Are worker-directors good for business? Yes, was the unequivocal answer given by a focus group of chief executives, other company directors and corporate governance types to a study conducted by think-tank Tasc and commissioned by the National Worker Director Group.
Worker-directors were “felt to be loyal to the company, trustworthy and diligent in their duties; their contribution was viewed as positive and unique by over three-quarters of respondents”, Tasc found. And, as Seán Barrett, the Ceann Comhairle, said as he launched the report this morning “there’s no State organisation that has gone down the tubes because there were worker-directors on the board”.
Some argue that worker-directors are more independent and resistant to groupthink than other directors; others feel the advantage worker-directors bring to boards lies in their long-term commitment to the organisation, and in their insider knowledge. This is exemplified in their role in industrial relations, where they “act as a two-way conduit for information in times of conflict”.
So why aren’t there more of them? And why are employee-directors almost always excluded from boards’ powerful remuneration and audit sub-committees? “I’m a qualified auditor, but I wouldn’t be allowed on my own audit committee,” said John Moore, employee-director of the Dublin Port Company since 2007. “I’m not saying you have to be an auditor to be on an audit committee, but it helps to have financial knowledge.”
Indeed. There are times, it seems, when a little bit too knowledge among worker-directors is seen, by their co-directors, as a dangerous thing. Tasc’s report, based on interviews with nine worker-directors and 13 non worker-directors, found that “almost all” worker-directors felt excluded from audit and remuneration committees, “and in particular felt that CEOs would not welcome a worker-director on a remuneration committee”.
No prizes for guessing why. The perception was borne out by the other interviewees, more than half of whom felt that worker-directors shouldn’t sit on remuneration committees “due to a potential conflict of interest”.
UCD professor of corporate governance Niamh Brennan has previously written that conflicts of interest for elected worker-directors are “so systematic as to completely undermine their ability to carry out their duties as directors”. But, as Barrett suggested at the launch of Tasc’s report today, worker-directors are no more at risk of a potential conflict of interest than any other director. “Don’t tell me the other directors don’t meet at the Stephen’s Green club or the golf club.”
Not everyone was happy when worker-directors were first introduced in Ireland more than 30 years ago. “In some quarters it was seen as a Communist takeover, if not of the country, then of certain State bodies,” recalled An Post employee-director Jerry Condon.
Tasc has now recommended that the worker-director model should be extended across the public sector, with a minimum 25 per cent employee representation on public boards to ensure worker-directors are not isolated. There were concerns in the room, however, that in the State assets privatisation journey that lies ahead, the days of worker-directors at some companies might be numbered.
Barratt insisted privatised and part-privatised State companies should retain their worker-directors. “The old fears of 30 years ago didn’t come to fruition,” he noted. Perhaps ominously for supporters of worker-directors expecting the Government to take the lead rather than just welcome new reports, he added that worker participation on boards should happen “automatically”, rather than needing to be backed up by legislation.