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How might Brexit affect UK employment rights? In the European Financial Review

Friday, October 28th, 2016

Article originally published in the European Financial Review on October 22, 2016

The potential consequences of Brexit for UK employment rights was hotly debated during the referendum campaign. Some fear that a bonfire will be lit under workers’ rights if the UK leaves the European Union. This article, however, argues that the government is likely to adopt a more cautious approach.

The potential consequences of Brexit for UK employment rights was a prominent issue in the debate that preceded the referendum. Many employment entitlements are underpinned by European Directives that establish a basic floor of rights for all EU and EEA member countries. The Directives cover issues such as working time, parental leave, equal treatment and information and consultation. In the lead up to the referendum, the TUC warned that Brexit would put these rights at risk while Jeremy Corbyn predicted a “bonfire” of rights should the UK leave the EU.

There were good reasons to be concerned. Over the past 30 years both Conservative and Labour governments have regarded employment rights as potentially damaging to the UK’s economic performance and have sought to preserve the “flexibility” of the labour market. Consecutive Conservative Party general election manifestos have promised to “repatriate” powers over employment rights from Brussels to the UK, claiming that EU Directives impose unreasonable costs on business and damage competitiveness. In the run up to his EU membership negotiations in late 2015 it was anticipated that David Cameron would demand that the UK be granted opt-outs from Directives relating to working time and temporary agency workers. In the end these demands, which would have required substantial treaty changes, were never made, but no-one should doubt the genuine desire of many Conservative politicians to end EU influence on UK employment legislation.

Similarly, most employers are not clamouring for the repeal of Equality Act, which provides workers with a right to be treated equally, and it is doubtful that any government would perceive permitting employers to discriminate against large sections of UK society to be a vote winning reform.


So what might happen next? As with everything related to Brexit, much will depend on the nature of the UK’s future relationship with the EU. It is widely assumed that the UK government will seek to maintain access to the single market, but unless there is a substantial change in EU policy, access will be contingent on the UK continuing to adhere to EU social policy Directives. Given that the Directives are intended to prevent countries from gaining competitive advantages through social dumping, it is extremely unlikely that the UK could be part of the single market while having the freedom to completely ignore EU social policy.

Other scenarios, such as a UK-EU Free Trade Agreement (the so-called “Canada option”), would leave the UK with more freedom to make changes to employment rights and mean that future rulings of the European Court of Justice would not be binding on the UK. What might we expect to see then?

To continue reading log in to the European Financial Review here

Prof Sumon Bhaumik comments: ‘Inside the machine: how two Nobel winners taught us how companies tick’

Thursday, October 20th, 2016

Originally posted on The Conversation 17 October 2016

One of the most notable evolutions in economic theory is the change in how we look at companies. No longer do we see a black box which uses some process or technology to turn inputs into outputs. These days we think of a business as a nexus of contracts among different stakeholders – shareholders, creditors, managers, workers, customers, suppliers and so on.

This evolution has led us to look at corporate governance through the design of contracts between those stakeholders. Oliver Hart and Bengt Holmström have laid the foundation to enable us to do that. The 2016 Nobel prize in Economics went some way to acknowledging this contribution.

While contracts are commonplace, they are generally not simple. They might be designed at times when the objectives of stakeholders differ (the so-called “agency problem”). For example, shareholders may want to maximise a company’s profits, while managers may want to build an empire through mergers and acquisitions.

There is also something called “asymmetric information”, where the actions of one set of stakeholders are not visible to other stakeholders in the company. Everyone can read the financial statements, but shareholders cannot directly see how much effort the managers put in to drive profits.

Shareholders can, however, enter into a contract with a company’s leaders that would give the managers an incentive to work in the interest of the shareholders. Pay can be linked to observable measures of a company’s performance. Similarly, shares and stock options may be included. In the Nobel citation, Holmström, a Finnish professor working at the Massachusetts Institute of Technology, was credited with demonstrating how shareholders should design an optimal contract for a CEO whose actions they would not be able to fully monitor.

Contracts can also be incomplete. It is either not possible or too expensive to write contracts that take into account all possible future outcomes. It is precisely the incompleteness of contracts that provides a rationale for corporate governance. This follows from research carried out by Hart, a British professor working at Harvard.

