Theresa May pledges to take on the fat cats

Theresa May has taken over at Downing Street. Matthew Partridge explains why Britain's fat cats should be worried, and asks what is she going to do about Brexit.


The unexpected withdrawal of Andrea Leadsom from the Conservative party leadership race this week left Theresa May as the last contender standing, allowing her to take David Cameron's place as prime minister on Wednesday, far earlier than expected. However, even before Leadsom had pulled out May was already setting out an agenda that goes far beyond Brexit. Indeed, says George Parker in the Financial Times, her final speech before learning of her new role "was not about Europe, but about making the country a fairer place".

"We need to make sure our economy works for everyone," May wrote in The Times last week. We need to "get tough on irresponsible behaviour in big business". In particular, she wants to block "irresponsible" takeovers, "make shareholder votes on company pay not just advisory but binding", and most controversially, "to have not just consumers represented on company boards, but employees as well".

On executive pay, May is "very much" pushing in the right direction, Simon Walker of the Institute of Directors tells the Evening Standard's Russell Lynch. "I have been warning large businesses for three years now that there would come a point at which public outrage about the grotesque excess in top salaries would gain a momentum of its own... and that even a Conservative government would legislate on these matters."

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As for having workers' representatives in the boardroom "that's a pretty radical idea from a steady-handed right-of-centre Conservative", writes Jack Torrance in Management Today. But "having worker representation on the board isn't unheard of". In Germany, since 1976, companies with 2,000 staff or more must reserve at least half of the seats on the board for labour representatives; for smaller companies, it's a third. Arguably, this is one reason why German firms "take a longer-term approach than Britain's".

Yet Britain "would be well advised not to go down this path", argues German business journalist Ursula Weidenfeld in the Financial Times. Joint decision-making has made it easier for staff and management to co-operate to preserve jobs while cutting costs, but "it has also hindered innovation and reduced profits".

Today's young staff "prefer taking stock options in start-ups to works councils and representation on the board" and "are reluctant to invest too much time in stakeholder matters". Part-timers and the self-employed "complain that trade unions and employers collude in protecting the interests of predominately male full-time workers".

That said, the fact that May even raises the possibility of representing workers on boards means that "fundamental principles of Britain's boardroom governance are being rethought", notes Nils Pratley in The Guardian. Whether May can push her agenda past the "free-market disciples" that people the Conservative party is another matter. And her agenda so far lacks any firm details.

However, business "would probably swallow binding votes on pay and a block on takeovers deemed not to serve the national interest". Ironically, "a Tory prime minister is now sounding more radical on boardroom reform than even Labour's Ed Miliband ever did".

It's not as ironic as it seems, says Alice Thompson in The Times. The reality is that "only a Tory is trusted to take on the City". Even if May doesn't actually do anything, her words indicate that she thinks she has a "moral duty" to "rein in excess and highlight the unedifying sight of those at the top getting vast pay increases while the youngest struggle even to find accommodation".

Of course, "she can't just bash the rich or investors will take fright". But she also knows last month's vote "reflected the sense... that even after the recession, the richest were still inflating their wealth while everyone else's wages were stagnating".

But what will she do about Brexit?

She has proved willing to compromise on many issues, "including the European arrest warrant" and has "quietly dropped her previous support for Britain to pull out of the European Convention on Human Rights". However, she also strongly resisted "efforts from both Berlin and Brussels to push for further European integration when it came to the refugee crisis".

May has already announced plans to set up a new government department dedicated to Brexit, led by an MP "who campaigned for Britain to leave". They will have several bargaining chips, says Juliet Samuel in The Daily Telegraph. "Our spies help ferret out criminals on the continent and our military is one of only two major defence forces in Europe, alongside France's."

Meanwhile, "our trade deficit might make some EU countries reluctant to risk tariffs by cutting us out of the single market completely". Finally, a threat "to turn Britain into a low-tax, loosely regulated competitor on the EU's doorstep might concentrate minds on striking a deal".

May is "highly regarded among European officials", agrees Paul Carrel on Reuters. But "EU leaders say market access can come only with a commitment to the free movement of people" which May has repeatedly ruled out. The prime minister will also have to deal "with the negotiating clout and stamina of Merkel, who in ten years as chancellor has regularly outlasted other EU leaders at late night Brussels meetings".

While Merkel "wants to retain strong links with Britain, Germany's fifth-biggest trading partner for goods", her bigger priority "is to hold together the remaining EU members". Whatever happens, don't expect immediate action May has already said that Article 50 will not be triggered before the end of the year.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri