Workers on boards: red herring from the 1970s or useful negotiating card?

‘We’re going to have not just consumers represented on company boards, but workers as well,’ Theresa May declared in July. ‘I can categorically tell you that this is not about… the direct appointment of workers or trade union representatives on boards,’ she corrected herself in her CBI speech last month. ‘It will be a question of finding the model that works.’ But is there such a thing?

The case was set out in a recent TUC paper, All Aboard, which argues that worker participation would encourage ‘a long-term approach to decision-making’ and ‘help challenge groupthink’. Support is claimed from the Bank of England’s Andy Haldane: ‘If power resides in the hands of one set of stakeholders, and they are short-termist, then we might expect high distribution of profits to this cohort, at the expense of ploughing back these profits [as increased investment] or distributing them to workers [as increased real wages].’

Examples are quoted of FirstGroup, the transport operator that has train driver Mick Barker as an employee director, and of worker reps’ successes on European boards in defeating merger and outsourcing proposals, and ‘the rejection of plans for a new office block’. A table showing that countries with ‘stronger participation rights’ spend more on R&D and have lower poverty rates is followed by a health warning: ‘Correlations do not in themselves prove causality.’

Quite so — and in the broader quest for better corporate citizenship, isn’t this debate just a big old red herring with a whiff of the 1970s? In today’s world, the shopfloor wage-earner is likely to be just as short-termist as the chief executive: neither expects to stay more than a few years, both put a priority on self-interest. But the codified duty of directors is to act in the best interests of a company and its shareholders while taking due account of the interests of its employers, suppliers, customers and community.