ICGN discusses employee representation on boards of directors

The International Corporate Governance Network (ICGN) has been discussing the relevance of worker representation on boards of directors. ICGN supports the idea that companies are responsible not only for their shareholders, but for all stakeholders that are part of their ecosystems. The issue, raised by the director Kerrie Warring, is controversial.
The Italian Assogestioni is contrary to employee representation on the boards. According to Dimitri Romessis, the measure can affect the activities performed by the board and change its focus on account of issues that may be relevant but not necessarily in line with the company’s and its stakeholders’ best interests.
The Dutch Eumedion is also contrary to the measure. According to the local code of corporate governance, boards must help generate long-term sustainable value for all stakeholders. “Board’s members are not nominated to deal with the interests of specific groups,” says Rients Abma. Therefore, the direct representation of shareholders, customers and suppliers is not recommended.
One of the factors that has been provoking the discussion is the new version of the UK Corporate Governance Code. The document now includes the requirement that boards of directors engage with employees and suggests three solutions for that: by nominating an employee to the board, to the advisory board or as a director (not an executive officer) to represent the employees. A recent survey conducted by the ICSA, however, revealed that 70% of the companies do not consider adequate that employees sit on the boards.