Coalition contemplating a cultural shift towards employee ownership?

Jesse Norman as well as being one of the new intake of Tory MPs is also one of the key thinkers (yes, they do have them) in David Cameron’s new liberal Tory project. In what looks like a kite flying exercise ahead of Wednesday’s UK Budget he has some interesting ideas (not least because some of it could have been served up just as easily by Will Hutton):

The government now has a huge opportunity to redress the balance, by promoting employee ownership. This does not mean new share option schemes as such; or fancier approaches to executive remuneration, of which we have too much already. It means measures that extend the core values and the culture of employee ownership. It is striking that the level of non-plc ownership in Germany is three times that in the UK.

Such “deep” employee ownership is often indirect and collective. John Lewis is an overused example, but it illustrates the point well: how many of its shares are directly owned by its employees? The answer is none. The shares are owned by a trust, whose beneficiaries are the staff. The firm succeeds not because individuals own shares directly, but because of its employee-led values and culture.

This is no panacea. But evidence suggests that employee-owned firms grow as fast as plcs, are more resilient and do better at creating and keeping jobs. They have higher levels of staff wellbeing and fairer pay. Deep employee ownership works especially well in smaller knowledge-based companies, on which the UK increasingly relies.

He concludes with some practical suggestions, which amount to tweaking the system to favour mutual over cruder joint stock models… And he says:

…we need to raise public awareness. A full-scale campaign might involve the creation of co-op-style “Rochdale principles” for employee-owned firms; more work on creating a social investment asset class; and above all a new Institute of Employee Ownership, which can work through existing organisations to train employees, business owners and advisers, conduct research and promote the sector.

Rochdale is a reference to the Rochdale Society of Equitable Pioneers who set up to the Co-operative movement in earnest… It’s also worth noting that the fully mutualised Nationwide Building Society and the Co-operative Bank have virtually no bad debt…

So whatever happens further up the chain (and given his overall commitment to austerity, the Chancellor has little room for manoeuvre either way), this will be worth keeping an eye out for…

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  • Mack

    Workers owning the means of production, I’m sure I’ve heard that before..

  • Comrade Stalin

    Workers owning the means of production, I’m sure I’ve heard that before..

    TL;DR ?

  • Mack

    Just noticing the similarity with a central tenet of Socialism.

  • Mack

    Probably, still leaving too much implicit.

    I’m not saying there is anything wrong with this policy, it could work out very well, and as a fundamentally socialist idea being implemented by the right, may actually solve one of the problems with the way socialism has been implemented elsewhere in the past (e.g. USSR) in that it reduces innovation and leads to stasis..

  • Comrade Stalin

    Mack, there is a difference between the idea of workers having a direct stake in a company, and the problems that are inherent to managing the distribution of resources in a centrally planned economy.

    There are many examples of companies that are large, successful and innovate well without having to deal with a large shareholder base. The Bosch company is a case in point; it’s operated by a charitable trust. It leads most of the markets it has a major involvement in. On the other hand I can think of large publicly traded corporations that singularly fail to innovate. The American automakers are good examples of this.

  • Mack

    On the other hand I can think of large publicly traded corporations that singularly fail to innovate. The American automakers are good examples of this.

    True, the Japanese and German auto-makers did. I absolutely agree with your point about central planning, top-down design and decision making has some role to play in society, but is completely unworkable as the primary economic process.

    I guess not all socialists are central planners though (although it’s by far the most common form)- I don’t get the impression that is what Noam Chomsky envisions when he speaks or writes, for example. And I guess there is no rule that says that socialist ideas must be implemented primarily by the left. Bismarck thought pensions were socialist but an idea worthy of introduction all the same..

  • Mick Fealty

    Mack,

    Welcome back. Long time no hear from. Another snippet from Norman’s piece:

    “…one deep reason for the crash was the loss over 30 years of mutuals, partnerships and other financial institutions that shared risks and information.

    “They were replaced by a corporate plc monoculture that separated employee self-interest from client wellbeing. Last week’s revelations about Goldman Sachs (partnership 1869, flotation 1999) made the point perfectly.”

  • NickRob

    Maybe employee ownership is more about “workers having a stake in making a profit” than it is about owning the means of production?
    As a small L liberal about a lot of economics and business I don’t equate employee ownership with socialism very much at all. Hopefully it will cross political left-right boundaries anyway. I think it taps into the same kind of motivation that made Thatcherite home-ownership popular as well as the ideals of fairness and equality that inspired the early British socialists.

  • Comrade Stalin

    Mack,

    I absolutely agree with your point about central planning, top-down design and decision making has some role to play in society, but is completely unworkable as the primary economic process.

    I think we are starting to confuse ourselves. It’s unfair and inaccurate in so many ways to characterize workers co-operatives, mutualized societies or businesses operated by charitable trusts to somehow be some kind of subset of socialism or communism. It is clear that these businesses, where they have been successful, have existed inside a market capitalist economy, and have not tried to replace it.

    My own attitude is to be pragmatic. If it works, use it. If it doesn’t work, throw it away and replace it. It seems clear enough that mutual societies and some co-operatives work, and there are lessons to be derived from that. It is also clear that some organizations run with a classic shareholder model have major downsides. Some of those downsides are economic. But some of the more urgent downsides are social. John Lewis’ turnover/profitability mostly seems to be bucking the trend of the rest of the retail sector. We should try to understand why that is.,