“The power balance between between workers and employees is shifting,“ says Dr Scarlett Brown, a policy expert with the Chartered Institute of Personnel and Development (CIPD). She was speaking at the launch of a new report that calls on boards to engage much more closely with workers over issues such as workplace culture, people and boardroom pay.
Brown’s comments follow observations of changing relationships caused by the pandemic and she concludes that there is now more attention given to “better working lives”.
“There’s a huge impact from the pandemic,” she says. “We’ve seen in research that working lives have come right to the fore for boards and HR leaders and we are seeing how that is changing their approach going forward.”
Those views chime with recommendations in the report that call for “more meaningful workforce engagement” and greater involvement of workers in the pay-setting process. At the heart of the report’s advice, jointly put together by the CIPD and the High Pay Centre, is recommendations for a remoulded remuneration committee that not only sets executive pay but also reviews workforce pay and oversees issues such as people matters and workplace culture.
The report says: “For large organisations, board and remuneration committees should be discussing people and culture matters at every meeting.
“To achieve fairer pay practices with the confidence of the wider workforce and wider society, the workforce needs to be considered when we make decisions about executive pay.”
The report attempts to set out in more detail how a workforce voice should be heard inside the boardroom. This includes recommending forums where trade unions and executives can meet to talk over executive pay issues and aligning chief executive performance pay with metrics used to work out employee bonuses, “so that the workforce understands how the CEO is paid.”
The report also advocates a workforce director to feed information directly into the boardroom (the 2018 UK Corporate Governance Code gives companies the choice of three engagement options: a worker director; a non-executive tasked with gathering workforce views; or some form of workforce advisory panel).
Neil Morrison, director of HR at Severn Trent, one of the companies that took part in the research for the report, says that the water company has built strong links between trade unions and the board to discuss executive pay.
But he added single forums for boards to hear workforce views, such as one of the three in the governance code, is not enough on its own. “We have a strong mechanism but it has to be more than that,” he says. Boards should also be looking at data such as staff surveys, reward, diversity, sick leave and staff turnover data.
This new report follows on from a document published in 2019 which saw the High Pay Centre recommend turning remuneration committees into “people and culture” committees that work to ensure executive pay matches with strategy for people management and corporate culture.
Elsewhere, researchers have found some signs that engagement with workers is taking root, but also uncovered “resistance and scepticism”. Staff from Royal Holloway University and the Involvement Participation Association found that few companies have appointed worker directors but where they have done, the option is “not incompatible” with governance. Most opt for specialist non-executive director or advisory panels.
At the time TUC general secretary Frances O’Grady told Board Agenda companies had issued an opportunity.
“Boardrooms should recognise the valuable opportunity that a genuine voice for workers presents. The best approach is to appoint worker directors, voted for by the workforce. It is mainstream practice across Europe and the evidence shows it can improve the long-term performance of companies.”
The mood is changing in business. There is much discussion of stakeholder governance and what it means for policy. Voices like the High Pay Centre and CIPD may yet bring board members closer to workers.