Since the British public voted in favour of Britain leaving the European Union, the Brexit vote has lead to both immediate changes and also decisions that will have to be made in the upcoming months. One of those immediate changes is, of course, the shake up in the Conservative government. The resignation of David Cameron as Prime Minister paved the way for the eventual choice of new Prime Minister, Theresa May, and, as part of her campaign speech to become the Prime Minister, she reintroduced an idea that could affect employers and boards of larger companies in the future; the question of whether employees should be play a part in the makeup of the boardroom.
So, should employees be a part of the boardroom? And, as part of a broader discussion, if you are an employer that works for, or is the owner of an SME, do you think your employees should be represented when important decisions need to be made for the future of your company? How much input do you think employees should have when it comes to making these decisions? Perhaps you already have a system in place or maybe it is a question you have started to consider since Prime Minister Theresa May raised the issue.
First of all, let’s take a look at what Theresa May suggested with regards to whether or not employees should be a part of the boardroom.
Prime Minister Theresa May Campaign
Well, as some news columnists have suggested, you could be forgiven for thinking this suggestion of employees in the boardroom is a more suited to a move by the Labour Party and, indeed, Ed Milliband, when he was Labour leader, made similar noises. For this suggestion to have come from the campaign speeches of a Conservative Party member who has since become Prime Minister; well, it is seen by some as a philosophical U-turn and this has got businesses watching to see what will happen next. Her views have received a lukewarm reaction from some business leaders.
Prime Minister Theresa May believes it is time for a shake up in the business world, particularly in the boardroom where she she says many of them are made up of members from narrow social and professional circles. As part of this shake up, she suggested it is time for employees to have more input in the way businesses are run by introducing them to the boardroom.
Naturally, what concerns some business leaders is exactly how this would be implemented:
- Would there be guidelines or laws that state how many employees should be in the boardroom as representatives of the whole workforce?
- Do those representative employees attend every single board meeting or just the meetings that don’t deal with sensitive issues relating to redundancies, for example.
However these measures are introduced – if they are introduced in the future – clearly, these are all discussions that would need to take place. Whether you are part of a large corporation or an employer running a small or medium enterprise, you are probably aware of the widening gap; the lack of trust that the general public has in big business: Boardrooms, financial settlements worth millions of pounds, redundancies because jobs are being moved to other, more profitable, countries. The Brexit vote has highlighted this mistrust – that there is a feeling of ‘us and them’ and, as a business owner, perhaps you yourself feel it is time to do something about this gap.
Prime Minister Theresa May suggests that having employees in the boardroom is one way to start bridging this gap and bring people together in business. What are you thoughts?
The Importance Of Boardroom Diversity
Most business leaders these days are fully aware that boardroom diversity is key. When we think of diversity, we often think of ethnicity or gender, for example, but diversity can also be take on other meanings such as diversity in skills or people’s social and educational backgrounds. Having employees in the boardroom – or including them in important decision making for SMEs can be a way of introducing that diversity to the boardroom.
Introducing employees to the boardroom is not a new idea. As I said above, Ed Miliband made the suggestion when he was leader of the Labour Party but even before that, it was a philosophy recommended back in the 1970s. Some countries on the continent embraced this philosophy and many of their top companies have a number of employees attending their board meetings. The number of employees on the board differs greatly from country to country and some have legal requirements where there needs to be x number of employees on the board per x number of workers.
In some European countries, there is no actual law or requirement to have employees represented in the boardroom by another employee. However, some companies choose to adopt this method of boardroom diversity because they believe it benefits the company. At the moment, there is no requirement for UK companies to have one or more employees present in the boardroom. Do you think it would be beneficial if there was a requirement or do you think it could hinder the future growth of your company?
What is the job of the board of the company?
Here are some of the roles that members of the board undertake for large companies. If you are an employer for a smaller company, you could be making some of these decisions for yourself.
- To assess the performance of the CEO (in large companies). Could it be beneficial to have a point of view from the ‘shop floor’ when looking at the performance of the CEO of a company?
- Evaluating opportunities and risks. Do you think having employees in the boardroom means a different insight could be offered when looking at opportunities and risks for the future of the company?
- Making strategic decisions. What do you think employees could bring to the table when making strategic decisions?
- Boards protect the investment of shareholders. Employees are the backbone of a company. Do you think think they should be allowed into the boardroom to consult on decisions and perhaps limiting to risk so that the investment of shareholders is protected?
As with many issues like this, there are pros and cons to having employees in the boardroom or, if you are a smaller outfit, having a system whereby you consult with your employees about major decisions. Let’s take a look at some of those pros and cons:
Pros of employee representation in the boardroom
- The business is more productive and more harmonious. Advocates of having employees in the boardroom believe it benefits the company because there is more mutual understanding between the board, CEO, managers and employees.
- Diversity on the board, including having employees present, can assist the CEO in ways that non-diverse boards cannot. Different ideas, methods and insights can be offered from people with different backgrounds and help the CEO to make decisions.
- In order to be successful, companies need to be in touch with the real world. And of course, the real world is a diverse place with people from many different backgrounds and life experiences. Having employees on the board, or consulting with employees, means there is more diversity so more realistic decisions can be made to benefit the company. If you employ school leavers, students or graduates, what about consulting them occasionally for a different perspective, too?
- Helps to keep staff and customers engaged. If employees are on the board or if you consult with them on a regular basis it helps to show that the directors are not distant and out of touch with what is happening in the workplace. Employees’ representatives have access to them and can raise issues. These days, students and graduates are citing job satisfaction and feeling valued in the workplace as being more important than a high salary. Knowing they are being represented (or listened to) in the boardroom is one way to value staff and keep them engaged. Consumers also feel more confident in buying from a company where employees are represented on the board.
- Companies need to be aware of the diversity amongst clients or customers for future success. Having employees in the boardroom makes for a more diverse board and this can help in the board’s awareness of a wider range of groups of people to target effectively. It broadens the customer or client base.
- Employees on the board can bring new ideas and perspectives. A company can become stale and stuck in its ways if everyone is from the same background and all ideas are dealt with in the same way. Having employees on the board means they can bring a new dynamic and different perspectives – perhaps ideas put forward by young apprentices, students or graduates who are working for you.
- Employees in the boardroom can create a win win situation. Directors inevitably become more aware of the needs, requests or concerns of employees and can more effectively take these into account. A stronger connection and more understanding of employees creates more harmony and perks such as time off for major sporting events can be addressed and dealt with with more understanding.
- Employees in the boardroom means they get a perspective of the issues facing management, too. Employees get a better understanding of difficulties and challenges in running a company. This can help in understanding why some things are implemented which wouldn’t necessarily make employees happy if they were not aware of the full reasons behind it.
- Healthy debate is beneficial to the company. When discussing possible outcomes after an action has been taken, it’s beneficial to have more perspective on this. Employees can offer their point of view – a point of view that might not previously have been considered. It could take time to build this culture where healthy and robust debate is something the boardroom feels comfortable with – a situation where there is not necessarily a right or wrong answer – but it can benefit the company.
- Employees’ views are taken into account. This can ultimately benefit the shareholders, too, because employees are happier and therefore more productive. The company can become more profitable.
- Employees in the boardroom can attract new talent to the company. If you are trying to think of ways of attracting young apprentices, students and graduates to your company then having employees in the boardroom can really improve the reputation and brand of your company. As I said above, young employees these days like to feel they are listened to and valued. You could find yourself choosing from a pool of young talent when job vacancies arise because people really want to to work for your company.
Cons of employee representation in the boardroom
With a list of advantages inevitably comes a list of disadvantages so let’s take a look at some of the concerns people raise when it comes to the subject of whether or not employees should be in the boardroom.
- Loss of confidentiality with the board Some people feel that there is always the risk that having employees in the boardroom means sensitive topics and trade secrets could be discussed with other employees. These could be sensitive topics such as redundancies. One solution could be a system where employee representatives only attend some board meetings; not every single one.
- Discussion is less free and open. Some directors in the boardroom might not feel comfortable in the presence of employee representatives and could feel they can’t have frank and open discussion. As I mentioned above, this would be a culture that would take time to adjust too for lots of people in the company.
- Conflicts could arise between workers and management. If there is a disagreement over an issue that just cannot be resolved then this could cause conflict and ill feeling rather than the harmony hope for.
- Employees could feel pressured Being a representative of other employees in the boardroom could put a strain on the employee. They could feel pressured by workmates to ask questions or tell secrets of what has been discussed.
- Employee representatives must be chosen very carefully. Clearly, a company is not just going to choose one or more employees at random to represent the workforce in the boardroom. A set of guidelines must be in place whereby there is a process for how the employee is chosen. A certain number of the years with the company, a particular position with the company or a particular background for example. Whilst diversity is seen as a positive in the boardroom, there has also got to be a certain chemistry whereby everyone is comfortable and feels they can speak openly and in confidence. As well as robust debate, there must also be collaboration. Choosing the most suitable employee or employees for this process could be a difficult task.
- A danger of just paying lip service to having employees in the boardroom. It is important that the employee or employees who are chosen to represent staff in the boardroom are not just there for the sake of it and their views ignored. It might look great on paper that a company has employees in the boardroom but this has to actually mean something. For those who are familiar with boardroom scenarios and who have sat on various boards in the past, it could take a lot of getting used to for them to have employees around. Having employees in the boardroom might not be an overnight success.
Having employees in the boardroom of larger companies – or consulting with employee on strategic decisions for smaller and medium term enterprises – is all about balance and the pros can outweigh the cons when you are getting a variety of perspectives on the outcome of these decisions.
When it comes to attracting young people such as apprentices, students and graduates to your company, advertising the fact that your company has a culture of listening to its employees and taking their ideas on board can be a plus point.
Some UK companies who have already adopted a system of having employees in the boardroom have said they are finding it very beneficial. The trick is to put in a lot of thought and strategic planning before such a system is implemented so that everyone knows the boundaries and what is expected from them.
If you have job vacancies that you would like to fill with some of the UK’s best young talent, why not place an ad with us today.