Clegg calls for ‘John Lewis’-style economy
Deputy prime minister wants workers to be given the right to request shares in their companies
Workers could be given the right to request shares in the companies they work for under proposals put forward on Monday by Nick Clegg, to create what he describes as a “John Lewis” economy.
In a bid to deploy century-old liberal principles to the mounting debate about crony capitalism, the deputy prime minister will argue that the economy is in danger of being “monopolised by a minority” and that wider share ownership among employees could be an answer. “Just as the eighties had been the decade of share ownership, so this decade should become the decade of employee share ownership”, he will say in a speech at the Corporation of London and the Centreforum thinktank.
In his speech. Clegg will argue that “liberals believe strongly in the virtues of the market, but only if it is a market for the many, not a market for the few”.
“Our economy is in danger of becoming the latter, monopolised by a minority, serving narrow and sectional interests.” He will describe employee share ownership as “a touchstone of liberal economic thought for a century and a half and a hugely under-used tool in unlocking growth.
“John Stuart Mill hoped that employee-owned firms could end what he called the ‘standing feud between capital and labour’. And liberals have been championing it ever since. 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.”
The employment relations minister, Ed Davey, has been asked to work on proposals for the coalition and the chief secretary to the Treasury, Danny Alexander, is to review possible tax incentives. Extending the tax relief from the Enterprise Investment Scheme from external investors to employees, as well as restoring tax breaks to employee benefit trusts are to be examined. Both ideas are proposed in a report prepared by the employee ownership association to coincide with Clegg’s speech.
Clegg will also announce an independent reviewer to develop off-the-shelf legal models for firms to ease extension share ownership.
The plan allowing workers to request shares could extend beyond publicly listed firms to private firms. In the case of John Lewis Partnership, the shares are not traded but held permanently in a trust on behalf of all employees. Clegg will argue that companies in which staff have stakes have higher productivity, greater innovation and more patient investors.
All three parties are battling for distinctive political territory in this field both over executive pay, and an end to short term irresponsible capital.
Clegg’s aides admitted the proposal for a right to request shares is at a formative stage, including whether such shares should be voting or offered at a discount.
Broadening the debate, he will claim crony capitalism is the product of poor regulation as much immorality by business. “It’s easy to throw rhetorical rocks at directors, bankers and businesses. But, if we are honest, this is as much a failure of politicians and regulators.
“The authorities are too often cowed by corporate power, Whether that is political parties of all stripes in hock to vested interests, or regulators struggling to stop supermarkets from putting the squeeze on small suppliers, whether it’s politicians kowtowing to media barons. The problem is endemic.”
Clegg will set out four key principles on executive pay, ahead of final publication of proposals next week, but will not support workers on the boards of remuneration committees. He is likely to support a broadening of their membership to include experts from outside the closed shop of UK boardrooms. The four points are:
• Companies will be forced to make information about pay and profits much clearer in their annual reports – for shareholders and members of the public.
• A clear single figure will be given for top executives revealing all the details of their pay.
• Companies will have to have a clear policy for departing chief executives – making it harder to grant hefty pay outs for failure.
• Firms will have to be much more open about how money is being distributed around the company.