Hart of the matter

Consider, for example, a simple executive pay scheme in a company where shareholders own the company but control lies with the management. The relationship offers both an agency problem and asymmetric information. As mentioned earlier, one option for shareholders would be to write a contract that links the compensation of the managers to an observable outcome such as revenue or profit.

But profits can be affected by factors out of a manager’s control, and a contract that takes into account all combinations of managerial effort and external factors is impractical. Managers generally act in groups and so it may also prove difficult to assign an outcome to one person. You can write contracts that penalise the group if a product fails or a plant proves inefficient, of course, but Holmström argued that uncertainty about the causes of such failures would mean that monitoring would be necessary and hence the associated costs are unavoidable.

You could judge the performance of managers against that of their peers to decide compensation (a supermarket CEO might cheer that sales are up 10%; shareholders less so if other stores are up 12%). But this approach would still only work if you can successfully remove the influence of common external factors affecting how managers perform.

In this case, where simple contracts may not be easy to design or enforce, we need a mechanism – corporate governance – that ensures that the interests of non-managerial stakeholders are not undermined. Hart views corporate governance as a mechanism to allocate rights to control a company’s non-human assets among the stakeholders.

Credit due

An interesting implication of this perspective on corporate governance is a rationale for debt. Suppose the shareholders of a firm are mainly interested in short-term profits, while managers prefer grandiose empire building that brings private perks and benefits. Any contract that attempts to address this conflict is likely to be incomplete, unable to account for every influence over the company’s future profits.

This opens up the possibility of a significant dispute between the shareholders and the managers about the latter’s compensation. Managers might claim low profits came despite their best efforts, rather than because of their poor efforts or judgement.

How can debt help in this case? A debt contract can enable the creditor to enforce liquidation of a firm if it cannot meet its repayment obligations. If the firm performs well and can meet these obligations, control over the assets of the company remains with the managers. If, on the other hand, the company performs poorly and cannot repay the creditors then it can be liquidated. At the time of liquidation, after the creditors have been repaid, the residual (or remaining) rights over the company’s assets are with the shareholders – the managers have no rights over these assets any more.

In other words, where contracts between shareholders and managers are incomplete, debt taken on for whatever reason can force an alignment of objectives. In the words of Hart and Sanford J Grossman: “managers can avoid losing their positions only by being more productive.” Productive managers are precisely what shareholders want. A company’s capital structure can, therefore, be used to both discipline managers and give outsiders (creditors) an incentive to enforce the discipline. Hart and Grossman also examined how control is exerted in work on voting rights.

Holmström and Hart do not provide all the answers to resolve the problems associated with weak corporate governance. They do, however, induce us to think about a firm as a microcosm of the society in which we live, where stakeholders with different objectives compete for power and control. Their work has helped us to move away from one-size-fit-all rules about things such as financial structure and pay and has led us to focus on making contracts and mechanisms that work. That is a transforming contribution to corporate governance research.

Author: , Chair in Finance, Sheffield University Management School

SUMS is proud to support Doncaster in its bid to secure the £150million High Speed Rail College

Friday, June 13th, 2014

The High Speed Rail College which would generate about £150million for the Doncaster and Sheffield City Region economy is one step closer after the Government announced today that Doncaster had made the national shortlist of four.

In an online article published on the ‘Business Doncaster’ website ( Sheffield University Management School’s Dr Tim Vorley expresses the university’s support of the project and the positive impact the college would have on the Doncaster and Sheffield City Region economy.

Read the full article below:

Doncaster is up against Birmingham, Derby and Manchester to land the college which will help the town’s expanding rail and engineering sector to flourish.

Mayor of Doncaster Ros Jones, said: “I am delighted we have made it to the final stage of the process and we will be pulling out all the stops to bring this college to Doncaster for the benefit of businesses and people in the town, the Sheffield City Region, Yorkshire and the north-east of England. This is a major achievement and testament to the partnership approach we have taken to get us into the top four.

“We are a rail town with a rich history of leading the way in rail and engineering. Cutting edge locomotives like Flying Scotsman and Mallard were designed, built and maintained right here in Doncaster and this engineering prowess continues today with over 10,000 people employed in the sector.

“Having the college in Doncaster will have a transformational impact on growing the sector. It will help our businesses expand, offer people world class training, deliver quality jobs and drive economic growth in Doncaster and across the Sheffield City Region.”

“By choosing Doncaster, the Government will spread the benefit of HS2 to other parts of the country and help rebalance the national economy. We want to bring rail home,” concluded Mayor Jones.

The project will be carried out in partnership with the Centre for Regional Economic and Enterprise Development at Sheffield University Management School, the MERail Railway Research Group in the Department of Mechanical Engineering and the AMRC Training Centre.

Dr Tim Vorley, Senior Lecturer in Entrepreneurship, at Sheffield University Management School, said: “The new college will reaffirm the Sheffield City Region as a hub for world class engineering. The University of Sheffield is extremely proud to partner Doncaster Metropolitan Borough Council in helping to produce highly skilled world leading engineers who will create this pioneering rail project.”

The private sector led Centre for Rail And Technical Excellence (CREATE), coordinated by Doncaster Council and supported by Sheffield City Region Local Enterprise Partnership, business leaders and partners including local authorities across the region submitted the bid last month.

Commenting on the news Wabtec Group Managing Director, Chris Weatherall, said: “Wabtec Rail is delighted that Doncaster’s submission to host the High Speed Rail College has been selected to go through to the next round.  The establishment of the College in Doncaster would be an acknowledgement of the town’s continuing role as one of the UK’s leading centres of railway engineering.  From Wabtec’s business perspective it is important that to support the continuing growth in railway engineering there is a centre for the training of future engineers and Doncaster is the ideal location for this.”

Just last week, Wabtec announced they had taken on their 1000th employee.

Simon Carr, LEP Board Member and Managing Director at Henry Boot Construction, said: “This is excellent news for Doncaster and will make the Sheffield City Region a worldwide hub for rail engineering training. As one of the biggest infrastructure projects in Europe, the scale of demand for engineering skills from HS2 will be unprecedented. With its reputation as a rail town, location on the East Coast Mainline and existing rail business base, Doncaster is clearly in a very strong position to win this competition. The new college will have clear benefits for businesses across the Sheffield City Region who will be looking to win contracts and recruit skilled staff as the £42.6 billion project gets underway.”

Professor Philip Jones, LEP Board Member and Vice Chancellor of Sheffield Hallam University, said: “It is great news that Doncaster has been shortlisted as one of the final bids for the new national High Speed Rail College. The new college will grow the Sheffield City Region’s strength in engineering skills through its universities and colleges, and will build on specialised courses such as the Network Rail Foundation Degree at Sheffield Hallam University. As the HS2 project progresses, demand for highly qualified engineers will become greater and greater and we look forward to working alongside the new college to train the highly skilled engineers this huge project will need.”

A final decision will be made by an advisory group in July following presentations by the bidders. The group will consist of representatives from Crossrail, HS2 Limited, the Department for Business Innovation and Skills and the Department for Transport.

The research and teaching centre would be built on a 5.1 acre site at Doncaster’s Lakeside. The site already has outline planning permission and is walking distance to household names in the rail and engineering industry including DB Schenker, Volker Rail and Unipart.  The campus would also be close to the town centre, motorway network and Robin Hood Airport Doncaster Sheffield.

People can back Doncaster’s bid at: and keep updated with the latest news on Twitter: #railtown

Read the article at:

Unique programme to help organisations develop in-house sustainability expertise from The University of Sheffield Management School and C02Sense

Monday, February 11th, 2013

A pioneering new course is being launched by The University of Sheffield Management School in partnership with the low-carbon expert consultancy, CO2Sense, and supported by 2degress, an active sustainable business community that helps businesses and professionals find practical solutions and address their sustainable business challenges.

Starting in March 2013, The Sustainability Leadership Programme will be the first course of its kind to provide a strategic understanding of sustainability through six months of project-based learning where students work on the real-life issues affecting their business. Designed exclusively for executive directors, the programme shows how they can embed sustainability across their entire company in order to achieve long-term success and profitability.

