Directors with experience of the shop floor can improve performance on the top floor, says report, with benefits for governance and long-term value.
A coalition of investors with £2 trillion in assets under advice, led by Railpen – one of the UK’s largest pension funds – is calling on businesses, shareholders and policymakers to prioritise workforce representation on company boards.
Since 2023, the Workforce Directors Coalition (WDC) has been campaigning to incorporate the worker voice in strategic decision-making and corporate governance processes at board level, including the potential use of workforce directors, which it says is “integral to a company’s performance”.
The model has struggled to gain acceptance, but investors and governance experts argue it can help firms anticipate and adjust to major shifts, such AI adoption or energy transition.
The WDC’s work builds on the UK Corporate Governance Code which requires companies to adopt and disclose their approach to workforce engagement, and suggests the appointment to the board of directors of one or more individuals drawn from the workforce.
According to an EY analysis of UK and US firms, certain financial and employment violations became two to 10 times more frequent between 2010 and 2023, including accounting deficiencies, anti-money laundering deficiencies, tax violations, labour standards, workplace safety and consumer privacy.
Under-utilised
The WDC cites multiple reasons why investors should back worker representation on boards. These include lessening the risk of scandals and regulatory issues; strengthening employee engagement, reducing retention risk and the additional recruitment and training costs associated with high turnover; and enabling innovation by giving more people the opportunity to express their ideas.
A report from the Predistribution Initiative, a non-profit organisation that works with investors to help take better account of social issues in investment decision-making, finds: “Co-determined firms show steadier long-term performance, narrower wage gaps, stronger innovation, and neutral to modestly positive impacts on productivity, investment, revenue, and profitability.”
However, a November 2025 white paper from the WDC says the model “remains under-utilised” arguing that “many companies do not genuinely consider its potential benefits”.
According to Railpen’s Head of Investment Stewardship and Co-head of Sustainable Ownership, Caroline Escott, misperceptions have contributed to the low up-take or sustained use of the model.
“Some [companies] think a workforce director needs to be representative of the workforce, or that they couldn’t possibly find a person with the right skill set,” she said.
“But we say that the role is not to represent the workforce, but rather to have the same duties as any other company director – they just happen to have a broader workforce background. And if you give a workforce director the same kind of training package as you give any other director, they will be more than capable.”
Investors can play a role in changing these misconceptions, she said, acknowledging companies are unlikely to revise their approach, “or even genuinely consider whether the workforce director model might be relevant for them, without further encouragement”.
This view is shared by Tom Powdrill, Founder of Social Governance – an organisation that supports investors and companies with effective stewardship – who notes there are limited incentives for companies to go beyond the standard approach to board membership.
“Some investors’ corporate governance policies may have in the past perhaps inadvertently discouraged employee representation at board level. In retrospect, not enough work was done at a policy level to support the idea of workforce directors when introduced into the UK Corporate Governance Code,” Powdrill says.
All eyes on policy
The High Pay Centre (HPC) has argued that the UK’s poor performance on income inequality – as ranked by the OECD – can be traced to a widening pay gap between workers and senior executives at least partly attributable to a lack of employee input on company strategy.
The UK is ranked 26 out of 28 on the European Participation Index (EPI), a benchmark for worker participation in business decision-making across Europe. According to the HPC’s own research, just 28% of FTSE100 firms were found to have a meaningful mechanism for worker voice that could be considered genuinely meaningful.
“While not related solely to directors greater EPI scores have been linked with higher rates of productivity. Additionally, research and development expenditure is twice as high in European countries with strong worker representation compared to those with weak participation,” said HPC Researcher Paddy Goffey.
“This more long-term thinking is likely to boost productivity given the greater consideration put to filling skill gaps, training and innovation.”
The WDC is hopeful that the current Labour administration can change the prevailing narrative, partly through the alignment of worker representation with a successful just transition to a carbon-neutral economy.
“The encouragement of workforce directors as a genuine model for improved corporate governance and workforce engagement is an initiative that aligns entirely with the UK government’s policy objectives,” said Escott.
According to Powdrill, the government has an opportunity to broaden the Audit Reform and Corporate Governance Bill to potentially mandate for workforce directors. He also calls for a reinforcement of the relevant section of the Corporate Governance Code, noting prior support for this from the Financial Reporting Council.
“This does need more of a concerted push than simply suggesting it as one amongst several options. Policymakers should consider how this policy might help manage transitions – whether decarbonisation or the adaption of AI – in a way that delivers change that is less socially damaging than the UK’s past history of industrial change.”
Shareholder voices
Although the WDC’s memberships boasts several large asset owners and managers, their support for worker voices at board level has not yet been reflected through resolutions at AGMs.
“In the past some investors have failed to appropriately and holistically consider workforce directors in context when making their voting decisions at company meetings,” said Escott.
“This has likely had an impact on company perceptions of the overall desirability of the workforce director model. It is important for investors that support workforce directors to be vocal.”
In June, Railpen made a positive voting pre-declaration at housing provider Mears Group’s AGM for its support for employee representation to the board, commending the company for its “commitment to engaging both with us and the wider industry to help investors and companies understand the potential and practical benefits of workforce directors”.
Workforce directors are not a silver bullet for companies’ corporate governance challenges, said Escott, but their track record means they deserve wider consideration.
“I would like to see influential politicians, companies and investors making the case for the workforce director model. In our experience, companies that have adopted the workforce director model have been able to derive tangible benefits from it.”
