Shrewd governance professionals always want reliable reconnaissance so that they can help U.S. boards avoid surprises, investor challenges, or activist attacks. One of the most prized skills of the job is knowledge of where to find such intelligence. We like to think the bodies for which we work—the IRRC Institute and the Harvard Program on Corporate Governance—offer such insight through research and roundtables. But there’s another place to look, too, and it has proven uncannily accurate: the United Kingdom. Governance developments there have a habit of migrating before long to North America. The exact form may change, but the basics remain as they cross the Atlantic. Among now-common U.S. governance practices that originated in the United Kingdom are “say on pay” votes, majority voting standards for director elections, and independent board chairs. So should it be worrying to U.S. companies that the newest governance goalpost in the United Kingdom—touted by none other than the country’s Conservative Party prime minister—is the appointment of workers to corporate boards?
The idea of a Conservative government even contemplating such a notion would once have been dismissed out of hand as outlandish—say, through the party’s 338-year history until July. Sure, the opposition Labour party had included such an idea in its platform for the 2015 general election, from which it emerged so devastated that the manifesto was later compared to its hard-core 1983 platform, famously dubbed “the longest suicide note in history.” In retrospect, though, Labour was comparatively restrained in 2015 compared to new Prime Minister Theresa May’s proposal. Labour only had pledged to “make sure employees have a voice when executive pay is set by requiring employee representation on remuneration committees.” Critics poured scorn on this worker-director plank as hopelessly leftist. But on July 11, then-Home Secretary May opened her brief campaign to become Conservative leader and prime minister with a speech in Birmingham in which she dropped a bombshell. “If I’m prime minister,” she declared, “we’re going to have not just consumers represented on company boards, but workers as well.” Notice that she promised workers on corporate boards not just for compensation committees, as Labour had proposed, but for everything a board does. Two days later May won the top job. Now she faces the challenge of cementing that promise into U.K. public policy. Or of walking it back.
