Jeremy Corbyn, the Labour leader, announced that the Labour government is set to introduce laws that will mandate businesses to reserve a third of the board seats for representatives of the workforce.
Under the said policy, employee directors would be elected by the workforce. They will be paid at a level that is equal to the other members of the board. The proposed policy was revealed as Labour kickstarted its annual conference that was held in Liverpool over the weekend.
Corbyn said that the change would “help transform our broken economic model.” He also said that it would fight against “reckless corporate culture.”
The proposed plans suggest that firms that have a workforce of at least 250 employees, regardless of whether they are private or public, would be mandated to reserve at least a third of the positions in the boardroom for employee representatives.
The change would force companies to have a minimum of two employee representatives regardless of board size, and stipulate that representatives would have to be members of a trade union.
Corbyn alleged Theresa May, the British Prime Minister, of having reneged on a pledge to get the workers onto the board of the companies which were made as part of her campaign for leadership of the Conservatives way back in 2016.
May withdrew an effort to introduce the change as part of a new corporate governance code. Instead, making it so that companies are able to nominate a non-executive director to represent the workers, or establish an employee advisory council – with both options considered as entirely voluntary.
Labour said that introducing worker-directors had garnered popular support among the voters. He pointed towards a research that revealed that the United Kingdom has recorded the lowest average business investment of any nation of the G7 as a share of GDP.
A Survation poll that was conducted in 2013 discovered that 76 percent of the employees in the United Kingdom were in favour of workforce representatives sitting on the boards of directors of the company.
Corbyn said that company governance practices which considered shareholder interests as a priority were forming a corporate culture that concentrated on short-term gains at the expense of growth.
Corbyn stated: “Businesses have been allowed to get away with such exploitative practices because the balance of power has shifted against workers. That has allowed a reckless corporate culture to fester which is damaging Britain’s economy.”
He added: “Labour will turn the tide and give workers more control and a real say at work. By ensuring businesses reserve a third of board seats for workers, we’ll help transform our broken economic model, as part of our plans to rebuild Britain for the many not the few.”
However, the Institute of Directors said that the policy of Corbyn would affect flexibility among businesses. Its head of corporate governance, Roger Barker, stated: “Employee directors are a valid option, but imposing them on all large businesses is a step too far.” The institute represents business leaders and company directors.
Barker added: “Firms should be allowed flexibility in how they take account of a wider range of stakeholders perspectives, including those of employees. The new corporate governance code, which outlines various options for enabling employee input, is in this light a far more apt approach than today’s proposal.”