Workers on boards could rein in executive pay, says TUC

Allowing workers to sit on company boards would mean top executives’ pay was set at more reasonable levels, according to a new report from the Trades Union Congress (TUC).

The TUC has long argued that corporate governance laws in the UK are missing a trick by preventing worker representatives from sitting on remuneration committees.

Workers on Board – which looks at how the UK workforce might become more involved in the running of companies they work for – says that the UK’s corporate governance rules have failed to keep pace with the new world of share ownership.

With over 50% of UK shares held by overseas investors, and with UK institutional investors increasingly reliant on short-term share trading as a route to profit, deciding what lies in the best long-term interests of a company can no longer be left to shareholders alone, says the report.

Instead Workers on Board suggests that involving employees in the running of companies would not only be a genuine break with the past and the UK’s failed system of corporate governance, but would also harness the contribution of people who have the long-term development of the company at heart.

The report says that countries which have included the participation of worker representatives within their company structures are also economies with higher R&D investment, better employment rates, stronger economic success and lower rates of poverty.

An accompanying report, Workers’ Voice in Corporate Governance: A European Perspective, looks at the ways in which workers are involved in the management of European companies – from being a part of the top team to having a voice at annual general meetings and a seat on company boards.

The report finds that far from simply being a German phenomenon – as is the common perception – employees have formal roles to play in the management of companies right across Europe, with workers being represented on company boards in 19 European countries including the Netherlands, Sweden, France and Austria.

Both reports note that the financial crash and its economic fallout have led to an increased interest in pursuing the option of worker voice in corporate governance in the UK.