From the TUC

Worker representation on remuneration committees moves one step nearer

19 Sep 2011, by in Economics

Vince Cable has today launched a Discussion Paper on executive pay, which includes a question on employee representation on remuneration committees. Not quite a firm proposal, but the first time I am aware of that the possibility of worker representation on remuneration committees has been put forward in an official Government document.

The TUC has been campaigning for worker representation on remuneration committees for over 15 years. There have been times in the past when we have been derided for putting forward a proposal that appeared to go so strongly against the grain of the status quo. It shows that ideas that are far outside the mainstream political discussion can inch slowly inwards and gain real traction over time.

There are many arguments in favour of worker representation on remuneration committees. There is now agreement across the political spectrum that the gap between directors’ rewards and those of ordinary workers has stretched too far. Giving workers a voice on remuneration committees is a direct response to this growing gap and a practical way to make a difference. This is not just as assertion: academic research among the largest 600 European companies has found that presence of board level employee representation is correlated with lower CEO pay and a lower probability of stock option plans.

Remuneration committees are required under the Corporate Governance Combined Code to take into account pay and conditions across the company as a whole, but there is little evidence that this principle is adhered to at present. Bringing workers into remuneration committees would at a stroke boost awareness among remuneration committee members of employee pay rises, pay levels and morale. Worker representation would bring an overdue sense of perspective onto remuneration committees, which has to date been sadly lacking.

As to the practical issues, there are useful precedents from Continental Europe that show how issues such as confidentiality can be addressed.

If worker representation on remuneration committees does become a reality, the TUC will organise training for worker representatives to ensure that they are fully prepared for their important role.

One Response to Worker representation on remuneration committees moves one step nearer

  1. John
    Sep 20th 2011, 1:53 am

    This remainds me of the hopeful days of [but failed]”Paticipation” in 1974. It worked in Germany, but was never adopted in the uk. Instead we went through a bad time of regular strikes, in the end leading to the WINTER OF DISCONTENT in 1978/79. The result was a change of government and the consequential affects for the uk and the whole world. I really think we are going through the same phylosophy again. Instead of the Falklands we have got Libya [& the onging problems of Afganistan & Iraq] with Cameran trying to make a world stage name for himself and distract people from ALL the real serious internal problems we have at home including the very obscene differencies between the very rich and the very poor, genuine unemployment, backward privitisation of the nhs, the true cost of education, costly fares on public treansport, etc etc. Workers are not an assett in the uk, they are as far as this government are concerned a hazard, unless of course you are a blue voting tory. Real worker participation has yet to emerge. Instead of using one’s own people [who should have been on ongoing continual training] we hire expensive consultants who still borrow your own watch to tell you the time!