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Represent employees’ interests at board level

To ensure employees’ interests are represented at board level, we will change the law to ensure that listed companies will be required either to nominate a director from the workforce, create a formal employee advisory council or assign specific responsibility for employee representation to a designated non-executive director. These strengthened arrangements will apply to publicly-listed companies.

Our Verdict

This policy is about ‘corporate governance’, and has been very much in the public eye following the collapse of BHS and Carillion.

It’s a promise to ensure employees’ interests are better represented (in listed companies), and the manifesto describes how it could be achieved:

  • nominate a director from the workforce
  • create a formal employee advisory council
  • assign responsibility for employee representation to a non-executive director

In August 2017, the government set out their plans for corporate governance reform. It included references to the The Taylor Review of Modern Working Practices regarding employee representation, and ultimately led to the updated 2018 Corporate Governance Code (aka ‘the Code’). The Code included all three options for representing employees interests, and requires organisations to report each year to confirm their approach.

So this looks pretty good news for employees. Definite progress. However, the tricky issue is that the Code is not compulsory – it works on a ‘comply or explain’ basis, which means if organisations choose not to comply, they must explain why (to their shareholdersnot to the government or the FRC who sets the governance code).

So when you consider the non-compulsory nature of the Code against the promise to “change the law”, this can’t be considered fully met. We are therefore classifying this as ‘in progress’ and will keep monitoring for new legislation. Follow this policy for updates.

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