Delegates will also receive expert consultancy support from CO2Sense, who will visit their business and help them to apply knowledge gained from the course into practice. It is expected that participants  will identify a minimum of £5k extra value within their company through the project and will reduce the need for external consultants.

Professor Lenny Koh, Director of Centre for Energy, Environment and Sustainability (CEES) at The University of Sheffield Management School, said:

“Sustainability is key to any business looking to improve their efficiency and performance and to face the challenges of today’s business environment. At Sheffield Management School we strive to develop and deploy innovative ways to advance the understanding of energy, environment and sustainability as we recognise that businesses need senior managers and leaders with these skills.   This unique project-based learning course is specifically designed for senior managers.  The programme equips them  in dealing with the environmental issues they are facing and helps them to become a sustainable and successful business.”

The course has been designed to complement busy schedules with just one day each month dedicated to classroom-based learning. The six lectures will feature presentations from internationally recognised business leaders and academics.. These sessions will explore the main issues around sustainability such as global supply chain issues, employee engagement and planning for severe weather events.

Dr Stephen Brown, director of partnerships and innovation at CO2Sense, says:

“No business can afford to ignore the sustainability agenda. Issues such as diminishing natural resources and energy supply are affecting how we all do business and pose a multitude of risks to long-term operations.  Consequently, we need to adopt  smarter and more innovative ways of working and business leaders are increasingly recognising the role of sustainability as a key driver new forms of value in their business success.

“Demand for senior business leaders who have the skills to navigate this new business environment is high. This course will provide a high-level understanding of sustainability, which in turn will put attendees ahead of their peers and by building in-house skills, companies will reduce the need for external consultants.

“Unlike most high-level courses in sustainability, our programme is project based and means that companies experience the financial benefits of attending the course with almost immediate effect.”

The six month programme costs £2750+VAT. For more information please  email or visit

Notes to Editors

The Sustainability Leadership Programme is the result of a unique partnership between The University of Sheffield Management School and the low carbon consultancy CO2Sense.

The Sustainability Leadership Programme is aimed at executive directors and senior-managers looking to develop their expertise in this field and prepare their business against new environmental and economical challenges. The course is suitable for companies across all sectors.

Please click here to view the course structure and modules.

About CO2Sense

CO2Sense is the not-for-profit low-carbon expert company that helps organisations to cut their costs and to improve their environmental performance.

We help organisations to find real cost savings by developing low-carbon strategies, which give no-nonsense, clear direction to reduce energy and water use, to produce less waste and to use fewer raw materials.

We help organisations to generate both free energy and an income by developing renewable electricity and heating installations. Because we’re not trying to sell a particular type of renewable energy, we make sure that organisations install the technologies that will deliver the best possible return for their investment.

We help companies that sell environmental products to develop their business. We find new markets for their products, and we help them to get the right product accreditation to make sure that their customers can buy from them with confidence.

We can also help organisations to get capital investment to help with the costs of installing new renewable energy and other low-carbon installations.

We work with some of the UK’s largest companies to develop new ways of cutting greenhouse gas emissions. For example, we are working with businesses and with government to encourage the development of a carbon capture and storage (CCS) network in Yorkshire.

About The University of Sheffield

With nearly 25,000 students from 125 countries, the University of Sheffield is one of the UK’s leading and largest universities. A member of the Russell Group, it has a reputation for world-class teaching and research excellence across a wide range of disciplines. The University of Sheffield was named University of the Year in the Times Higher Education Awards 2011 for its exceptional performance in research, teaching, access and business performance. In addition, the University has won four Queen’s Anniversary Prizes (1998, 2000, 2002, and 2007).

These prestigious awards recognise outstanding contributions by universities and colleges to the United Kingdom’s intellectual, economic, cultural and social life. Sheffield also boasts five Nobel Prize winners among former staff and students and many of its alumni have gone on to hold positions of great responsibility and influence around the world. The University’s research partners and clients include Boeing, Rolls-Royce, Unilever, Boots, AstraZeneca, GSK, ICI, Slazenger, and many more household names, as well as UK and overseas government agencies and charitable foundations.

