02 May 2019

UK employers have overwhelmingly rejected the opportunity to appoint worker-directors to their boards, a new survey has found.

A poll of public companies by the Local Authority Pension Fund Forum (LAPFF) measured compliance to new corporate governance guidelines issued by the government.

Although Theresa May initially promised to give workers a seat on boards, her proposals were watered down over time until employers were given three options: appoint a worker to the board to represent their peers; designate a non-executive director to speak for workers; or establish a workforce advisory panel. Firms were also given the choice to disregard all three options so long as they could explain why.

LAPFF’s survey found that almost one in five (18%) of companies had chosen not to comply with the guidance. The explanations they gave for this choice included that the size of their workforce was either too small to necessitate a worker-director or too large for one worker-director to represent all of their peers (it is worth noting here that there is no law against appointing more than one worker to the board!) Other companies cited conflicts of interest, fear that worker-directors would create a distraction, and anxieties over delayed decision making.

”This is particularly disappointing given that no respondent to LAPFF’s survey considered the changes would be negative for the market or their company,” LAPFF commented.

Furthermore, of those firms willing to comply with the guidance, nearly three-quarters (73%) avoided directly appointing a worker to the board by designating a non-executive director to speak for the workforce instead. Most of the rest (27%) said they would form a workforce advisory panel, while only two companies (5%) said they would invite a worker to join the board.

LAPFF helpfully reminded us that In 2016, Theresa May herself said: “In practice, [non-executive directors] are drawn from the same, narrow social and professional circles as the executive team and – as we have seen time and time again – the scrutiny they provide is just not good enough.”

Cllr Paul Doughty, LAPFF’s acting chair, commented: “Companies’ response shows a disappointing lack of innovation and imagination. There are already large UK public companies with workers on their boards and the practice is common in Europe. It is surprising that so few companies couldn’t find a way to represent workers more directly than giving responsibility to a non-executive director.”