Putting workers on the board is back as a serious discussion for helping to improve the UK economy. That may be overstating it—but it is place plumb in the middle of a recent report from the Resolution Foundation as part of the answer to stopping the UK’s 15-year run at decline that has made it the “stagnation nation” gripped by a “toxic combination” of low growth and high inequality.
In the widely respected report, Ending Stagnation: a New Economic Strategy for Britain, the Foundation takes a poke at the UK’s unitary board system.
“Many European countries take a different approach, with some adopting two-tier board systems, with a supervisory board composed of representatives of shareholders and workers who together select and monitor executives.
“This recognises that workers, particularly if they develop firm-specific skills, have as much interest in the long-term fortunes of their firm as shareholders, even substantial ones.”
The Foundation says research in Germany, Finland and Norway suggests workers on boards can be positive for investment levels and productivity.
“To increase the pressure on managers to invest for the long term from below as well as above, we propose the mandatory inclusion of worker representatives at the board level for all larger UK firms (both listed and unlisted) with more than 200 employees,” the reports says. It adds:
“This would be a big change for British corporate governance, but not an unimaginable one…”.
Investment levels in the UK are a major issue in the report, which says that the UK’s total fixed investment in the 40 years to 2022 averaged just 19% of GDP, the lowest in the G7. Productivity, it adds, in the 12 years after the 2008 financial crisis, was just half the rate of the 25 richest OECD countries. The productivity gap with France and Germany has doubled since 2008.
The report offers many recommendations but a reform of corporate governance is in the Foundation’s mix.
This is not the first time workers on boards has been floated as a key element in modernising the UK economy.
Back in 2017, former prime minister Theresa May proposed workers on boards as part of her efforts to tackle inequality. Her efforts were short-lived—as was the idea. But at the time it was implemented, companies were given three options in the UK Corporate Governance Code: a designated non-executive gathering worker views; advisory panels; or workers on boards.
As researchers noted some time later, boards almost entirely went with the “safe option” of a designated non-executive.
At the time, the Local Authority Pension Fund Forum, a body representing council pension funds up and down the country, said boards demonstrated a “disappointing lack of innovation”.
The Resolution Foundation’s report runs to 291 pages and workers on boards, if not it’s beating heart, at least a serious proposal for governance reform in the UK. It’s unlikely to catch the attention of mainstream commentators, but it may be enough to prompt workers-on-boards adherents to begin lobbying for the elevation of shopfloor staff to the upper echelons of decision making once again.