New Prime Minister Theresa May recently announced potentially radical and fundamental changes to boardroom governance.

The PM apparently wants to see employees and consumers on UK company boards. Whilst other countries such as Sweden, Denmark and Germany already have systems that require certain companies to have employee representation, any mention of such a proposal in the UK has been out of favour and not discussed seriously since the 1970s.

This would represent a massive change of direction for the UK. Details are very vague at the moment in terms of the nomination, election and appointment process, penalties for non-compliance etc., but this development certainly gives us an insight into the PM’s thoughts and plans for this area:

“In practice, (boards) are drawn from the same, narrow social and professional circles as the executive team and – as we have seen time and time again – the scrutiny they provide is just not good enough.…we’re going to change that system – and we’re going to have not just consumers represented on company boards, but workers as well.” – Prime Minister Theresa May

There has already been some lively debate on the topic, with some critics fearing that employee representation will lead to a clunky decision-making process, unwieldy boards, the stifling of debate at meetings and potential loss of confidentiality.

Some have also argued that the German model hasn’t worked out quite as planned as it didn’t stop the emissions scandal from rocking the VW boardroom and governance structure.

Others, however, have welcomed the news. Employee representatives can, they say, provide a balancing voice on remuneration and bring other values to the board, such as providing news from the shop floor and providing practical feedback on how technology and other changes are bedding in.

There is also a suggestion that the new reporting regulations on directors’ remuneration may also be put under the spotlight, despite being introduced less than three years ago. May plans to give shareholders stronger powers to block pay packages, making all votes binding rather than advisory.

Watch this space for further updates on this and other corporate governance issues.