Employee Directors at Sports Direct

It seems that controversial company Sports Direct (SPD) are likely to become the first UK public company to have a worker on their board. They plan to appoint an elected “Worker’s Representative” who will attend and speak at board meetings although they would not formally be appointed as a director. A spokesman for Sports Direct said: “Having explored all options we believe this is the best way to ensure the Workers’ Representative is free to champion the interests of all staff. We see this as a major step forward in bringing about positive change.”

Comment: if that improves their employee relations, which has seemed far from ideal in the past, then so much the better. But is there not a risk that the person so appointed might be seen as a “shadow director”? For those not familiar with that concept, anyone who has significant influence on the operations of a company and its board could be seen as a shadow director and in that case the legal position is that they have the same duties and obligations as any other director (and the associated legal liability).

One objection to these kinds of arrangement is that employee directors might have power without the associated obligations and hence make cavalier decisions. But in this example, not being formal directors they presumably will not be able to vote on any board resolutions.

ShareSoc has not adopted any formal policy on employee directors although we do think that a Shareholder Committee is a better way to improve corporate governance and stakeholder engagement. The presence of a worker representative on a Shareholder Committee might be an alternative solution.

Roger Lawson

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