‘Empty proposals’

The collapse of retailer British Home Stores (BHS) earlier this year will go down in history as one of the biggest business scandals of all time, with tens of thousands of people losing their jobs and pensions as a handful of corporate fat cats raked in millions at their expense.

You’d be forgiven for thinking that something on the scale of BHS could never happen again – but you’d be mistaken. For all the iniquities carried out by Sir Phillip Green — moral violations that might in the end only cost him his knighthood — breaking the law was not one of them.

Enshrined in the Companies Act 2006 is shareholder primacy, which means that executives are, first and foremost, beholden to shareholders – any consideration for employees, consumers, or the environment is secondary.

It is this provision – that the often short-term interests of shareholders takes precedence over the long-term success of the company and the concomitant benefit to society as whole – that allowed the BHS scandal to happen in the first place and which may allow it to happen all over again.

That corporate governance in the UK is broken is beyond doubt – even the Tory government has come to terms with its failure as it published a green paper this afternoon (November 29) outlining measures to check corporate greed.

‘Glorified suggestion box’

But as prime minister Theresa May has shown time and again, any concessions for workers have so far amounted to mere tokenism – her flagship proposal to include workers on company boards has now been watered down.

Now, the government is proposing only to consider ways to enhance workers’ and consumers’ voices on company boards, but it stressed the way in which these voices are heard will be up to the companies themselves.

TUC general secretary Frances O’Grady criticised the latest proposals as a mere “glorified suggestion box” and expressed concern that when management appoints worker representatives, the spirit of the whole idea is undermined.

“The only way you can have a genuine voice for workers is if workers elect [their own representatives],” she told the Today programme this morning.

Despite the government’s U-turn, a new TUC poll published today (November 29) has shown that workers on company boards is a policy that is in fact widely supported.

The survey found that more than 60 per cent of the public supports elected worker representatives in the boardrooms of large companies, with only 1 in 10 people being opposed to the idea.

“Workers on boards is a policy that’s tried, tested and proven in many other countries,” O’Grady noted. “And it will work for Britain too, helping us build a stronger and fairer economy.

“Today we’ve shown Theresa May that the public backs her flagship policy – and that should give her the confidence to take on the big business elites.

“This is about giving workers a say in the decisions that affect them,” she said. “It’s about making Britain’s businesses more successful by bringing in ideas and insight from the workforce. And it’s about building an economy which works for everyone, not just those at the top.”

‘BHS test’

Business secretary Greg Clark spoke today (November 29) in the Commons after the government published its green paper, outlining additional proposals to improve corporate governance, such as giving shareholders a binding vote on executive pay; requiring large companies to publish pay ratios between chief executives and average workers; and holding privately owned companies to the same standards as companies which are publicly traded.

Responding to Clarke’s statement, shadow business secretary Clive Lewis argued that none of today’s proposals would ‘pass the BHS test’ – that is, the BHS scandal would still have happened had all the proposals outlined in the green paper been in place.

He said that the current corporate governance framework has encouraged “damaging short-termism” in the economy, which has led to the UK’s frighteningly low productivity and investment levels.

Unite assistant general secretary Steve Turner agreed that today’s green paper goes nowhere near far enough to truly bring justice and equality to company boardrooms.

‘More of the same’

“Yet again, we get more of the same from this Tory government – empty proposals that merely gesture toward the issue of corporate greed without offering any concrete steps to effectively solve the problem.”

“Theresa May’s rowing back on having employees on company boards shows just how beholden she is to big business interests, at the expense of the workers who are the true backbone of the long-term success of their companies and the wider economy.

“All the evidence shows that countries where worker representation is standard have higher productivity rates, greater investment in R&D, better employment rates as well as lower rates of poverty and inequality – workers on company boards is a win-win situation for all concerned.

“While a proposal to publish pay ratios between chief executives and average workers may help make pay structures more transparent, again there is no mechanism to actually fix the yawning pay gap between bosses and workers.

“The underlying theme of today’s green paper is that merely suggesting ways to improve corporate governance will compel big businesses to do better by consumers and workers – that legislation with teeth simply isn’t necessary.

“At the same time the government is ploughing ahead with its implementation of the draconian Trade Union Act that will further strangle trade unions – the vehicles that enable workers to organise themselves and achieve better working conditions and to ensure proper worker representation and corporate governance in their workplaces.

“But as any BHS or Sports Director worker will tell you, unscrupulous companies will always get away with what they can.”

The government has published its full green paper here and is seeking views from the public, including from employees, consumers and those involved in businesses. Make your voice heard in the consultation here.