May's backtrack on workers on boards shows the old guard is still in business
Two days before she was installed as the UK’s new prime minister in July, Theresa May pledged to “have not just consumers represented on company boards, but employees as well”. She repeated the idea to her party faithful in October, by saying “later this year we will publish our plans to have not just consumers represented on company boards, but workers as well”.
Just a month later, May has rowed back on this promise. Addressing the conference of the Confederation of British Industry, she said:
While it is important that the voices of workers and consumers should be represented, 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 … It will be a question of finding the model that works.
In other words, there will be no legal compulsion for companies to have workers on their boards. Essentially, they will continue to be free do to as they wish, by having worker directors or not having worker directors. At present, just one British company has a worker director on its board, the transport conglomerate First Group. So, don’t expect a rush from others to join it, given that nothing is changing.
Undeveloped and untested
This is a u-turn from a prime minister who entered 10 Downing Street promising an economy and society that “works for everyone”. Either she had not thought through the policy very well when she first proposed it, or she has been turned by business interests, which are clearly opposed to having workers on boards. Perhaps it’s both.
May made her pledge about workers on boards in her first campaign speech. The campaign was then immediately cut short by her opponent pulling out of the race that day. This meant that the idea was never developed or tested. Such a testing would have helped establish her commitment to the idea. Plus, necessary specifics could have been worked out, such as what mechanisms would be chosen to enforce the requirement; whether there would be penalties for non-compliance; and whether all employers would be obliged to have worker directors.
The pledge remained in the baldest of states between its first announcement in July and its reiteration in October. All May did was to say that a former adviser to Tony Blair, Matthew Taylor, had been appointed to review the issue, along with a host of others on employment matters.
It seems that making policy promises is easy, but delivering them is a much, much harder task.
Ever since May became prime minister, business groups have campaigned and lobbied against the idea of statutory worker directors. The initial response in July was polite but frosty. For example, Tim Thomas, director of employment and skills policy at the EEF, the industry body for manufacturers and engineers, commented: “These items would not be at the top of businesses’ wish lists right now.”
Then a concerted campaign swung into operation, which appears to have changed May’s mind. The very nature of this kind of business lobbying means that it is not open to public view because it happens behind the scenes. But there was an unexpected glimpse of what companies were saying when the matter was raised at the House of Commons’ business, energy and industrial strategy committee in early November.
Here, the doyenne of progressive business practice, the John Lewis Partnership, said: “We do not believe that encouraging or mandating employee representation on boards will, in isolation, create a strong system of corporate governance.”
The responses from the Institute of Directors, British Bankers’ Association and CBI – all highly influential business groups – were no more favourable. CBI director-general Carolyn Fairbairn has already echoed May’s new approach, commenting that “different approaches will work for different businesses”.
Pressure from business must have been pretty concerted for May to drop her flagship policy on employment matters and corporate governance. She would be well aware that the move to bring workers onto boards would generate big headlines. And, by the same token, dropping it would generate equally big, and disparaging, ones (as it has done).
But it is not just the matter of headlines that is important. May promised to sweep out the old guard of vested interests, best epitomised by her predecessor’s “old boy network”, in pursuit of her agenda of “one-nation Tory” social justice. The act of caving in, and so quickly, to business interests on this matter severely tarnishes her claim to be capable of following through on her more broad-ranging reforms of the economy and society in Britain.
May has scored a big own goal here. In a twisted echo of Britain’s first female prime minister, Margaret Thatcher – who famously pronounced in 1981: “You turn if you want to. The lady’s not for turning” – Britain’s second female prime minister has made it clear that she is a lady who is for turning if enough pressure from the right sources is applied.