UK Corporate Governance: Change Has Got to Come!
A number of themes trailed in UK's Theresa May’s first speech after securing the Conservative nomination, were repeated at last week’s Conservative Party conference in Birmingham. The new Government reiterated its intention to occupy the centre ground of British politics and the delivery of this political objective will undoubtedly have implications for corporate Britain – in the words of the Prime Minister “ a change has got to come.”
At the moment we are short on detail, but the Government has promised to publish plans later this year to have consumers and workers represented on company boards of directors. Speech soundbites also focussed on executive pay, the taxation of international business and the payment of excessive dividends, together with a more general promise to protect and enhance workers’ rights.
How all this will play out remains to be seen, but it is clear that worker representation on company boards will be at the forefront of the changes with specific proposals scheduled to appear in the next few months. Whilst we don’t know what these will look like, given that 19 out of 28 EU member states have some form of worker representation there are plenty of examples that could be followed. Obviously there are many issues that will need to be worked through (such as, how to reconcile worker representation with the existing statutory duties of directors and requirements of the UK Corporate Governance Code), however, the momentum that has developed makes it hard to see how anything other than significant change will result.
At the moment commentary appears to be focussing on what this will mean for our larger listed companies, which are already subject to extensive governance requirements (although not worker representation). However, nothing in Theresa May’s speech drew any distinction between companies that are publicly listed and those that are owner managed or private equity backed. Indeed, her speech contained a number of thinly veiled references to BHS in relation to some of the behaviours she is seeking to regulate, so she may not be as adverse as some may think to the TUC’s recently stated position that companies with 250 or more employees should be covered.
A Conservative Government promising to protect and enhance workers’ rights and adopt continental models of corporate governance – strange times indeed!