Research & Insights

Governance Sea Change: Why Labor’s Exclusion Is a Governance Design Flaw

Tom Powdrill

Corporate governance in the US and UK rests on a simple idea: shareholders with money at stake will watch over companies. That idea is under strain. Most institutional capital is now highly diversified and increasingly passive, so the incentive to focus on any single firm is weak. At the same time, policymakers are cutting back the shareholder rights and disclosures that made engagement easier. Tom asks who else has a deep, long-term stake in a company’s success. The answer is its workforce. Workers see the business up close every day. They often spot risks and opportunities before they reach the boardroom. And they can’t spread their jobs across a 3,000-stock index. The logic that justifies equity pay for executives points toward a governance role for workers too. As Tom puts it, today’s system should give ‘voice’ to those less likely to ‘exit’.