Last year, the Accountable Capitalism Act was proposed, outlining the idea that corporations earning $1 billion or more in annual revenue should be required to allow their workers to elect 40% of the membership of their board of directors.
Some might ask, what are the pros and cons to placing employees on their company’s board of directors? Here are some to consider.
Employees will care more and do more. Many experts claim that placing employees on boards makes sense because the employees will be direct stakeholders in what the company achieves. Without workers, companies wouldn’t be able to do what they do or be successful.
When employees are given a real voice at the table, and when important companywide decisions are being made, they’re more productive and engaged in the success of the organization for which they work. They’ll also feel more responsible and accountable for what happens at their company.
There will be more diversity and realistic perspectives. When a board of directors includes workers or individuals who closely represent those workers, they will be able to share their everyday work experiences and bring them to the table when decisions need to be made for the company, which will put the company more in touch with the real world.
As examples, a plant manager’s perspective on new equipment acquisitions used in various plant locations could prove very valuable, and a customer service manager could bring a valuable perspective regarding new communications technology for customer interactions.
Gaining trust might not be easy, and conflicts might arise. Some members of a board of directors might be concerned that workers in their boardroom will trade or share confidential company information with others outside of the boardroom, even if unintentionally. And conflicts between leadership teams and workers might arise due to differing perspectives and goals, which could lead to a lack of trust and transparency among members. If members in the boardroom don’t trust one another, it might be impossible to make important decisions and move a company forward.
Governance rules might be hard to establish and manage. Selecting employees for a board of directors could be challenging because it might be difficult to determine which employees would or would not be qualified to sit on the board and how they should be selected.
Establishing how involved employees should or should not be in the governance of the board, as well as how the board of directors will be held accountable, could also prove challenging, especially if members don’t trust one another and employees aren’t involved in its management to some degree.
Keep these pros and cons in mind, and read tomorrow’s post, which will explain how to include these workers on your board.