger workers’ participation rights – meaning widespread rights for board representation, workplace representation and collective bargaining – do better in terms of their employment rate , expenditure on R&D, and the risk among the population of poverty or exclusion, plus a whole range of other indicators.

Experience from Europe also shows that worker board representation operates successfully in countries such as Sweden, Norway and Ireland, who have a unitary board structure, as we do in the UK, as well as in countries that have a two-tier board structure, such as Germany and Austria.

Beth Farhat, Regional Secretary Northern TUC