Sunday, 26 September 2010

Labour and remuneration committee reform

Ed Miliband mentioned in his Andrew Marr interview today the idea of employee representation on remuneration committees. I've written about this previously, and support the idea. I think it's a decent reform proposal as a) it's not too radical and b) there's some evidence from Cass Sunstein about why it might actually make a difference.

It has dangers for Ed as an idea. The first is that it could be characterised as throwing a bone to the unions, though that assumes that it would be a union person on the committee. The second that is that business would paint it as a slippery slope to co-determination type governance. A third is that some shareholders might argue that it's prioritising stakeholders over owners.

I don't think any of these arguments are really compelling, and could easily be counterposed with the the clubby nature of rem comms at present, and the poor decision-making they frequently exhibit. More importantly employee representation can be argued from the perspective of group dynamics (and the need to challenge reinforcing behaviour) rather one of the right of representation for social partners (I know some people won't like this).

I as I said previously, I am really pleased that Ed mentioned corporate governance. There are sensible reforms that could be enacted here, and the proposed high pay commission could do a useful job tackling some issues that the governance industry doesn't touch currently. I'll try and come up with some more ideas over the coming weeks and months...

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