Governance Watch - Issue 4

By Dina Medland in London

An AGM For Workers

It certainly made the headlines in the Derby Telegraph as well as in Britain’s national newspapers. Employees at FTSE 100 engineering giant Rolls-Royce plc are to be given a chance to grill bosses about the company's recent performance. For the first time the firm, which has its civil aerospace and nuclear divisions in Derby, is set to hold an Annual General Meeting for its workers, which is likely to take place at Derby County's Pride Park Stadium in May, the paper reported.

It pointed out that Rolls-Royce is Derby's largest private sector employer with 14,000 staff. Globally, the company employs almost 50,000 - and this staff AGM, said the paper “is understood to be part of the company's strategy to improve communication with its workers.”

Rolls-Royce workers are expected to have a chance to put questions to the Rolls-Royce board on a number of topics. “However, not all of the firm's 14,000 staff will be able to go to the meeting, which is expected to take place on the same day as the firm's shareholder AGM on May 4, which also takes place at Pride Park. Rolls-Royce workers will have to apply for a place to attend, unless they are already shareholders” said the report.

The employee AGM was revealed in the company’s annual report. “We note with interest the government's green paper on UK corporate governance” said Ian Davis, Chairman
Rolls-Royce plc.

"The board is considering the level of interaction with stakeholders, particularly employees” said Mr Davis.  “We are planning to hold an 'AGM for employees' in 2017, and Irene Dorner will take the lead at looking at how we can strengthen our links between the boardroom and our employees." Ms Dorner is the former HSBC banker who is a non-executive director at Rolls-Royce.

Rolls-Royce reported its worst ever financial results in its entire history, spanning over a century. Hit by a combination of a £671 million settlement of bribery and corruption charges and the plunge in the value of sterling, the firm posted pre-tax losses of £4.6 billion.

Engaging with its employees would seem to be crisis management, as well as timely innovation – one to watch, either way.

‘Honest Mistake’

The governor of the Bank of England, Mark Carney, has thrown a new word (or term, to be precise) into the conversation around UK corporate governance: ‘honest mistake.’ He has defended his handling of the controversy surrounding his deputy Charlotte Hogg and said she shouldn’t have had to resign for failing to disclose that her brother was a senior director at Barclays Bank plc while she was COO for four years. Barclays Bank plc is, like all the banks, regulated by the Bank of England.

I covered the conflict of interest aspect of Ms Hogg’s departure here on Forbes.

In a speech Mr Carney said he had spoken to the top bosses of the major banks last week to tell them they should not feel under pressure to fire staff for making similar errors. Ms Hogg quit in the face of a damning report by the Treasury select committee into her lack of disclosure.

But Mr Carney has now made it clear he believes the Bank of England response was somehow “tougher’ than would have been expected from the banks it regulates. What, if any, are the implications of this for regulation and the senior manager’s regime?

‘Gig economy’

What do we do about corporate governance in the so-called ‘gig economy’? The Guardian newspaper has made it a priority by featuring regular stories like this one about the lack of worker entitlements in many businesses that deem their employees to be self-employed sub-contractors.

Cases coming to court are mounting. Prime Minister Theresa May commissioned Matthew Taylor, the Chief Executive of the Royal Society of Arts, in October 2016 to look at how employment practices need to change in order to keep pace with modern business models.

In an interview with The Guardian, Mr Taylor said this week that he expects Theresa May to support changes to the rights of self-employed workers.

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