Do you trust your employer?

Large Group employeesIn a somewhat disturbing article in the Financial Times dated 18 August 2016, Michael Skapinker draws attention to the discontent among workers in the developed world, in response to stagnant real wages, less generous pension arrangements, increasing automation and job losses. He refers in particular to the Edelman Trust Barometer which shows that, in the UK, only 57% of workers trust their employers. Admittedly, this is a better result than the 48% in France and 40% in Japan, but that is little comfort for businesses seeking a motivated and engaged workforce.

Another survey, this time among workers in the USA, found that 49.5% were “not engaged” and a slightly alarming 16.5% were “actively disengaged” – not just discontented, but actively opposed to their employer’s interests.

It is in response to this perception of “Us” and “Them” that has led Theresa May, the UK Prime Minster, to suggest the curbing of executive pay and the appointment of employee representatives to company boards. This proposal has received initial support in principle from organisations as diverse as the Institute of Directors and the Trades Union Congress.

There is some precedent for such a system in Germany, but German companies operate a dual board system: a management board comprises executives who are held accountable by a supervisory board comprising independent directors and employee representatives. This is very different from the unitary board system in the UK. It is probably also worth noting that the dual system is not without its difficulties, as shown by the problems experienced at Volkswagen.

Employee directors on a unitary board could have a major conflict of interest when trying to balance what is right for the business as a whole with what is in the interests of the workforce taken in isolation. Would they be representatives, free to form their own individual views, or would they be delegates whose job was to implement a manifesto which is limited to the interests of the workforce to the exclusion of all other factors?

What other ways might there be in which this “Us” and “Them” mentality can be countered? One possibility is for employees to hold an economic stake in the company, which would allow them to feel a greater sense of ownership, rather than alienation. The UK Coalition Government took sizeable strides towards extending employee ownership by making it easier, and cheaper, for businesses to become employee-owned. There continues to be wide cross-party acceptance of the academic research which indicates that businesses with a high level of employee involvement are more successful than others. There has been encouraging, but at this stage fairly limited, take-up of the Government incentives, mostly among smaller businesses (even though the model can work in very large concerns, such as John Lewis).

It may well be that widening employee ownership by promoting a new breed of employee-owners is a more straightforward way in which to encourage greater employee engagement and to counter what seems to be the prevailing “Us” and “Them” approach. Such a development would not be without its obstacles and there would need to be an extensive education campaign so that employees were fully versed in the implications of their new role – but it must be worth at least a try.

Stephen Chater