British home stores collapse: the case for an employee derivative claim

What is it about?

Using the BHS collapse as an example, the paper explains why we should pay attention to employees' rights in corporate governance. We critique recent corporate governance proposals in the UK brought forward to strengthen employee voice as ineffective. We argue that it is unlikely that the proposed corporate governance mechanisms intended to protect the company and to strengthen the employees' position will work effectively without giving the employees the power to enforce them. Hence, we suggest that in addition to the proposed reforms, employees should have the right to bring a lawsuit on behalf of the corporation.

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Why is it important?

Cases such as BHS inflict a great deal of harm on employees. A more effective system might prevent such harm in the future. Giving the derivative claim right to employees would be a threat to potential wrongdoers such as the owners of BHS. In the future, this might induce individuals in a similar position to refrain from actions harmful to the company, its shareholders and employees.