The requirement to adopt one of three options for workforce engagement specified in Provision 5 of the 2018 UK Corporate Governance Code is an important development in terms of integrating stakeholder interests into board decision-making, resulting in better stakeholder engagement. At a high-level, the key provision providing for integration of stakeholder interests (s 172 CA 2006) is focused on outcome: it specifies that the board should consider the relevant stakeholder interests. The move to Provision 5 indicates a shift to a more explicit process for the integration of a (limited set) of stakeholder interests and a move away from the reliance on disclosure as the primary regulatory technique.
The aim of this chapter is to evaluate the early stages of the implementation of Provision 5. We present empirical evidence on the options selected by companies, the rationale for adoption, overlap with pre-existing techniques and the role of the ‘comply or explain’ approach in facilitating the development of alternative models. We also consider the quality of disclosure, linked to Provision 5, and the manner in which disclosure and process work together to produce real impact on board decision-making in the context of workers’ interests.
Chalaczkiewicz-Ladna, Katarzyna and Esser, Irene-Marie and MacNeil, Iain, Workforce Engagement and the UK Corporate Governance Code (April 26, 2021). Forthcoming in Corporate Governance, Sustainability and Reputation, II, International Conference of Corporate Governance proceedings, to be published by Thomson Reuters Aranzadi.