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All Change at Number 10

on Friday, 15 July 2016.

Following the recent tumultuous events at Westminster, we have a new Prime Minister. Theresa May has become the second female Prime Minister at a time of great change

Theresa May has become the second female Prime Minister at a time of great change and uncertainty following the UK's vote to leave the EU. Whilst it will be some time before we know the detail of the changes she will introduce, here we reflect on the significance of her appointment and what we know so far about her intentions for corporate governance and whether they have any relevance to the voluntary and higher education sectors.

Glass ceiling or glass cliff?

Theresa May takes office at what has been described as the most difficult time for the UK since the second world war. Is that just coincidence?

There has been much written about the glass ceiling and Theresa May has been at the forefront of encouraging women to enter Parliament and progress to senior positions. Her appointment will no doubt be seen as an example of breaking (or at least cracking) the glass ceiling but is that too simplistic?

Research undertaken by Professor Michelle Ryan, University of Exeter and Professor Alex Haslam, formerly of University of Exeter and now University of Queensland Australia, introduced the concept of 'the glass cliff'. They investigated the context in which women and other minorities are appointed into leadership positions and researched what happens when those from minority groups take on leadership roles.

Extending the metaphor of the glass ceiling, 'the glass cliff' describes the phenomenon whereby individuals belonging to particular groups are more likely to be found in leadership positions that are associated with a greater risk of failure and criticism. In other words, think crisis think female!

Changes to corporate governance

Theresa May made clear in her speech on 11 July 2016 that she wants more transparency (including disclosure of bonus targets and the publication of 'pay multiple data', forcing companies to reveal how much more their bosses earn than the average company worker), and employees to be represented on company boards. So is this just something for corporate business or will it have a wider reach?

At this stage, there is no indication as to the intended scope of any changes and specifically if they would apply to the voluntary and higher education sectors or just to 'business'. There is an expectation, often enshrined within the constitutional documents of Higher Education Institutions (HEIs), that governing bodies will contain staff (and student members) and encourage their full and active participation but that is not the case for the voluntary sector where trustees are generally prohibited from being employees.

In relation to remuneration, The Equality Act 2010 (Gender Pay Gap Information) Regulations 2016 include mandatory gender pay gap reporting for employers with at least 250 employees (due to commence in October of this year). Given that the Regulations include bonuses, it is likely that employers in the voluntary sector will wish to consider publishing a narrative about executive bonus arrangements, including bonus targets, even if not specifically required to do so, in order to demonstrate good governance.

The Regulations do not currently apply to the public sector and hence not to the majority of HEIs which nevertheless already have obligations to publish pay data. There is to be a separate consultation on extending mandatory reporting to public sector organisations but we think it likely that HEI governing bodies will similarly wish to publish a narrative about executive bonus arrangements, including bonus targets.

What should you be doing now?

Remuneration committees should keep up to date with developments in this area as the intentions of the government become clearer but in the meantime it would be good practice to bear in mind the initial pledges of Theresa May particularly when setting bonus targets.

For more information, please contact Bettina Rigg in our Employment Law team on 020 7665 0960.

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