CBI says no to two-tier boards

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Business leaders yesterday launched an attack on Labour's plan to give employees and customers a say in the running of companies by allowing the introduction of Continental-style two-tier boards.

A report by the Confederation of British Industry says that allowing stakeholders to be represented on company boards would raise conflicts of interest, blur lines of responsibility and create barriers between shareholders and management.

The CBI also warned that creating a two-tier structure - whereby a supervisory board of directors monitors the performance of the executive management board - would not deliver greater protection for investors while robbing companies of the cohesion that the British system of unitary boards produces.

Martin Broughton, chief executive of BAT Industries and chairman of the CBI's companies committee, said: "In the UK the unitary board is still the best way to make sure that directors are held accountable for the performance of their company. The unitary board encourages high standards of direction and oversight of the company by combining the outside experience and independence of non-executive directors with the operating knowledge of the executive directors."

Directors, he said, had to take into account the interests of customers, employees, suppliers and local communities as well as shareholders. But if there were to be two-tier boards with wider stakeholder representation, how would truly representative individuals be found, who would select them and how could they be trusted not to pursue their own agendas at the expense of the company's interest?

The report is being sent to the Hampel Committee on corporate governance, set up to review the workings of the Cadbury code.