Russell Lynch: One size does not fit all for workers in the boardroom

Abandoning plans to force firms to put workers in the boardroom was one of the most egregious of Theresa May’s many U-turns after last year’s disastrous general election cost her majority.

Her reduced political clout, as well as widespread corporate suspicion, saw potentially radical reforms watered down to the publication of largely meaningless pay ratios showing how much more the bosses get paid than their average workers.

So the move by Capita’s newish chief executive Jon Lewis, who’s managing a turnaround at the previously struggling outsourcer, to bring two employees onto the main board is certainly eyecatching. Only one other company in the UK, FirstGroup, has done it, but there should be more to come following July’s update to the UK Corporate Governance Code, which comes into force next January.

To help tackle boardroom groupthink, the Code says companies should appoint to the board a director from the workforce, a designated non-executive director or a workplace advisory panel — or say why they are not doing so under its “comply or explain” dictum.

Capita is still finalising its plans, but elections among the 77,000 Capita staff look likely for employee directors with the same full voting rights as the other eight members of the board, probably from the middle management of the business. The Code says this shouldn’t merely be window-dressing: the new directors “will be in a position to contribute to discussions on wider issues” and “training should be given in understanding company finance and business decision-making”.

For Lewis — getting to grips with an unwieldy business with huge numbers of staff working on countless contracts around the world — there’s a definite advantage in having a board hotline to the workers. He can tap their expertise, make improvements at the ground floor and nip potential problems in the bud.

Trade unions pushing the worker-director model much more widespread on the Continent also argue that businesses tend to be better invested and take a less short-termist view as a result, although sceptics might counter that workers in the boardroom might blanch at the much tougher decisions occasionally needed on job cuts in a downturn. After all, a board serves at the behest of the shareholders who own the business.

Increasing boardroom diversity is a laudable aim, and I can see the advantages for businesses like Capita and other companies with vast numbers of staff like the grocers for example. But would it work for a Rio Tinto, for example, or any number of large UK listed companies with most staff and operations overseas? How does a UK employee represent them? And do companies like British Land or Shaftesbury — property firms with far smaller numbers of staff than a Tesco, say — really need somebody on the board as well? Good luck to Jon Lewis but among corporates many may choose to “explain” rather than comply with the new rules.