Britain’s bosses must prove that they have listened to workers’ views under a long-awaited package of reforms aimed at rebuilding trust in UK business.
The Financial Reporting Council (FRC) is today unveiling a new corporate governance code for listed companies aimed at cracking down on bad corporate behaviour and giving more power to staff.
The reforms include a new provision for workers to be represented either by an employee advisory panel, a director from the workforce or a non-executive director.
The move comes two years after Theresa May vowed to force companies to put workers on boards during her campaign to be prime minister – a pledge she later back-tracked on amid concerns over confidentiality.
Both FirstGroup and Sports Direct have chosen to have a worker representative on their board, with the Mike Ashley-led sports retailer last year appointing a 30-year old shop manager to the role in an attempt to counter criticism of its working conditions.
Although the focus on giving staff more of a say was praised by lobby groups, TUC general secretary Frances O’Grady said she was disappointed by the watered-down rules.
“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. “The Government should have stuck to its commitment to make workers on boards mandatory.”
Other changes include a ban on executives selling shares for up to five years after they step down, as well as an extension of the amount of time an independent director can work for a company in an attempt to encourage more female board members into chairman roles.
The initial proposals for the revised code first emerged in December, when the FRC’s chairman Sir Win Bischoff said the shake-up would “be essential to restoring trust in business” following a string of scandals.
“We still have a hangover from the financial crisis and high-profile examples of companies where there have been problems – clearly trust in business needs improving,” said the FRC’s director of corporate governance, David Styles.
“I wouldn’t say that boards have lost their way, overall we have high standards of governance but it’s very noticeable when things go wrong.”
Some business groups argued that the rules were too soft. Dr Roger Barker, head of corporate governance at the Institute of Directors, said he was disappointed that a “crucial recommendation for directors to undertake continued professional development” had been removed from the code.
The overhaul also urges companies to report the ratio between boss and worker pay amid concerns over corporate greed.
Business Secretary Greg Clark said that the changes will “help the UK remain the best place in the world to work, invest and do business”.