Emmet McNamee is a Research Associate at Glass, Lewis & Co., LLC. This post is based on a Glass Lewis publication by Mr. McNamee.
UK Prime Minister Theresa May has recently backtracked on her proposals to increase employee representation on boards. It was an idea which had largely been confined to the wilderness of UK governance for several decades after seeing its heyday in the 1970s with the publication of the Bullock Report. Mrs May’s proposal has been lauded and criticised in equal measures, and it is unclear now whether it will be abandoned altogether or merely watered down.
Given the increasingly visible disparities between the pay of executives and employees, and a US election largely characterised by discussions over income inequality and the outsourcing of jobs overseas, it is perhaps unsurprising that the question of employee representation on boards is back in the spotlight. There is widespread sentiment that public companies are not adequately serving all their stakeholders, and that increased worker voice could in some way enhance the “social licence” of companies to operate. But what are the effects of such moves on the board’s ability to oversee the business, and ultimately on shareholder value?