Theresa May has already come up with some bold proposals on workplace governance. Will they work?
Even before she was pronounced as the new leader of the Conservative Party and installed as the new Prime Minister, Theresa May had espoused some radical proposals on corporate governance. They include proposals for employees to be on company boards and legally binding shareholder votes on pay.
This bodes well for enhancing employee voice within organisations. It also suggests there will need to be much more transparency around the performance of senior leaders and how they are rewarded. But will this help build trust between employees and leaders? And will it rebuild trust between voters and big business?
Enhancing employee voice
Theresa May warned that Britain’s Boardrooms are often made up of “narrow social and professional circles”. These fail to provide adequate scrutiny of how firms are run, she argues. Her proposed solution? Bring into the Boardroom not only the voice of the customer, but the voice of the employee too.
But how has this worked previously? Experience suggests it has had mixed results to date. For example, at O2, the use of “Real Directors” was first brought in almost ten years ago when we first started working with the firm. The approach was designed to encourage the firm’s employees to shape the company from the inside out. It gave O2 employees the chance to influence company strategy: the “Real Directors” are people working in frontline customer service positions who have been selected to take their customer insights back up to the boardroom. Within the firm, there was a sense that this both created better employee voice at senior level and injected a dose of reality into decisions being taken at the top level.
However, the experience of companies like the engineering multi-national, Siemens, whose supervisory board consists of 50% employee representatives have had a slightly different experience. As the Guardian has reported, Joe Kaeser, the firm’s CEO, has warned of potential pitfalls: “In Germany we’ve seen companies where workers’ representatives thought they co-managed the company – that obviously is a bit too much … You need to get used to it but if it’s being practised well it has its benefits”.
“A board member needs to act in the best interests of [his or her] company no matter which region they are from. So if you have workers’ representatives that are hypothetically from the UK, they also need to act in the best interests of the company if [the issue] is about job cuts in the UK and creating new jobs in China because demand has shifted. This typically puts quite a strain on the workers’ representatives”.
Meanwhile, one of our Engage clients, First Group, which has faced numerous shareholder revolts over executive pay in recent years, although without suffering absolute defeats, can claim at least to be a step ahead of the new Prime Minister, whose constituency is served by its Great Western trains.
A company spokesman has commented: “In most of First Group’s UK businesses, bus and trains, an employee director chosen by the workforce is on the board, up to and including the group plc board – it’s a well-established practice. We’ve found it helpful to have an employees’ voice on the board”.
Critical success factors
So a mixed reaction to date, but from our experience at Engage, we think three factors can make the approach work:
- The role of employee representatives needs to be absolutely clear
- As ever, success depends upon definition. In firms like O2 and First Group, this has been delivered really well. Clarity around expectation, role and remit for the “real directors” has been pivotal to the success of the approach.
- Senior leaders need to be prepared to take employee voice seriously
- In order to build real trust with employees, the listening process needs to be genuine. Too many companies pay lip service to true dialogue with their people. Done genuinely, it can both be a huge driver of engagement and a real learning process for the executive leaders.
- The whole approach needs to be given more serious weight by Government
- Finally, if Theresa May is to see this whole approach succeed, it will need serious backing from her newly formed Cabinet. Legislation may not be necessary, but strong guidance from Greg Clarke, the new Secretary of State for Business, Energy and Industrial Strategy will be vital to helping make employee voice in the UK stick.
By Dr Andy Brown
CEO & Practice Head: ENGAGE Leadership