By: Janice Atkinson-Small
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Nick Clegg will use a speech today to call for more John Lewis-like employee led companies. John Lewis is led and owned by its employees and distributes profits between them. He stole this idea from the Conservatives who never had the courage to implement it.
Back in the 1990s the Conservative MP Tim Yeo, who was Shadow Secretary of State for the DTI and Greg Clark (before he was elected an MP in 2005) who was a policy wonk at Conservative central office, developed a model of John Lewis type ownership for the Royal Mail. Tim proposed that the Royal Mail be privatised with one third of its shares owned by the employees; one third from the sale would go in to plug the black hole of its pension fund and one third would go into business development and investment.
The then leader of the Conservatives, Michael Howard, said this would frighten the public and did not want to take on the unions; it was too right-wing. He was wrong and Tim and Greg were right.
THE JOHN LEWIS MODEL
The John Lewis Partnership says it puts the 'happiness of partners at the centre of everything it does'.
All of its 76,500 staff own shares in the 35 John Lewis stores, 272 Waitrose supermarkets, johnlewis.com, a production unit and a farm.
Annually it has sales of over £8.2bn and staff 'share in the benefits and profits of a business that puts them first'.
The company has a constitution and permanent staff co-own it - an idea that was laid down by founder John Spedan Lewis who set up the partnership in 1864.
He signed away his personal ownership rights in what he described as an 'experiment in industrial democracy'.
I welcome the debate on the British form of capitalism. The pernicious private equity groups with their smash and grab attitude are not interested in the long-time state of the business or its employees. They are just interested in the short-term asset stripping and profit rather than the employees and research and development. At the other end of the scale there are family-owned businesses that flounder after the head of the family retires or dies with no obvious successor who are then gobbled up by a competitor or go under.
Some describe the current capitalist set up as “predatory” or “crony capitalism”. It is interesting to note our politicians’ rhetoric on this. Labour, returning to its anti-capitalism roots under Red Ed, would like employees having a say on bosses remuneration. Clegg, cites the John Lewis example of the way forward and Cameron talks about “responsible capitalism” with plc shareholders being able to restrict executive pay.
Labour is out of the game on this discussion. Why should employees have the right of say on bosses pay unless they are shareholders? With respect to most employees, most of them would think that the board of directors were over-paid in comparison to the ordinary workers. What qualifications do employees have to determine boardroom pay?
Cameron’s suggestion of the shareholders having more power sounds like a good idea but in reality the shareholders do not generally attend AGMs and those that do are out-voted by the pension fund corporate block shareholders.
Today Clegg will say that companies tend to run better if their employees have a share in them. This is worthy of consideration. If businesses are struggling then perhaps the owners or shareholders should look at this form of business model. However, there is no room for legislation to force this to happen but could be encouraged through tax breaks.
There is a strong caveat emptor here, Northern Rock. Clegg will not cite the failure of Northern Rock where more than 80 per cent of Northern Rock’s staff had signed up for shares that became effectively worthless when the bank was nationalised.
Shares go up and down and it doesn’t automatically follow that just because a business is employee led that the business will do well. He will probably cite other businesses such as Baxi and Loch Fyne, although the latter in my opinion could do with an overhaul of its lacklustre and hostile staff on the very banks of Loch Fyne where the business was established.
I suggest that the coalition test out this model of privatisation for the Royal Mail this as a matter of urgency and report back before tripping over themselves to legislate on private industry.
I also wonder whether this model would have worked better for our privatised utility companies, particularly our railways?
