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
    +3

    Comment number 16.

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

    If Labour were so good a leading why is it that after years of a Labour Government this country was left in such a mess?

  • 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...

  • rate this
    +1

    Comment number 14.

    It's not such a bad idea, it's also not a new idea but then Clegg has never had an original thought in his life. The problem is that the employee's at the lower end of the company scale probably haven't had a pay rise in years and are struggling to make ends meet as it is so buying shares is probably out of the question. But then that wouldn't occur to rich Mr. Clegg would it.

  • Comment number 13.

    All this user's posts have been removed.Why?

  • rate this
    +3

    Comment number 12.

    Good idea in principle as this will motivate employees to work with greater passion as they will have a greater sense of belonging.

    MORE needs to be done though in terms of legistlation to ensure that this 'John Lewis' model is enforceable.

    Will the government pass ENFORCEABLE legistlation?

  • rate this
    +1

    Comment number 11.

    Watch out Cleggy - with this and House of Lords reform on your books - be sure that you manage your time so you can make effective changes to these important topics.

    On the subject of employee shares - the same could be said for any shares. Shares were supposed to develop businesses, not make a quick buck.

  • rate this
    +2

    Comment number 10.

    Oh dear Labour have become so desperate since doing their massive U-turn. Almost as big as their U-turn when they were sucking up to bankers so much, throwing out knighthoods, then stabbing them in the back as soon as the bubble Brown created burst.

  • rate this
    +3

    Comment number 9.

    Start off with RBS distributing shares so that we can get our dividends.

  • rate this
    -15

    Comment number 8.

    Clegg you still dont get it do you
    people dont want shares they want a living wage one that allows them to atleast cover their bills each month.
    But no you and your tory chums want to try to drag them into your love afair with the gamblers on the stock markets.
    what a plank a very thick plank you are

  • rate this
    +15

    Comment number 7.

    David, I don't think the intention is to give employees the same pay as the business owner. The idea is to give shares or another form of by in to the company. Collective ownership, or that feel of, can have very positive effects on productivity, loyalty, sickness rates and a whole host of other benefit.

  • rate this
    +1

    Comment number 6.

    Whilst I agree with Clegg in principle, I feel that there are too many people on the board of companies who would ensure that the insignificant low-down employees do not spoil their party. This will make no difference to the excesses.

  • rate this
    -13

    Comment number 5.

    @3 - David

    So if someone goes through the hassle of starting a business, make and pay themselves a lot of money(presumably that is the whole point of starting a business right?) then he should somehow pay his employees the same amount of money because they have the same 'intellectual level' - or need to feel connected?? Wow - just wow.

  • rate this
    -1

    Comment number 4.

    The SIA was partly bought into the Security Industry to improve pay and conditions within the industry. This has NOT happened. The National Minimum Wage is the only thing that has improved this industry. In my experience ( and I use to work for waitrose) security companies will not want to go down the same route as John Lewis as they tend to have a high turn over of staff. Better T&Cs are rqrd

  • rate this
    +6

    Comment number 3.

    Ultimately it's the ridiculous salaries which are the problem. The average person needs to feel genuinely connected to those who run the companies which we work for. 99% of those in charge are really not that far removed from the average intelligent citizen, so when we see them getting paid literally hundreds or thousands of times what we get it leaves a bitter taste. Sort this and we can progress

  • rate this
    +1

    Comment number 2.

    Can I have shares in the DWP, please? They seem to be doing better than most companies.

  • rate this
    0

    Comment number 1.

    You have a LOT of redeeming to do Mr Clegg.

 

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