A new Conservative government would require listed companies to ensure the interests of their employees are sufficiently represented at board level, according to the party’s manifesto. The commitment is one of several proposals put forward by the party to ensure that boards “take account of the interests not just of shareholders but employees, suppliers and the wider community”, according to the document.
The manifesto proposes giving companies a choice of three ways to comply with the new requirements: by nominating a director from the workforce; creating a “formal employee advisory council”; or assigning responsibility for employee representation to a designated non-executive director. Employees would also be given the right to request “information relating to the future direction of the company”, subject to certain safeguards, according to the manifesto.
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Writing in the Financial Times last week, party leader and UK prime minister Theresa May said that a Conservative government would “take action to ensure that employees have a greater stake in the companies they work for”. I will ensure that there is representation for workers on company boards and that every employee has a statutory right to receive information about key decisions affecting their company’s future,” she said.
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“This will be no more than the information that shareholders currently receive – but we will extend to those who invest their labour the same information available to those who invest their capital,” she said. If elected, a new Conservative government would also consult on ways to strengthen the corporate governance of privately-owned businesses, according to the manifesto.
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“The proposal appears to be for annual binding shareholder votes on remuneration and incentives paid, vested or awarded for the relevant financial year to each individual executive director,” said executive remuneration expert Graeme Standen of Pinsent Masons, the law firm behind Out-Law.com. “Such binding shareholder votes could cause serious practical difficulties for quoted companies, even if the final statutory amendments are optimally drafted – for example, to relate only to bonus and LTIP amounts not yet paid or vested, proposed salary or benefit increases to be implemented after approval and proposed LTIP awards to be granted after approval.”
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The party has also committed to extending newly-introduced gender pay gap reporting requirements for large businesses to also cover information on the pay gap between people from different ethnic backgrounds. Similar reporting or ‘pay audit’ requirements have also been proposed by Labour and the Liberal Democrats in their pre-election manifestos, while Labour have also proposed the introduction of a ‘civil enforcement system’ to ensure compliance with gender pay gap reporting.
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On corporate takeovers, the Conservative manifesto includes commitments to ensure that “all promises and undertakings made in the course of takeover bids can be legally enforced afterwards” and to allow the government to “require a bid to be paused to allow for greater scrutiny”. The government would also take action to “ensure that foreign ownership of companies controlling important infrastructure does not undermine British security or essential services”.
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The party has also committed to “simplify” the tax system, particularly for small businesses and the self-employed. It would maintain the planned reduction of the headline rate of corporation tax to 17% by 2020, legislate for “tougher regulation” of tax advisory firms and “take a more proactive approach to transparency and misuse of trusts”, according to the manifesto.
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For Out-law.com’s article on this story, visit this link.