Sunday, 22 April 2012

Employee directors and shareholder interests

A quick snippet from the Bullock committee report on industrial democracy.
We do not see why a board comprising employee as well as shareholder representatives should be unable to strike an adequate balance between short and long term interests. A board consisting of shareholder representatives is said to be able to strike the correct balance between the short and the long term interests of equity investors in determining, for example, the size of dividends. If employee directors are unable to strike a similar balance on wage and employment policies, it must be either because they or their constituents are more short-sighted than shareholders and their representatives, or because the the real economic interests of employees lie, relatively speaking, in the short term and those of the shareholders in the long term. Neither proposition is self-evident, let alone proved. To put it no higher, there does not seem any reason to believe that employee representatives will not have as clear a perception of where their constituents' best interests lie, or that the stake held by employees in the long term health of the company is less that that of the shareholders.
Obviously in the UK we haven't really revisited such radical (by UK standards) ideas about corporate governance since the 70s. There is a slight resurgence of interest on the Left now, and we've obviously had the issue of employees on rem comms under discussion. The striking thing is how commonplace employee representation is in other European countries, whereas in the UK it is portrayed as almost communist (seriously, one rem consultant compared employees on rem comms to Cuba).

No comments: