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Workforce engagement

2020 UK Spencer Stuart Board Index

2020 Snapshot

 50 %

of boards designated a non-exec to handle workforce engagement


company appointed employees to a board committee role

The 2018 UK Corporate Governance Code included a specific reference to section 172 of the Companies’ Act 2006, which requires boards to consider key stakeholders in their discussions and decision-making. The Code now requires companies to choose one (or a combination) of three mechanisms to ensure the board’s engagement with the workforce: a director appointed from the workforce; a formal workforce advisory panel; or a designated non-executive director. If a board does not choose one or more of these methods, it must explain what alternative arrangements are in place and why it considers that they are effective.

How FTSE 150 boards have chosen to handle workforce engagement
A designated non-executive director 49%
A formal workforce advisory panel 7%
A director appointed from the workforce 0%
A designated non-executive director and a workforce advisory panel 1%
Other 36%
Did not disclose 7%

These boards have mainly opted for a combination of employee engagement channels they already have in place, site visits and engagement surveys.

ITV and Pearson chose both the ‘designated non-executive director’ and ‘workforce advisory panel’ options.

Derwent London chose the ‘designated non-executive director’ option, but also appointed two employees to its board-level Responsible Business Committee, established in 2019 with a remit to monitor the Group’s corporate responsibility, sustainability and stakeholder engagement activities. The employee members of the committee are rotated on a biennial basis and elected by staff ballot (although they are not board directors).

While not a company that qualifies for inclusion in the UK Board Index on the basis of its market capitalisation, it is worth noting that Capita appointed two employees of the company as non-executive directors in 2019, becoming the first FTSE 250 company since the late 1980s to appoint workers to its board. However, the board does not define these directors as “employee representatives”; they were not elected by the workforce, nor were they recruited with the purpose of representing other employees, but to be full participants in the board process.

One-third of companies (23) with a ‘designated non-executive director’ responsible for workforce engagement provide an additional fee for that role. Fees range from £5,000 to £30,000. The average fee is £13,139.

Our perspective

The 2018 UK Corporate Governance Code recommends that boards adopt one of three options to increase their engagement with the workforce. 56% of companies have so far opted for one of these three options, although we expect others to follow suit over the next 12 months. The most effective route to workforce engagement will depend entirely on the nature of each individual business. Workforce directors may not be for every company, but better workforce engagement is.