It's disappointing to find that Theresa May is backtracking, in the face of the clamour of pain from business, from her promise to put workers on the boards of British companies. It's even worse that she's indicating that the limitation of top salaries and executive enrichment she wants to see won't now happen.Two big mistakes Now that we've made Britain a good place to do business it shouldn't be a good place for business to do the people. We need strong British companies to do it.
Having urged a requirement to put workers on boards to the last two enquiries into corporate government I can understand the difficulties of making business see that its best interests lie in developing a team relationship with its employees rather than imposing low wages and casual conditions. The Cadbury enquiry, commissioned by the Financial Reporting council in 1992 after a series of scandals, did at least listen. Sir Adrian Cadbury met us and agreed to some of the reforms we urged in respect of stronger audit committees. The second enquiry was far more reactionary. It laughed at our proposals and flatly refused to share any power with the workers or to envisage any further reform of a system of corporate government which they viewed as the best possible in the best of possible economies
Their claim that companies are answerable to their shareholders, not to government or their workers is a hypocritical myth.The average time for which shares are held has fallen from years to less than six months. Turnover at that speed means that few shareholders come to eat the cucumber sandwiches at AGMs, that it's rare for them to object to top salaries and even rarer to get them reduced The Directors always come armed with sufficient votes to carry whatever they want The funds who hold most of the shares are more interested in trading them to raise their own fund indexes than to exercise any supervision.Everything is short term. The prevailing concern is not about company growth but shareholder value which determines the rewards of those at the top.
Because of this myth British companies have managed to escape giving workers a say in the running of their companies in the way the Germans do with two tier boards such as the one running Volkswaggon,or the worker representation on the boards of most other companies in Germany and in the other EU countries. The benefits are obvious and were well argued by Labour's Bullock report in the seventies. Workers involved in the running of their company are treated as a team not an exploitable, disposable resource. They have a strong interest in its strength ,success and survival unlike even the directors and CEOs of British companies who are all too ready to sell up, gab huge sums for themselves and get out leaving their company to be run down or dismantled.
Worker directors would also advance Mrs May's other aim of reining in fat cats ."Star" CEOs and directors effectively decide their own remuneration and they're usually very generous to their own talents. Shareholders have little say, witness the puny protests at Martin Sorrell's enormous rewards Eighty British CEOs take home over a million pounds a year and legions are showered with bonuses and share options. Are they worth it when British companies are fairly consistantly beaten by Germans?
Instead of maintaining their rewards in a decent ratio to those of their workers British directors are too inclined to milk their companies and vote themselves massive rewards while treating workers as a cost to be cut down on by low wages, casual employment terms and intense exploitation of the Sports Direct kind.No wonder our productivity is so much ,lower than Germany where workers are treated as part of a company team and Mitbestimmung,or co-determination, produces ensures that waged claims are less excessive. No wonder too that far too many British companies have been closed down (look at the wool industry) or sold out to foreigners giving Britain the highest proportion of foreign ownership and killing off our few national champions like GEC and ICI.
If we are to compete successfully and build up strong companies as national champions we must stop treating them as commodities to be sold swapped dismantled or closed down just to enrich the few at the top. We can avoid this by treating workers as a team and giving them a say. Britain should learn from Europe rather than imitate the US. My advice to Theresa' May is to press ahead with reform Don't be deterred by the fear,shock and terror they'll generate in our greedy CEOs and our irresponsible board rooms.
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