Monday, 13 April 2015

Remuneration revolution

The Labour Party will require employee representation on remuneration committees if they form the next government. It's there, in the manifesto, on page 21. Despite some whispers that this policy might be dropped, because business lobbyists don't like it, it's now a manifesto commitment.

On its own this is not a big step. There are several arguments I've heard about from people why this won't make any difference. But what it represents is significant in corporate governance in the UK, and perhaps more widely. Firstly, if enacted, this policy will mean that remuneration is no longer solely a matter for companies and their shareholders. That formulation is part of the 1990s vintage of corporate governance which Labour had previously embraced, so to shift away from it is interesting on its own.

Secondly, to formalise employee representation of any type at board level is entirely new. The UK took a different path from the rest of Europe in the 70s and 80s when it rejected the extension of employee rights into the field of corporate governance. Now - if Labour can get this policy through - we are heading in a new direction. 

Like many people on the Left, I see this policy as important, but not enough. If we are going to have a fight with business over this policy we might as well go the whole hog and advocate what many of us really think is needed - board-level representation, not just on rem comms. If Labour gets in, and consults on this policy, we should argue that representation on rem comms should be achieved as a subset of representation on boards. But that is an argument for another day.

Finally, I've spoken to various people about employee representation in corp gov in the UK many times over the last few years and quite a few seemed confident that it would never happen. I'm not so sure. Even in a hung parliament with a minority Labour government I wonder if the Lib Dems or SNP would vote against? It wouldn't enhance their radical/left-of-centre credentials in either case. Change might be closer than we think.

PS - I'll blog the rest of the corp gov related bits in the manifesto later.

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