Workers on Boards: Thoughts from Europe

Speaking shortly before her appointment in July last year, UK Prime Minister Theresa May stated ‘If I’m Prime Minister, we’re going to… have not just consumers represented on company boards but employees as well.’ Re-stating her proposal at the Conservative Party Conference in October, Mrs May took aim at existing company boards, stating that ‘too often the scrutiny they provide is not good enough.’ More recent statements from the Prime Minister, and the government’s green paper on corporate governance reform published on 29 November 2016 make clear, however, that the current government does not intend to mandate worker representation on company boards.  Most recently, the Business, Energy and Industrial Strategy Committee of the House of Commons has given its support to a voluntary system of worker representation, focussing on the benefits of diversity and encouraging companies to recruit directors from the widest possible net of candidates, including internally. The Committee envisages that employees on boards would be full board members rather than figureheads.

Under the current corporate governance framework, there are very few substantive rights for UK employees to participate in or influence corporate decision-making; European works councils have seen a relatively low take-up in the UK and trade union membership has been declining steadily since the late 1970s.

European models of employee representation generally take two distinct forms: co-decision at board level and collective representation through works councils. Worker representatives on boards are generally expected to comply with the duties required of all board members, including fiduciary duties owed to the company as a whole.

Our memorandum examines models of worker representation in France, Germany and the Netherlands, with additional insight from Belgium and Italy, and considers some of the common criticisms levelled at such models by both employers and employees.

This post comes to us from Cleary Gottlieb Steen & Hamilton and is based on a memorandum that was first published here.