Featured in today's briefing:
- What if employees had a voice on corporate boards?
- Age limits for boards gather steam.
- Save the planet, stop wearing neckties for work.
The latest virus forecast: The US has had a 5% decrease from two weeks earlier, with about 124,000 new Covid cases on Friday. New York declared a state disaster emergency over the spread of monkeypox and health officials are now concerned about the spread of that virus among children, though there have been few such cases to date.
The business impact: US gross domestic product fell at an annual rate of 0.9% in the second quarter, as inflation weighed on consumer spending and retailers restocked inventories at a slower pace.
Focus on Giving Employees a Say on Corporate Boards
The idea of “stakeholder capitalism”—with employees being one key stakeholder—might have more teeth if workers had a representative in the boardroom who could participate in discussions and decision-making.
That’s a legal requirement for certain types of companies in European countries, including Germany, Norway, Sweden, and France. But the practice has been rare in the US, apart from a period in the 1980s and 1990s when financially troubled firms in industries including airlines and trucking offered board seats as a bargaining concession to workers.
To understand what employee representation on boards achieves and whether it could get new momentum in the US, we spoke with Thomas Kochan, a professor at the MIT Sloan School of Management and faculty member in the MIT Institute for Work and Employment Research. Kochan formerly served as a representative of employees on the boards of Transcon and Smith Trucking. Here are excerpts from our conversation, edited for space and clarity:
Why should companies have employees as members of their boards?
There are several reasons for this. One is that employees can add value and expand the agenda that typical boards of directors discuss by bringing information from what the workforce is saying, feeling, and experiencing into the discussions. It helps bring new information to board decisions. Often, in my experience at least, it allows the member to suggest issues that might be discussed at future board meetings that typically haven't been on the agenda.
The second reason is American workers now want a seat on boards of directors. The evidence is growing. We did a survey that asked 'What form of representation would you prefer?' And representation on boards of directors came out positive as something that workers want. So there is a growing expectation that workers want a voice in the key decisions that shape the company, not in a necessarily adversarial way, but in a way that their voice is heard and that they can help hold the company accountable for adhering to its values.
Does having a worker representative on a board correlate with any difference in company performance, worker engagement, or any other things that companies care about?
There are two bodies of evidence. One is much more quantitative and well grounded, but it comes from Europe. Colleagues have carefully studied with an experimental design the effects of board representation in Germany, where there are requirements that companies have board representatives.
In Germany, a colleague of ours, Simon Jäger, used a very creative research design when the law changed for companies with 500 employees having to have representatives on their board. Through careful econometric work, they found that companies with board representation invest more for the long run. They don't necessarily have higher wages and benefits, but are more productive because of the longer-term investments. That's the most careful study of this that I've ever seen.
The second body of evidence comes from more qualitative, personal evidence from the 1980s and 1990s, when a number of US companies turned to board representation when they were in financial trouble as a wage concession. This happened frequently in the airline industry. United Airlines was the biggest example, but others followed suit. In the trucking industry also—industries after they got deregulated and ran into all kinds of difficulties.
So you saw a number of people put on boards as representatives of the workforce and the union. I served on two of those trucking company boards. What we learned is that if it's just looked at as a financial transaction where now we expect a role because we took a concession, and it stays adversarial and you have leaders or people on those boards who don't really understand how boards work, it had no effect. But where you changed the culture of the organization to reflect the desire of employees to have a stronger voice and really brought it down to the workplace level, you had a better chance of success.
What is the status of employee representatives on US boards today? I've struggled to find any examples of it in public companies.
It's not surprising you have a hard time finding data on it because there's no database that tells us how many companies have employee board representatives. You find it where there are employee stock ownership programs (ESOPs) and there are a number of those. But they're kind of under the radar. I think they're going to grow as there are some new groups now that are committed to really promoting employee ownership. And I think as part of that we will see more experimentation with worker representatives of one form or another.
It's also a bit of a myth that labor law doesn't allow you to put employees on boards of directors. It basically allows it, certainly if a union and a company agree to put a worker representative on the board. There's no question that that's legal. But even in non-union settings there's really nothing in the law that clearly prohibits it.
How does worker representation on corporate boards relate to unionization?
It's possible to have one without the other. I think it works best where workers have some formal representation, probably a union since that's the model we have in the United States at the moment and have had historically. That allows you to aggregate worker interests and to have a structure for figuring out who should serve on the board, whether it's an employee, or sometimes it's an outsider, sometimes it's an academic—like I've served. Sometimes it's a former union leader. Having someone who is respected by the workforce and is not controlled—in the sense that that person has to consult and only reflect the workers' views or the union's views—is really important because that representative has to speak truth to power on both sides.
Read a full transcript of our conversation, including more about best practices and resources for those who want to explore employee representation on boards.
What Else You Need to Know
A growing number of companies are instituting age limits for their boards as part of a push toward greater board diversity. Some 70% of companies in the S&P 500 have an age maximum, up from 50% seven years ago.
- Term limits are comparatively less popular, with just 6% of S&P 500 companies having a cap on years served.
- To comply with Nasdaq’s board-diversity rule approved last year by the Securities and Exchange Commission, Nasdaq-traded companies have until August 8 to fill out the stock exchange’s board diversity matrix. They then have until August 2023 to have at least one female director or one who identifies as LGBTQ+ or non-white, or provide an explanation for why they don’t.
