Thompsons Solicitors explains why trade unions should be incorporated in revisions to the FRC’s revised code to maximise its impact
Giving workers a voice in the boardroom is welcome but the new UK Corporate Governance Code must recognise unions’ key role in business success too, says Thompsons Solicitors.
A revised version of the Financial Reporting Council (FRC) code is out for consultation until next month [February], aimed at encouraging a business culture that promotes integrity, openness, diversity and is responsive to all stakeholders. The code emphasises the importance of the workforce’s voice in long-term business success.
The new code proposes company boards establish a way to gather their workforce’s views. It offers three options for doing so: nominating a director from the workforce, creating a formal workforce advisory panel or assigning a designated non-executive director. It also states there should be a system for employees to raise their concerns in confidence, anonymously if they wish, and the system should ensure arrangements for “proportionate and independent investigation of such matters and for follow-up action”.
Rakesh Patel, head of employment rights strategy at Thompsons Solicitors, said: “We welcome the FRC’s focus on greater engagement with the workforce. But, the final version should if it is to be truly transformative, recognise the key role to be played by trade unions.
“Unions can identify common views and concerns among workforces and offer anonymity to those wishing to share views on sensitive issues that they’d be reluctant to discuss directly with management. The TUC has suggested any formal workforce advisory panel should include trade union members, where they exist, and that worker directors will only be effective if they are elected by fellow workers, rather than chosen by management. We wholeheartedly agree.”
"“The recent pension scandal at BHS, the debacle at Carillion, concerns about working conditions at Sports Direct as well as the legacy of blacklisting all highlight why change to boardroom culture is overdue.”"
The FRC’s proposed revisions to its 25-year-old codes are stating as seeking to ensure it is relevant to the current social and economic climate, and a rapidly evolving business environment. It considers five key areas of corporate governance: leadership and purpose; division of responsibilities; composition, succession and evaluation; audit, risk and internal control; and remuneration.
The principles are enforced on a “comply or explain” basis, meaning companies that fail to comply must explain why.
“The recent pension scandal at BHS, the debacle at Carillion, concerns about working conditions at Sports Direct as well as the legacy of blacklisting all highlight why change to boardroom culture is overdue,” Mr Patel added.
“As the UK’s most experienced trade union law firm, we have witnessed the crucial role trade unions play in protecting employment rights and workplace safety. It is vital that the FRC reference them in their final Code.”
The code is expected to be finalised in June.