In a speech to the CBI on Monday, Theresa May seemed to backtrack on her earlier enthusiasm for the idea of employees on company boards. But she said that there would still be some changes, to be outlined in a Green Paper in the next few weeks, and then consulted upon.
The director-general of the CBI, Carolyn Fairbairn, welcomed the move but also indicated support for more employee involvement. “There are other ways of doing it, through works councils, through representative non-executives,“ she acknowledged, but she said that, “Companies have to do something, and something significant, because this is important.“
It appears that employers will continue to be encouraged to invite employees to join their boards, or to use an alternative model of representation, such as works councils. Rather than imposing a legal obligation, the government will invite voluntary compliance instead.
What has been ruled out is a German-style system of dual boards, where employee representatives sit on a supervisory board while a separate management board makes the day-to-day decisions.
But the question remains as to what will happen if companies do not embrace the concept voluntarily. As with gender pay gap reporting and age discrimination, if voluntary take-up is low, there is a possibility that compulsion will be introduced in future years. The carrot could be replaced with a rather less appetising stick.
We are finding that some clients like the voluntary approach, but others less so, and some want to “wait and see“. Those wanting to take a proactive approach favour an opportunity to communicate with employees in an organised way, whereas the “wait and see“ camp point to the extra cost and management time, as well as confidentiality issues.
Fieldfisher’s UK and German employment lawyers have advised a number of clients about the advantages and disadvantages of employee representatives sitting on boards. Although the German style system of dual boards has been abandoned, a lot can be learnt from Germany who has nearly 65 years’ experience of employee representation on boards. We would be very happy to introduce you to Marcus Kamp an employment partner in Germany.
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