Nick Clegg plans more employee ownership

 

Nick Clegg: "I want this to be the decade of employee share ownership"

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Deputy Prime Minister Nick Clegg has urged more companies to offer shares to their employees, saying it will improve productivity and unlock growth.

He told an audience in the City that the government planned to cut red tape, and reform the tax system to accommodate employee ownership.

It is hoped the measures will create what he called a "John Lewis economy".

Shadow business secretary Chuka Umunna said Mr Clegg was following Labour's lead on responsible capitalism.

Department store group John Lewis is owned by its employees and distributes its profits between them.

The Lib Dem leader told the event hosted by the City of London Corporation and Centre Forum think tank: "We don't believe our problem is too much capitalism - we think it's that too few people have capital.

"We need more individuals to have a real stake in their firms. More of a John Lewis economy, if you like.

"And what many people don't realise about employee ownership is that it is a hugely underused tool in unlocking growth.

Start Quote

Firms that have engaged employees, who own a chunk of their company, are just as dynamic, just as savvy, as their competitors”

End Quote Nick Clegg

"I don't value employee ownership because I believe it is somehow 'nicer' - a more pleasant alternative to the rest of the corporate world. Those are lazy stereotypes.

"Firms that have engaged employees, who own a chunk of their company, are just as dynamic, just as savvy, as their competitors. In fact, they often perform better.

"Lower absenteeism. Less staff turnover. Lower production costs. In general, higher productivity and higher wages. They weathered the economic downturn better than other companies."

Mr Clegg said the concept of employee ownership had long been a "touchstone" of liberalism and he wanted to get it "into the bloodstream" of the British economy.

That could include the introduction of a right for workers to request shares in their companies, he said.

The move would challenge the corporate culture and help usher in a new era of "responsible capitalism", he added.

Ministers have already announced plans to give shareholders more power to curb executive pay, following public anger over excessive boardroom pay and bankers' bonuses.

The John Lewis model

  • All 76,500 permanent staff are partners
  • Partners share in the benefits and profits of the business
  • The bonus is the same rate of pay for all partners, regardless of job level or length of service
  • They own 35 John Lewis shops and 272 Waitrose supermarkets across the UK
  • They also own an online and catalogue business, a production unit and a farm
  • The business has annual gross sales of over £8.2bn
  • John Lewis owned his first store in 1864
  • The partnership was set up by his son, John Spedan Lewis

The government's full package of boardroom reforms is expected to be announced by Business Secretary Vince Cable next week.

Lib Dem Business Minister Ed Davey will spearhead work on removing barriers to employee ownership.

And Lib Dem Chief Secretary to the Treasury, Danny Alexander, will study the tax arrangements.

Shadow business secretary Chuka Umunna said Labour leader Ed Miliband had led calls for a more responsible capitalism.

"Despite having first scorned Labour's initiative, David Cameron now claims he has become a convert to the cause," he said.

"The question for both him and Nick Clegg is whether they have the courage or the conviction to make the change that is needed.

"If Nick Clegg wishes to follow Labour's lead in promoting shareholder activism and engagement, that is welcome."

Charlie Mayfied, chairman of the John Lewis Partnership, said greater diversity in the ways companies were owned and run should be welcomed.

"Employee ownership is not a silver bullet to the economy's ills, but it could be one solution to the problem of building a more sustainable economy built on long-term foundations.

"Employee ownership can also help fulfil the increasing desire we have for more influence in our work so as to unleash our potential and productivity," he said.

Michael Stephenson, general secretary of the Co-operative Party, said: "We welcome the recognition from the government that crony capitalism needs reform, but Nick Clegg's ideas barely scratch the surface of employee ownership or co-operative businesses.

"There are one billion members of co-operatives worldwide and only 328 million shareholders: the Tory-led government are clueless about giving ordinary people a real say in running businesses."

Government Labour

Taxation

Introduced bank levy - now 0.088% on the value of all of the debts of UK banks - aims to raise £2.6bn a year

Wants repeat of tax on bank bonuses - says it could raise extra £2bn. Says bank levy amounts to a tax cut

Bonuses/pay

Wants "no rewards for failure". Not in favour of a salary cap, but wants to use shareholder influence to rein in pay

Supports High Pay Commission recommendations, including employees on salary committees

Transparency

Consulting on new rules to require UK's 15 largest banks to reveal remuneration for eight highest-paid non-board executives (board executives pay is already published)

Simplify pay packages and require investors and pension fund managers to disclose how they vote on pay. Publish ratios between highest paid and company average

Shareholder power

Wants shareholders to have veto on excessive pay and dismissal packages

Wants shareholders to replace board members on remuneration committees

Other

Pressing ahead with plans to separate retail from investment banking

Supports code of conduct for bankers - could see them struck off

 

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  • rate this
    +15

    Comment number 436.

    I think the vast majority of the Working class would be very wary of putting any money into company's that they work for simply because they will end up losing it all and their jobs if the company goes to the wall.

    And the way employers treat employees nowadays this would be done without a moments thought for the employees or the money they have invested.

  • rate this
    0

    Comment number 167.

    I think that this can certainly encourage the involvement from the employers and possibly motivate them to become a more active part rather than passive, although shares are risky. Especially during the economic recession, people may be skeptical about this concept.

  • rate this
    +22

    Comment number 95.

    I can see the rationale behind this but, as a pessimist, I'm not certain that it's wholly sensible to have a large proportion of your personal savings tied up in the company that you work for. While it may provide some incentive to work for the 'common good', if the company fails, not only do you lose your income, but the value of the savings that you then have to fall back on is also wiped out.

  • rate this
    +31

    Comment number 94.

    This is good news if Clegg is actually serious about cutting red tape. I run a small business, and would love to offer my employees a share ownership scheme. The trouble is that all the red tape puts it out of our reach (you need to pay very specialised and therefore expensive accountants for this sort of thing).

    But I'm not holding my breath. Many politicians talk about cutting red tape. Few do.

  • rate this
    +52

    Comment number 15.

    Yes, I threw all my hard earned monthly savings into the employee share scheme of a well known bank when I worked for them. Clegg, shares go down as well as up...

 
 

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