Hidden Talent 2: Has workforce reporting by the FTSE 100 improved?

By 02.04.19PublicationsAugust 27th, 2020No Comments

HPC research carried out on behalf of the Pensions and Lifetime Savings Association analyses disclosure of employment models and working practices in company’s annual reports

New research by the Pension and Lifetime Savings Association (PLSA) and the High Pay Centre shows the UK’s leading companies still have some way to go to achieve best practice on reporting employment practices despite increased public scrutiny and regulatory focus on disclosure.

We examined the annual reports of the FTSE 100 companies, assessing the extent to which they discuss workforce-related issues, with a particular focus on the themes of workforce composition; stability; skills and capabilities; and engagement and voice.

UK Company Law requires company directors to have regard for the interests of all stakeholders – including their workers – when exercising their duties as directors. The 2018 edition of the Corporate Governance Code now requires annual reports to detail how they have complies with these responsibilities. From an investment perspective, the make up of a company’s workforce ought to be critical to its long-term strategy and business model. Therefore, one would expect to see detailed, meaningful and balanced discussion of the companies’ employment practices in annual reports.

However, the quality of disclosures was highly varied. Key findings were as follows:

  • Just 31% of companies reported their aggregate turnover rate, a useful proxy for workforce stability and morale;
  • Despite concerns about precarious working and the scandals uncovered around the use of temporary and agency workers at companies such as Sports Direct, only 6% provide details of the breakdown of their workforce by employment type;
  • While 53% of companies provided details of mechanisms for employee voice in the company, this was usually on the company’s own terms – staff surveys or ‘townhall’ meetings, for example – just 8% discussed engagement with trade unions.

The report has important implications, suggesting that the UK’s business culture has become focused on delivering (often short term) returns for shareholders rather than taking a more balanced perspective on the ‘purpose’ of business focused on delivering good outcomes for a broader range of stakeholders. Factors such as the lack of investor interest in workforce-related issues; the weakening of trade union and workforce participation in strategic decision-making; and the elongated investment chain that puts multiple intermediaries between the ultimate providers of capital (pension fund savers) and the companies where their money is invested. HPC will be examing how reforms to corporate governance, industrial policy and investment industry regulation can address these issues.

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