Corporate Britain drops the ball on worker directors in favour of government cop outs

A new survey shows that Theresa May's "world leading" package of corporate reforms have failed employees and resulted only in world leading excuse making on the part of British companies

Setting an example for corporate Britain? Mike Ashley's Sports Direct has appionted an employee director (PA)

The Government’s “world leading package of corporate reforms” have certainly generated some world leading excuse making on the part of Britain’s biggest companies.

When she entered Number 10 Downing Street, Theresa May looked like she might be poised to do something bold and radical on behalf of employees by giving them a voice in the boardroom, only to back pedal in the face of an intensive lobbying campaign.

The end result was that companies were given a couple of cop outs. As an alternative to appointing employee directors, they could instead designate an existing non executive director to pretend to care about workers interests or set up an employees’ advisory panel.

A big problem at the outset is that the measures were introduced via Britain's corporate governance code. It gives businesses carte blanche to ignore anything they don’t like as long as they say why they’re doing so under the principle of “comply or explain”.

When the Local Authority Pension Fund Forum, whose members oversee £230bn of investments, conducted a survey of companies to find out how they were dealing with the new rules, nearly one in five (18 per cent) said they planned to ignore them. That’s where the world leading excuse will come in.

Of those planning to comply, just five per cent said they would appoint employee directors, with nearly three quarters (73 per cent) opting instead to hand the job to existing non executive directors. The remainder chose to convene advisory panels.

A look at the way some companies are handling the latter two suggests that they're treating the new requirements with rather less seriousness than you would hope.

Melrose, which controversially took over engineering group GKN a while back, has, for example, filled its panel not with workers but with the HR directors of the various manufacturing businesses it owns.

Mediclinic, which operates private healthcare clinics in Southern Africa, Switzerland and the United Arab Emirates, has, meanwhile, appointed its former CEO Danie Meintjes to speak for employees in his new role as a non executive director. It’s hard to imagine a less appropriate person to serve as the voice of its workers than a company’s former boss.

The LAPFF, which commendably supports reform, described its overall findings as “particularly disappointing given that no respondent to the survey considered the changes would be negative for the market or their company”.

The sort of cynicism it has unearthed is, however, by no means true of all British companies. Transport operator FirstGroup has, for example, had an employee on its board for 30 years. I’ve talked to the group about its experience of this in the past and the response has been extremely positive.

More recently, contractor Mears Group has taken the plunge as has, wait for it, Sports Direct. That’s right, Sports Direct. When it comes to employee representation none other than Mike Ashley is setting an example.

Given the way the Sports Direct founder conducts his business, that serves as a rather damning indictment of the rest of corporate Britain, and of the government’s tepid efforts at reform.

The LAPFF says it’s disappointed with its findings and hopes to see more “innovation” in future. Sadly, it may take more than time to drag corporate Britain into the 21st century and improve the low esteem in which it is held by the public at large.