The contribution of worker-directors on corporate governance

Abstract

PURPOSE: The adoption of Board-Level Employee Representation (BLER) in an entity increases the accountability of the board of directors towards other stakeholders, such as employees. This study analysed the impact of worker-directors on corporate governance decisions of an entity. The presence of BLER in the local scenario in comparison to other European Union (EU) countries was also analysed. Moreover, the study examined the feasibility of the worker-directors in today’s world. DESIGN: A qualitative research instrument was adopted with the aim of carrying out an exploratory study. This was done through six in depth semi-structured interviews with former and current worker-directors, and experts on the adoption of BLER in Malta. Data analysis was focused on the use of the inductive method enabling the researcher to query the participants in an unbiased manner, thereby identifying a thematic analysis.

FINDINGS: Worker-directors on the board neither hamper the decision-making process of an entity, nor increase the risk of there being a conflict of interest. Also, while a workerdirector decreases the level of information asymmetry in an entity, this is not due to the oversharing of information by a worker-director to employees, but rather due to the ability of a worker-director to act as a bridge between the board of directors and employees. In Malta, there is only one entity which still maintains BLER and this contrasts greatly to other countries in the EU. While the adoption of BLER in entities is feasible, there is no hype towards this model in the local scenario. In fact, local entities are not presumed to adopt this model in the near future, especially due to the resistance posed to change.

CONCLUSIONS: This study concludes that although the role of the worker-director is not very prevalent in Malta anymore, it has the potential to yield multiple benefits such as enhanced employee representation, especially in the case of larger entities. An update of legislation and an increase in education and training can act as a key towards the widespread adoption of BLER.

VALUE: This study delves into the relationship between worker-directors on the board and their impact on the corporate governance of an entity. The lack of local literature on the interrelationship between these two topics enabled this study to unveil the stigma towards the adoption of BLER in Malta, along with providing recommendations to how this model can become the norm in an entity.