Friday, 8 September 2017

Worker directors via the UK Corporate Governance Code

As anyone who reads this blog will probably be aware, the Conservative government bottled its commitment to put workers on boards. Instead it has asked the FRC to amend the UK Corporate Governance Code to give companies three options, one of which is a worker director, under the 'comply or explain' regime.

It's worth noting that some people in corporate governance warned against the government seeking to achieve worker directors on boards through the comply or explain mechanism of the Code. For example, this was a particularly explicit call for political intervention instead of leaning on the Code:
The full-blown worker-elected director model should not be done through the corporate governance code. That is quite a big shift and requires parliamentary weight behind it to get it done. There is a risk if we try to do it through the code that we would have a very high level of non-compliance. That would cause the code to come into some discredit.
That comment was from Stephen Haddrill, head of the FRC, which is responsible for the Code, when giving evidence to the BEIS committee's corporate governance inquiry (see Q31). To be fair, Haddrill did also advocate looking at other ways of achieving representation, including NED chairing a employee committee. Nonetheless the FRC will have something in the Code that the FRC said could discredit it.

No comments: