Should employee representatives on Boards be mandatory?

Board room meeting with seven people

Theresa May is committed to making significant changes with regard to corporate governance. Possibly the most controversial aspect of these plans is to push companies to appoint representatives from amongst the broader workforce to the Board.

The argument has raged back and forth since these proposals were first put forward.  Some are all for this approach, arguing that a ‘workers’ view may temper what is perceived as ‘Board excess’ whilst providing a better insight into how the company actually operates at the coalface. Others take an opposing view – the Board’s primary role is to ensure that the interests of the shareholders are maintained and to support and direct the Executive team accordingly; so no need for this additional and unnecessary voice. So, polar opposites? Possibly.

Appointing employee representatives to the board isn’t something new. Some of our European neighbours (Denmark, Germany and Sweden) have been early adpoters of this policy. And maybe it’s no small coincidence that according to Undercover Recruiter, the first two enjoy the highest levels of employee happiness in Europe.

However there is possibly one stark difference to the proposals made by the current British government: culture, and leadership as a component of culture. When it comes to business, Denmark, Germany and Sweden have a more paternalistic, nurturing and supportive approach towards their workforce – rooted back to their ideals of social democracy. Works Councils representing employees have long been present in countries like Germany, working with the organisation and employees to strike the right balance. While Swedish organisations have embraced social policies such as 480 days parental leave, split equally between both parents, encouraging job sharing as a way to cope. They are not however, involved in the type of governance suggested by May.

So returning to the UK. What will having employee representatives on the board help achieve? And should we be employing a different language from that used by May?

For organisations where there is a lack of trust, respect and transparency between management and the employee base, the suggestion certainly has certain merits. However, how successful will the policy be? Do we need to force the issue? Should we be using language which suggests their role will be a ‘policing’ one, or should we focus more effort on developing the right culture and leadership traits, allowing things to evolve organically? Let’s not forget, many successful organisations exist perfectly happily without this arrangement, primarily due to the fact that management recognise the benefits that accrue from a close working relationship with the workforce and understand how to create the communication environment that facilitates it.