The Conservative manifesto, ‘Forward, Together’, unveiled late last week by Theresa May, was notable rather less for reiterating commitments to traditional, small government, Conservative principles of ‘low tax’ and ‘better regulation’ and rather more for its embrace of social inclusion, identifying a “need [for] a partnership between the individual and the wider nation, between private sector and public service, and the strong leadership only government can provide”.
Unsurprisingly, perhaps, most of the attention has focused on the proposals to implement “the first ever proper plan to pay for – and provide – social care”, so much so that Mrs May was today forced into a policy u-turn, stepping back from a firm commitment to implement her plan and instead merely promising to consult on the issue.
By contrast, relatively little has been said about the Conservative party’s plans to continue to tinker with the rules regulating corporate governance and employment taxes.
As highlighted in several posts on this Blog over the past year or so – see, for example, May or May not? Further proposals to get tough on UK executive pay, Board games: Employees to be fairly represented on the boards of UK companies? and “A change has got to come!”– employee representation on company Boards was a persistent, off-on and, most recently, off, theme under the previous government. But, should the Conservatives be back in power on 9 June, the idea is most definitely back on again because, “Boards should take account of the interests not just of shareholders but employees [too]”. Following the conclusion of the Department for Business, Energy and Industrial Strategy’s inquiry on the Corporate governance reform green paper (for our previous commentary, see: Bringing UK “big business” into line: corporate governance reform), the manifesto reaffirms existing commitments to change the law requiring listed companies to either:
- nominate a director from the workforce,
- create a formal employee advisory council, or
- assign specific responsibility for employee representation to a designated non-executive director.
The new policies could be extended to privately-owned businesses too. Despite the BEIS consultation covering the corporate governance rules that impact the private sector, a future-Conservative government will continue to ponder how best to strengthen them in a further (yet another) consultation on the issue.
On corporate pay, the Conservatives are also committed to further law changes to:
- make executive pay packages subject to annual votes by shareholders,
- oblige listed companies to publish the ratio of executive pay to broader UK workforce pay, and
- make companies explain their pay policies (including, in particular, complex incentive schemes)
alongside examining how share buybacks are used with the possibility of further legislation to ensure they can’t be used to artificially to hit performance targets and so inflate executive pay-packets.
Together with other, uncharacteristically ‘interventionist’, announcements (including, in particular, regulating M&A activity more closely to address aggressive asset-stripping and enabling greater government scrutiny of inbound direct foreign investment), the reception from business has been, at best, cool. The CBI, for one, is wary of many of the proposals highlighting, in particular, in relation to both executive pay and employee representation, “that every business is unique” and “the unacceptable behaviour of the few does not reflect the high standards and responsible behaviour of the vast majority”, pleading for both targeted (rather than blanket) rules and for businesses flexibility to be protected.
Assuming (as still seems likely) that Mrs May does indeed win the forthcoming election, we will be keeping a close eye on how these manifesto commitments are implemented in due course.