Worker director fudge in governance code
After extensive consultation, the City watchdog, the Financial Reporting Council (FRC), has issued an updated UK corporate governance code for listed companies.
On engagement with the workforce, the code recommends that one or a combination of the following methods should be used:
• a director appointed from the workforce;
• a formal workforce advisory panel;
• a designated non-executive director.
If the board has not chosen one or more of these methods, it should explain what alternative arrangements are in place and why it considers that they are effective.
In addition, there should be a means for the workforce to raise concerns in confidence, and — if they wish — anonymously.
TUC general secretary Frances O’Grady was disappointed. “These reforms are a step in the right direction but they are not the shake-up of corporate Britain Theresa May promised and the country needs,” she said.
“While it’s good this new code recognises the importance of workforce engagement, the real test is whether companies give workers more of a say in how they are run. The government should have stuck to its commitment to make workers on boards mandatory.”
On boardroom pay, the code says the remuneration committee’s report — a section of a company's annual report — should describe “what engagement with the workforce has taken place to explain how executive remuneration aligns with wider company pay policy”.