Originally mooted by Theresa May during the hustings for the leadership of the Conservative Party (see our report), the proposal to enable employee representation on the Boards of UK companies finally assumed the status of formal government policy on Wednesday (5th October 2016) with the measure being specifically mentioned in the Prime Minister’s closing speech to the Conservative Party conference. The policy is likely to form part of various measures designed to enhance corporate governance and, so the Prime Minister maintained, help protect workers’ rights as part of a commitment to a wider ‘fairness’ agenda.
Some of the issues that will need to be addressed, and the potentially far-reaching implications of this policy becoming reality for UK companies (in a post-Brexit world), are examined in more detail in our “A change has got to come!” post on our Down the Wire blogsite.
Although detailed proposals are still awaited, and while the Commons Business Innovation and Skills (BIS) Select Committee is currently conducting its own inquiry on this and related matters, it is perhaps worth re-emphasising that the final detailed proposal (when it comes) is likely to include some form of automatic right for employee representation on a company’s remuneration committee.
Assuming that conclusion is correct, and while acknowledging that changes in this particular area will probably reinforce the more exciting changes in the culture surrounding executive pay, there could be some interesting knock-on effects. For example, one area where the final detail will be critical will be confidentiality issues and the extent to which employee directors will feel able to speak their mind publicly, especially where they disagree with a particular decision or outcome. It may be that, as a practical consequence, some remuneration committees will find that they can no longer make decisions on a consensual basis and formal votes will be required more frequently. That will represent (no pun intended) a cultural change in itself but probably one that companies and committees will just have to get used to. And quickly.