The University has well-established partnerships with a number of universities and major corporations, both in the UK and abroad. Its partnership with Leeds and York Universities in the White Rose Consortium has a combined research power greater than that of either Oxford or Cambridge.

The BIG Energy Upgrade launched in Sheffield by the Rt Hon Chris Huhne

Friday, September 30th, 2011

An innovative project, which is set to install low carbon measures in houses in some of the most deprived areas in Yorkshire and Humber, was launched on Thursday 29 September 2011 at the University of Sheffield ICOSS centre, by the Rt Hon Chris Huhne, MP, Secretary of State for Energy and Climate Change.

The launch featured a key note address from the Rt Hon Chris Huhne who explained the importance of tackling energy efficiency.

He said: “Energy efficiency is a no brainer because it makes homes warmer and cheaper to run. The Big Energy Upgrade is a great example of different organisations working together to help the most disadvantaged communities in Yorkshire. We want to see more of this collaborative working to help the effectiveness of the Green Deal when it’s launched next year. The new Green Deal will be the biggest home improvement plan since the second world war, helping to insulate people against rising energy prices at no upfront cost.”

The BIG Energy Upgrade takes a `whole house´ approach to energy conservation; UK households identified in ten disadvantaged communities across Yorkshire and the Humber will benefit from a package of measures highly individual for each of the households and will ensure householders achieve the best energy efficiency performance through the measures. The initiative represents a big step forward in the way insulation and micro generation are integrated and will make a huge difference to deprived communities.

The project is being led by Kirklees Council and partners include six local authorities, four Arms Length Management Housing Organisations, two Registered Social Landlords across Yorkshire and the Humber, Yorkshire Energy Services along with University of Sheffield, who will monitor the performance of the installed measures; look at behavioural issues linked with energy consumption; support the supply chain associated with the programme and monitor energy consumption in some of the households.

The University of Sheffield´s Vice-Chancellor Professor Keith Burnett, said: “We´re delighted to be working in partnership with regional local authorities on this flagship project which we´re supporting through a multi-disciplinary team including architecture, supply-chain, digital technology, civil engineers and psychology. This allows understanding of the problem as a whole: the building, the new energy technologies, and importantly the human behaviour.

“The University´s strength of partnership with our region is rarely more important than in a project of this nature that is piloting solutions to the integrated challenges of carbon emissions, economic growth, and fuel poverty.”

Professor Lenny Koh, Director of the Centre for Energy, Environment and Sustainability and Associate Dean at the University of Sheffield’s Management School, is the Principle Investigator of The Big Energy Upgrade project said: “This project brings together the University’s cross cutting team from energy and environment, using a truly multi-disciplinary approach to tackle these important energy challenges in society. We look forward to working closely with the local authorities and other partners in pioneering this low carbon direction.”

Big energy upgrade partners

The project will run until March 2014 and will act as a catalyst in attracting further funding towards energy efficiency projects, which in turn will create more demand for materials and skills in the area of retrofitting and micro generation. As well as creating 114 new jobs, it will also help to prepare the region, in terms of knowledge and experience, for the delivery of a new area-based `whole house` approach to be delivered as part of the Government´s Green Deal post 2012.

To read the full media release see:

For further information and coverage of this story see:

The Sheffield Management Lecture June 2008

Thursday, June 19th, 2008

The Sheffield Management Lecture 2008 was another successful event in this series of annual lectures. Speaker, John Seddon, educated and entertained the audience of nearly 450 people with an exposition of the problems associated with managing by targets.

Citing many examples of failures of management attempting to comply with ministerial target setting – the so called “Command and Control” approach – John instead proposed a model where “flows” are managed rather than costs.

His entertaining oratory style went down well with the assembled members of the region’s business community.

Keith Glaister, Dean of the University of Sheffield Management School said “I was delighted at the success of the Management School lecture. John Seddon gave a provocative presentation which stimulated wide-ranging discussion and debate. John was able to integrate management practice with an academic perspective based upon his experience with private and public sector bodies and organisations.”

More information, photgraphs and an audio download.