A coalition of eight pension investors have launched guidance for companies on how to take a ‘meaningful approach’ to including workers’ voices at board level, including the potential use of workforce directors.

The guidance aims to describe best practice around the role, recruitment and retention of workforce directors.

The coalition also published an investor statement, to which signatories managing around £400bn of assets have signed up to so far.

Signatories to the coalition, led by Railpen, are Border to Coast, Brunel Pension Partnership, Church of England Pension Board, Merseyside Pension Fund, Rathbone Greenbank Investments, Royal London Asset Management and Universities Superannuation Scheme (USS).

The workforce directors guidance was produced following requests from some of Railpen’s portfolio companies for the investor perspective on workforce directors.

A workforce director was defined as a director of a company that is drawn form the firm’s wider workforce or employee base.

Railpen’s definition does not consider the workforce director to be a representative of the workforce, but rather that they have the same set of fiduciary duties and stakeholders to consider as any other board director.

According to the guidance, there could be two main benefits from the appointment of workforce directors: Potential improvements to the cognitive diversity of a board, and helping workers feel like they voice is being heard and acted upon.

The guidance is broken down into four ‘R’s: Role, recruitment, retention and reporting, with each discussing how good practice on workforce directors can be achieved.

Railpen added that investors were keen to understand how the workforce perspective is internationally included in strategic decision making at their portfolio companies, as an engaged and motivated workforce was seen as important to the long-term sustainable financial performance of a business.

“Fulfilled, engaged and empowered workers are fundamental to the long-term success of companies,” said Railpen senior investment manager, Caroline Escott.

“The Covid-19 pandemic and the subsequent ‘Great Resignation’ have highlighted how important it is that a company’s most senior leaders genuinely consider and respond to the perspective of the wider workforce.

“While we do not think there is a single ‘right’ way for firms to engage the workforce, we believe more companies should at least consider the merits of appointing a workforce director to the board – such as the potential improvements to cognitive diversity.

“We hope our guidance provides some helpful considerations and insights into what we think is an underexplored workforce engagement mechanism, and welcome the opportunity for open and collaborative conversations with all those keen to ensure the worker voice is effectively heard.”

USS senior responsible investment analyst, Bruce Jackson, added: “We are delighted to support Railpen's Investor Guidance on Workforce Directors, which will provide company boards with meaningful suggestions to enhance workforce engagement and consider appointing workforce directors to their boards.

“USS has workforce directors on the board (directors that are appointed by University and College Union) and, while we recognise this may not be suitable for all companies, we believe the inclusion of workforce perspectives at board-level can align the interests of shareholders, management and workers over the long term.

“It can also provide valuable insight into company operations to improve strategic decision making.”

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