How have UK companies performed against corporate governance measures asking them to consider the views of their workers? There are some bright spots, even “progress”, according to new research—but also “resistance and scepticism”.
A report compiled by academics at Royal Holloway University and experts at the Involvement Participation Association, on behalf of the Financial Reporting Council, reveals a number of best practice examples. It also worries about an apparent lack of commitment by many firms to undertaking more communication with workers.
But perhaps the most eye-catching conclusion is that though few companies have opted to appoint workers on their boards, researchers say those companies that have welcomed an employee director to their boards have proven the option is “not incompatible” with the UK’s governance approach.
The report notes in a 2020 review of governance reporting compiled by the FRC—and on workforce engagement statements in particular—the FRC expressed “disappointment” that there seemed to be “little analysis” of the approaches selected and whether they worked. It was also unclear how boards were passing information back to workers. The new report concludes: “Our study suggests that, 12 months on, there is little reason to alter this overall view.”
That will come as a disappointment to some, but the study does say there are “pockets” of good practice, reporting and reasoning about how worker views are fed into boardroom deliberations. It also concludes that it is still early days, and that attitudes and approaches to worker engagement are evolving.
Worker engagement: the options
Workers’ views were placed on the boardroom agenda with a 2018 revision of the UK’s governance code which offered companies a choice of three options: an employee board member, a designated non-executive director, or an advisory panel.
The report says a survey of the FTSE 350 (with 280 responses) finds that around a third (32%) of companies ignored the code options to stick with their own arrangements; 40% opted for an NED; 16% went with an advisory panel supporting a designated non-executive; and 12% opted for an advisory panel on its own. Just one company appointed worker directors to the board after the code changed.
Most companies—around two-thirds—said they did not consult workers on new engagement arrangements, while the study finds that in many cases non-executives tasked with responsibility for worker engagement only read a staff survey; some staged focus groups; while others “appeared unclear what their role should be, were disconnected from other engagement programmes and appeared to have few formal ways of actually engaging with the workforce”.
Moreover, researchers found that among designated non-executives only around one in five had any previous experience in HR and none had experience as a trade unionist or workforce representative. Half of companies said their designated non-exec had “no previous experience of working in workforce engagement”.
When it came to advisory panels, they were often used together with non-executives. There is, the report says, evidence in some companies that “careful thought” has gone into their advisory panel arrangements. But often they are used only to consider issues from the annual engagement survey.
That said, the researchers conclude advisory panels appear to be a “more robust and structured mechanism for obtaining employee views and feeding these into board deliberations”.
‘Not an impediment’
Findings for workers on boards are more positive. This was the option floated by Theresa May when she launched her campaign to become leader of the Conservative party back in 2016. Only one company opted for worker directors after the 2018 code, adding to the four companies that already have them.
The report is upbeat about their performance. “Most notably, they have proved that the UK corporate governance framework and unitary structure are not the absolute impediment to worker directors that some commentators have long tried to claim.”
Union representatives, supporters of greater worker involvement in company management, are unimpressed. The TUC says boards have missed an opportunity to appoint worker directors.
General secretary Frances O’Grady says: “But despite the new code requirements on workers’ voice, little meaningful action has been taken. The most common approach is designated non-executive directors, with few firms even consulting their workforce about the approach they take. It’s not a credible way to include workers’ voices.