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Insight - Union representation on boards

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The precedent from having employees’ representatives on the boards of the Employees Provident Fund (EPF) and Social Security Organisation (Socso) has brought about the belief that a more wide-scale placement of union representatives on boards can boost the participation of the working class in government initiatives with a view of pursuing stability, unity and sound industrial relations.

AS antithetical as it may sound, collective agreement is an effective armament to resolve sensitive disagreement.

Indeed, trade unions have long been known to leverage collective agreement as a means to pursue the interests of unionised employees by striking a consensus with employers on fair wages and other working conditions.

It is well established across the globe that unions through their collective voice are critical to protect workers’ rights so much so that union movements have increased lately, driven, in part, by Covid-19 and workers’ desire for increased health and safety practices.

This is further accentuated by the Great Resignation phenomenon whereby companies are catapulted to pay close heed to their employees’ desires or risk a continuous exodus.

In fact, in the current environmental, social and governance era, one of the more discernible social indicators that investors and other stakeholders can deploy to assess companies is the level of trade union engagement as this dimension has a huge compounding effect.

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In the famous words of United States’ President Joe Biden during his address in honour of labour unions, “when unions win, workers win – that’s a fact – and families win, community wins, nation wins”.

In Malaysia, trade unions recently received a shot in the arm when our Prime Minister announced that government-linked companies (GLCs) and government-linked investment companies (GLICs) should appoint a representative from the Malaysian Trades Union Congress (MTUC) to their board of directors.

It is the Malaysian government’s hope that this move will enable workers to have a say in decisions made by the board of directors of GLCs and GLICs, particularly on those relating to employee interest.

The precedent from having employees’ representatives on the boards of the Employees Provident Fund (EPF) and Social Security Organisation (Socso) has brought about the belief that a more wide-scale placement of union representatives on boards can boost the participation of the working class in government initiatives with a view of pursuing stability, unity and sound industrial relations.

While the potential value proposition of this reform measure is indubitably compelling from an institutional standpoint, there are various intricacies to navigate in effecting this policy.

It is worth mentioning that the construct of wide-scale workers’ representation on boards is relatively unchartered in jurisdictions with a single-tier board structure like Malaysia as opposed to the tried and tested model in selected European countries that deploy a two-tier board structure (i.e. supervisory board and board of management).

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