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Insight

Would employee representation on the Board have made any difference?

Nick Thorpe
26/07/2016
In the last few days the Work and Pensions and Business, Innovation and Skills Committees have published two damning reports on the business ethics and working practices of two high street giants.

In the last few days the Work and Pensions and Business, Innovation and Skills Committees have published two damning reports on the business ethics and working practices of two high street giants, Sports Direct and BHS.  And they didn't pull any punches. 

 

The Business, Innovation and Skills Committee concluded that Sports Direct had treated "workers as commodities rather than human beings with rights, responsibilities and aspirations" and made clear its intention to hold "Mr Ashley's feet to the fire, so as to see what progress he has made on improving working conditions for workers at his premises".    

 

Sir Philip Green did not fare any better.  In its much publicised inquiry into the demise of BHS, the two Committees concluded that the demise of BHS was "the result of a series of bad business decisions and personal greed" which created "many losers" including its 11,000 employees and 20,000 current and future pensioners, who face an uncertain future and substantial cuts to their pension entitlements.

 

The issues investigated by the two inquiries may have been different, but a common theme emerged in both - the Committees reported "a deeply concerning lack of corporate governance" in both cases.  Amongst other things, there seemed to be a worrying lack of knowledge and understanding of worker rights and responsibilities in evidence at either inquiry.  This concern has prompted the two Committees to widen their investigations into the labour market, and to give broader consideration of the corporate framework in which companies operate.

 

One does wonder whether these reports might also, ultimately, support Theresa May's pledge to put employee representatives on company boards.  

 

This pledge came as a surprise to many – it is not often that a Tory pledge is warmly welcomed by the TUC.

 

It also raises a number of questions.  For example, to which businesses should arrangements for employee representation apply?  And how should employees be represented?  Should they take their place directly on the Board of Directors, or should we adopt the German model and have a Supervisory Board upon which employee representatives sit, which meets regularly to approve the decisions of the Board of Directors?

 

If employee representatives are to have a seat on the Board, why not HR?  There was a notable lack of evidence given by anyone with responsibility for, or knowledge of, HR issues at either of the inquiries into the working practices or business ethics of Sports Direct and BHS.   

 

And if employee representatives and/or HR had a seat on the Board, would we see the same decisions being made or would we see a greater focus and sense of accountability being given to working practices and worker rights? 

 

If Theresa May is true to her word and her reputation as someone who just gets on with "getting things done", then it will only be a matter of time before we see employee representatives on company boards.  Companies should therefore start to think about what this might look like for them and also what role HR might play.

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