Corporate governance has become politicised in the US on another front: workers on boards.

Republican politicians will this week launch a new bill that calls for worker-directors to be included on some company boards. That’s a call that generally comes from left-leaning sources here in the UK and Europe.

However, the move, driven by senator Marco Rubio, is yet another example of governance becoming a weapon in the intense political battle currently underway in the US.

The workers on boards proposal is expected as part of a bill to be introduced by Rubio and congressman Jim Banks. Though yet to be unveiled, the move is also expected to propose the creation of employee involvement organisations (EIO), a policy measure similar to worker councils elsewhere in the world. Companies opting to have an EIO will also have to place a worker, chosen by fellow employees, on the board.

The bill represents an abrupt divergence from the usual Republican policy course, which assumes workers’ interests are Democrat territory. Commentators argue that it has the potential to change the nature of corporate deliberations and shore up trust between the boardroom and shop floor.

A ‘genuine new channel’ for workers’ voices

Writing in the Financial Times, Oren Cass, executive director of conservative think tank American Compass, says studies of worker councils have shown they “enhance productivity, capital formation, market value and resilience”.

He concedes that EIOs would be weaker than traditional unions, but they would provide a direct path to the boardroom. Could the left and unions, he asks, “turn their backs on a model that also provides a genuine new channel for workers’ voices to be heard… ?”

Good question. Democrats will not doubt wonder why the idea is not coming from withiin their own ranks. Even more so given the discussion about the policy is not without precedent. In 2019 Lenore Palladino, a professor at the University of Massachusetts, argued on the Harvard governance blog, that the time had come for workers to take a seat in the boardroom. “The model of shareholder primacy should be replaced with a stakeholder theory of the corporation. In a stakeholder model, workers should elect and serve in substantial proportion on the corporate board of directors,” she wrote.

Big US companies have moved towards stakeholder thinking, but they are yet to embrace the idea of employees in the boardroom. The idea presents a challenge to the Business Roundtable, a club for the highest profile US chief executives, which famously declared in 2019 that its members—among them current Amazon CEO Andy Jassy and Tim Cook, chief executive of Apple—would shift to a “stakeholder” version of governance.

A heated background debate has simmered ever since, with many questioning whether the Roundtable’s statement has resulted in any substantive change. Harvard professors Lucian Bebchuk and Roberto Tallarita have consistently argued that it has produced little of note. “Overall our findings support the view that the [Business Roundtable] statement did not represent a meaningful commitment and was not planned or expected to bring about meaningful improvements in the treatment of stakeholders,” they wrote.

That may have made Roundtable CEOs wince, but the scepticism does not end there. Oren Cass wonders in the FT whether the Roundtable’s beliefs could “extend to giving the most vital of those stakeholders a role in setting the company’s course?” Could US CEOs rise to the challenge of welcoming workers into the C-suite?

Boards in UK and Europe

Of course in Europe, worker representatives already sit happily on company boards, while the UK’s corporate governance code offers boards a choice between a non-executive director representing workers, a workforce advisory panel or a worker-director. Few companies have taken the latter option, but pub chain JD Wetherspoon made national headlines when it appointed four employees to the boardroom in December. The US has much catching up to do if it is to match even the UK, let alone companies in Germany, France and elsewhere.

This is not the first time Marco Rubio has chosen corporate governance as a political battleground. In October last year, as part of the right’s “war on woke” the senator launched a bill that would allow shareholders to bring legal action against company managers for breach of fiduciary duty if they pursued policies that raised the “spectre of political bias”.

The move followed a decision at many companies to adopt positions on issues such as the environment, immigration and even the right to abortion that run counter to Republican policy initiatives under Donald Trump.

In the US, governance is developing into an arena for political conflict. It’s hard to see how that will end soon.