- Worldwide, women make up around 28% of directors of publicly traded companies, according to a recent report from intelligence firm Altrata.
- Corporate boards are still whiter than the general US population: Black, Latinx, and Asian Americans are all underrepresented, and indigenous Americans make up less than 0.1% of board seats.
Workers want more frequent feedback than what employers are providing. While 63% of employees would like more regular in-the-moment feedback on how they’re performing, around half said they only receive it once or twice a year, according to a new survey from Eagle Hill Consulting.
- The desire for more frequent feedback was highest among younger workers, at 74%, compared to 57% for their older peers.
- Hybrid workers reported struggling to get feedback at higher rates than fully remote or in-person employees.
- While past research has shown that employees value constructive feedback more than praise, the annual review isn’t the most effective vehicle for delivering it. Just 14% of workers strongly agree that these reviews motivate them to improve, and 77% of human-resources leaders say they don’t accurately capture an employee’s performance.
- The most effective feedback is specific, fact-based, and takes into account a person’s preferred receiving style (for example, in person versus via email).
Companies are investing in disability inclusion. A majority of companies have initiatives such as disability-focused external hiring goals (60%), in-house accessibility experts focused on digital tools (61%), and a policy of ensuring job candidates are aware of the option to request accommodations for interviews (61%), according to a new report by advocacy group Disability:IN.
- The report found an increase in the number of companies that count a disabled person among their senior leadership, up to 126 of the 415 companies surveyed in 2022 from 99 last year.
- Flexible work arrangements, identified by Disability:IN as a “foundational practice” for disability inclusion, were offered by 96% of employers surveyed.
- Still, companies have work to do in helping employees feel comfortable disclosing their disabilities: Some 4% of employees surveyed publicly identified as disabled, compared to the 15% of the global population that has a disability. Research has shown that hiring managers are less likely to show interest in job candidates who are open about having a disability.
- While 90% of global companies say diversity is a priority, just 4% make people with disabilities a priority within their DEI efforts, according to the Valuable 500, a World Economic Forum initiative for disability inclusion.
Return to workplace speed round:
- The travel site Trip.com introduced a company-wide hybrid work policy after a randomized, controlled trial of hybrid work schedules among its employees found that working from home part-time reduced attrition rates by a third.
- Investment firm Andreessen Horowitz is opening new offices in Miami Beach, Santa Monica, and New York as it forgoes a centralized headquarters for an HQ “in the cloud.”
- Twitter is reducing its office footprint in several cities, including San Francisco, Tokyo, New York, and Mumbai, and considering closing offices in several more, including Seoul, Madrid, and Osaka.
- San Francisco is doubling down on its efforts to lure workers back to its downtown with a new set of initiatives, including welcome ambassadors to greet commuters and festivals in public spaces.
- Among the largest recipients of venture funding, roughly half are fully or predominantly in-person, according to a recent Crunchbase survey, which also found that the majority of job listings for early-stage software startups are remote.
- Real-estate startup Fundrise is investing in suburban residential properties concentrated in the Sun Belt, betting that workers will continue moving to less dense areas amid the rise of remote work, with CEO Ben Miller telling MarketWatch: “Offices are toast. It’s like saying malls are going to come back.”
- Connecticut towns are some of the latest employers to try out four-day work weeks: Ellington just joined Vernon and Somers in bringing three-day weekends to municipal employees in the Nutmeg state.
Here are some of the best tips and insights from the past week for managing yourself and your team:
- Make space for brain breaks. If you work from home, designate a separate area of your workspace for down time, such as a comfortable chair away from your desk, to make it easier to pause and refresh throughout the day.
- Check your “Me Sat.” Periodically assess your personal work satisfaction by using a system developed by Stripe’s David Singleton: Score your job from one to four on four indicators: “enjoyed it,” “got stuff done,” “progressed goals,” and “learning,” then average those numbers for your “Me Sat” score.
- Batch your notifications. Cut down on the constant distraction of Slack and email by turning off notifications and instead batch-processing your communications: Check your inboxes a few designated times per day instead of every time you hear a ding, and reply to any new messages during those windows.
- Dig deeper with an open-ended statement. If you’re trying to deepen your conversations, questions like “How was your weekend?” can easily elicit one-word answers. Saying something like, “I want to hear about your weekend” is more likely to prompt a richer response.
Save the planet, stop wearing ties. Spanish premier Pedro Sanchez ditched ties and is urging workplaces to follow his example in order to reduce the need for air conditioning.
- Already the Spanish government is trying to cut electricity usage—an especially urgent issue because of elevated energy prices amid the Ukraine war—by running air conditioners at a not-so-cool 80 degrees Fahrenheit.
Gen Z’s workplace drama is tackling the workplace return. The second season of HBO’s Industry, premiering this week, has its early-career finance employees navigating a return to the office of fictional British firm Pierpoint and Co.
Work wardrobes and weekend wardrobes are now the same. Think jeans and tshirts that can be dressed up or down. Suits and tailored clothing are being worn less frequently, according to researchers.
- Such “hybrid wardrobes” are the logical result of flexible work schedules and the move toward more casual office dress codes.
The latest vocation for our AI age? “Prompt engineering.” A startup called PromptBase is letting “prompt engineers” sell strings of text optimized to yield better results from artificial intelligence services, such as DALL-E and GPT-3.
The handbook for this new era of business doesn’t exist. We’re all drafting our own as we go along—and now we’d like to start doing so together. You can sign up here to receive this briefing by email.