I have previously suggested that this week's autumn statement may include publication of government consultation on corporate governance reforms. Well, latest gossip is that this may be slightly delayed: it is in the "to do" tray at Number 10, awaiting a spare moment for proof-reading.
So it may be a few weeks or so before we see the green paper. It was therefore very helpful that in her CBI speech yesterday Theresa May gave more details of what to expect. Key points:
First, Theresa May signaled that the government now accepts the need for a more flexible approach on "workers on boards". She said:
"I can categorically tell you that this is not about mandating works councils, or the direct appointment of workers or trade union representatives on boards. Some companies may find that these models work best for them – but there are other routes that use existing board structures, complemented or supplemented by advisory councils or panels, to ensure all those with a stake in the company are properly represented. It will be a question of finding the model that works. ".
This is welcome news for business and for employees. Employee engagement levels in the UK are low across many industries. And employee engagement can drive productivity and innovation. But a tick box approach to having an employee on the board risks stifling innovation and in some businesses will not be the best way of achieving the desired outcome. We may see an alternative option in the Green Paper - for example a requirement for companies to report on what action they have taken to give employees a voice.
Second, Theresa May made very clear that " this is not about creating German-style binary boards which separate the running of the company from the inputs of shareholders, employees, customers or suppliers. Our unitary board system has served us well and will continue to do so." No flexibility on this point - and no continental models.
Third, she said less about plans for binding shareholder votes on executive pay. She did not row back on any previous statements about this. This does suggest that the government will still propose reforms on accountability to shareholders on executive
And finally the Prime Minister made a point of saying that "This will be a genuine consultation – we want to work with the grain of business and to draw from what works. But it will also be a consultation that will deliver results". Translation: we are ready to back down from a mandatory requirement to have workers on boards. What we won't back down on is the need for all businesses to do something and to deliver the outcome we are looking for - greater employer involvement in running businesses.
Theresa May also stressed that the government’s ambition: to establish the best corporate governance of any major economy, ensuring employees’ voices are properly represented in board deliberations, and that business maintains and – where necessary – regains the trust of the public.
So in summary:
- the consultation paper on reforms to corporate governance may be late but it will appear fairly soon (December or January at latest?)
- government has listened to points about the efficacy of mandatory approach to employees on boards and may take a less "tick box" approach
- but be very clear that government will pursue reforms and expects to see results: companies will have to do more to ensure the employee voice is heard and shareholders will have more say on executive pay.
Speaking at the Confederation of British Industry (CBI) Annual Conference, Theresa May said that the Government would publish a Green Paper within weeks that will set out reforms to shareholder accountability, executive pay and employee representation.