Employee representation on Bank of Valletta board

The government's decision, as reported in the press, to abolish the Bank of Valletta worker-director post is a retrograde step that tends to weaken rather than enhance the bank's CSR credentials. The bank has given tangible evidence that it can operate within the constitution of a sustainable company and still be economically viable. It can act as a model. But its directors have to acknowledge that employee board level representation is a piece in the jigsaw of this model.

BoV's corporate social responsibility (CSR) mission statement is in line with the parameters outlined for the new model of corporate governance in the EU. It is meant to lead to a formation of a sustainable European company to ensure transparency, fairness and accountability to shareholders and stakeholders.

The integrity and credibility of the firm are gained by its serious commitments to the interest of shareholders who, due to their non-contractual relations with the firm, bear a residual risk.

The bank's 2006 CSR report clearly spells out these commitments and outlines the bank's policies to honour them. According to the report the bank is showing equal concern with its main stakeholders - its employees - through its "continuous investment in the development of technical and soft skills of its employees, in order to ensure that staff members are highly trained people".

The report omitted to mention its trust fund, in operation since 1994, which entitles employees to a lump sum on reaching retirement age.

The report should also have mentioned the employees' representation at board level. BoV is the only firm listed on the Malta Stock Exchange with an employee representative at board level. I do not know whether these two unique features of its corporate governance were omitted because of an oversight.

Employee representation at board level should be seen as part of the underlying principles of CSR. The EU Commission defines CSR as "a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis".

This perspective is indicative of the inherent responsibilities of the enterprise towards its employees.

While the notion that shareholders bear residual risks cannot be disputed, workers tend to bear the brunt of the higher level of risk in today's labour market.

The firm-specific skills acquired by the workers constitute the firm's human capital which is vital for its operations and viability.

Therefore, while the bank's code of practices should include provisions of checks and balances as well as regulatory mechanism aimed at minimising risks to its shareholders, by the same token it should acknowledge the rights of its employees to have a voice in the bank's decision-making process.