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
    +32

    Comment number 96.

    More old hat. Been there done that,makes no difference,still work longest hours in Europe for least pay,fewest holidays and worst job security.Having a share certificate in the drawer makes no odds at all.

  • 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
    +8

    Comment number 93.

    I never bought shares in my company, despite the option, because I had zero faith in the senior management. A senior management that seemed to collude with a certain ex-presidents club to line all their pockets with magic shares that converted tiny investments into multi-million pound payouts, but which weren't available to ordinary staff except in token amounts.

  • rate this
    0

    Comment number 92.

    @65. bbtzs
    Here's a free tip - if you wish to convert people to your point of view (in your case, one as vacuous as Clegg's - I must assume you are one his rare apologists), it is usually not a good plan to insult all your potential converts first.
    PS - what might those "employee advantages" be?

  • rate this
    0

    Comment number 91.

    this will then enable the rich to periodically wipe out the poor much more effectively .

  • rate this
    +2

    Comment number 90.

    Poor old Clegg he's damned if he does and damned if he doesn't. Now Milliband on the other hand.....LOL

  • rate this
    +2

    Comment number 89.

    Lots of cynicism in the comments section, one point to remember is that the staff of John Lewis are very happy with the arrangement.
    A reduction of the Welfare State isn't a bad and if this business model is successful in creating a better economy, as the economics suggests it will, then the Welfare State will become less necessary, everyone's a winner. Capitalism as it should be, warm and fluffy

  • rate this
    +18

    Comment number 88.

    Codetermination, co-ownership, employee participation in management: these were features of Liberal Party policy decades ago - dating back to the 1920s, when John Spedan Lewis handed his firm over to his employees. How clever of Cleggie to rediscover party policy after all these years!

  • rate this
    +3

    Comment number 87.

    Another desperate attempt by a discredited Nick Clegg to try and show what a "good bloke" he is.
    I have heard these sort of noises off for over 40 years,and nothing has/will happen.
    Capitalism concentrates capital,and power, in the hands of the few.Unless Clegg is prepared to address this fundamental issue,then this speech is nothing more than froth.

  • rate this
    +3

    Comment number 86.

    Yes Clegg another one of your whimsical ideas. Give the employees a few shares to gee them up, but in many large companies/corporations the bulk of shares are held by pension funds etc. So the little shareholders, formerly just employees or drones carry on as per usual working for the big guys with all the job security that entails, which is very little.

  • rate this
    +7

    Comment number 85.

    What is the point of Nick Clegg? all he seems to do is make vacuous statements, that invariably lead to nothing happening. Now he is on about share options for staff, There are a number of companies already doing this, who do not need the likes of Clegg to tell them how to run their businesses. I just wish Clegg would fade back into obscurity, hopefully this will happen at the next election

  • rate this
    +2

    Comment number 84.

    How many shares will three shirt buttons get me?

  • rate this
    +1

    Comment number 83.

    Smoke and mirrors

  • rate this
    +1

    Comment number 82.

    The entire thing is a joke.

  • rate this
    +8

    Comment number 81.

    Out of touch with reality.

    It already happens, has for decades. Been there. Great if you've got long term job security.

    Given the present economic climate and the decline in employees contributing to pensions, its unlikely they'll want to take shares in lieu of wages.

    More jobs is a more pressing matter at the moment.

  • rate this
    -5

    Comment number 80.

    When I worked in retail, I loved it when someone worked in with a John Lewis quote. I knew I'd get the business, I could 'under sell' them every time. So Thats the key to recovery, increase your competitors running costs and reap the benefits.

  • rate this
    +2

    Comment number 79.

    You've got employees of companies like Tesco and they already issue share options to staff.

  • rate this
    +5

    Comment number 78.

    @33.tomfer "why should the entrepreneurial skills of one person in starting a business , mean that every person who actually benefits from employment by them, also have a share in their skills... "

    Because it often takes the efforts of others to realize the entrepreneurs vision. Employee schemes can be a good tool for creating loyalty, cohesion and a sense of worth amongst a team of people.

  • rate this
    +1

    Comment number 77.

    Please forgive my cynicism, but I really do have a crisis in confidence & very little if any faith in this current generation of career 'politicians'
    A short while ago the idea issuing shares to the public of bailed out companies, ie banks was mooted.
    This leads me to benefits, and questions asked about share ownership & income
    A 'backdoor' attack on the welfare state is what I see ultimately

 

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