The Deputy Prime Minister will launch today a campaign for a “well-rewarded workforce”, saying that businesses owned by their staff are more dynamic and have higher morale.
He wants to encourage companies to follow the model of John Lewis, the department store group which is owned by its employees and distributes its profits between them.
Mr Clegg’s call for “responsible capitalism” will come as City firms are preparing to pay executives billions of pounds in bonuses, despite pledges from politicians to curb excessive pay and growing hardship among ordinary families. Bob Diamond, the chief executive of Barclays, is reportedly in line for a £10?million payout.
The banks are handing out part of the profits to the staff. This is bad. John Lewis hands out all of the profits to the staff. This is good.
Is Clegg (et al) really so fucking ignorant that he doesn\’t realise that a system of bonuses is equivalent to employee share ownership? Especially as many of those bonuses are in fact paid in restricted shares? In fact, I think I\’m right in saying that by law some part of bankers\’ bonuses must be paid in restricted stock. It\’s certainly how Bob Diamond gets a piece of his wedge.
Do we really have a Deputy Prime Minister who is that thick?
The Deputy Prime Minister will add that companies tend to be run better if workers have a stake in them.
“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. The 1980s was the decade of share ownership. I want this to be the decade of employee share ownership. We need more individuals to have a real stake in their firms, more of a John Lewis economy.”
One proposal under consideration is a “right to request” rule, which would give staff an automatic opportunity to ask their employer for shares.
Mr Clegg has asked Danny Alexander, the Chief Secretary to the Treasury, to incentivise companies by “[looking] at the tax arrangements for employee-owned firms”. A source close to the Liberal Democrats said: “Nick is pushing his Government colleagues for real, early, radical action on this.”
Whatever tax breaks they bring in, guess who are going to be the companies who dive in and take advantage of them?
Yup, the banks. For they already do this, don\’t they? Hand out wodges of equity to their staff each year. So if there\’s a tax break for handing out wodges of equity then the banks will structure bonuses to meet the demands of that tax break.
This is a tax break for bankers\’ bonuses.
Won\’t Compass, nef, Ritchie, all those who support the mutualisation of the economy, be happy about that?
He’s not thick, and it is in some ways an insult to thick people to suggest he is being thick here.
I d certainly not say Nick Clegg was without merit in general. But this is an exhibition of the classic political vice of intentional ignorance: carefully avoiding contact with any facts that would conflict with a populist policy-claim. “I only know what I believe,” as Tony Blair, The
Master, put it.
Regardless of the banker bonus angle surely promoting employee share ownership is a good thing ?
Tim adds: Not entirely convinced personally. It’s usually a bad idea to have your wealth and your income in the same place. If it goes tits up then you lose both, not one.
I agree that on the other side it’s a good thing. Greater engagement with the company etc etc. But it’s not an unalloyed good, it’s a trade off, just like everything else is.
Employee share ownership isn’t all it’s made out to be. Very few employees are in a position to have a significant effect on the share price. And the ones who do may be given the wrong incentives – Dick Fuld might have done a deal with the Koreans to save Lehmans had he not had a large shareholding that would have been wiped out by the deal on offer.
Clegg has never actually done anything that wasn’t paid out of some public’s purse, has he? Wikipedia’s “Careers outside politics” can’t come up with much, although I was unaware of this one: “Between 1992–1993, he was employed by GJW, which lobbied on behalf of Libya.” (I especially like the initial “between” two adjacent years.)
I’ve had good and bad experiences with employee ownership. The bad ones came with a struggling multi-national, the good have come with well-run companies. employees need to apply the general rules of purchasing shares before entering the scheme. Of course, Nick’s big idea, as supported by Chucka, (who claims that Labour thought it first) is effectually un-reconstructed Thatcherism. More proof that Baroness Thatcher’s greatest achievement was to make a true Left-Wing government unelectable.
We’ve been here before.
This year’s grand new scheme to encourage share ownership becomes next year’s unacceptable tax dodge.
“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.”
Good, so they will outperform other businesses in the market. So no need for politicians to get involved then.
Another problem that markets will solve if politicians stop screwing up fair competition.
“Do we really have a Deputy Prime Minister who is that thick?”
No, we have one who is very much aware that a significant proportion of the Great British Public is that thick that they won’t even question this…
No doubt Nick will expect those shares to be protected against any future cash calls and being diluted in share splits.
Enron staff had quite a lot of shares and that worked well, except for all those who lost their life savings.
Staff already have an opportunity to ask their employers for shares, thusly:
Johnny Faceground: “Sir, instead of a tangerine for Christmas, can I have a share in the company?
Mr Gradgrind: No.
See how easy that was?
He’s also assuming that employees might prefer shares in a company to cash bonuses, cash having the advantage that you can spend it or save it, and it won’t suddenly lose all its value if the company goes under.
Obviously, calculations will be different if (say) you’re on the public payroll or (say) can rely on basic living wage from a large trust fund.
Will other companies charge John Lewis’ eye-wateringly high prices too?
The banks aren’t actually “handing out part of their profits to the staff” as bonuses are classed as a cost, like salary, which means they are deducted pre-profit.
Dividends and other forms of profit share are post-profit. This is an important distinction as it highlights the agency problem / moral hazard of bonuses – i.e. executives can loot a business by maximising bonuses to the detriment of owners.
The “thickness” of Clegg’s comments is the belief that employees could become the majority owners of most businesses.
As we saw in the UK in the 80s, and in Russia in the 90s, popular shareownership delivers a small cash bonus (or bribe) through a rigged market that encourages early liquidation, but leads inexorably to share concentration by privileged players. It does not lead to a “shareowning democracy.”
mmm…the idea of popular share ownership warms the cockles of every paternalistic politician…but how many shares does Sid still own these days?
I am reminded of a story that was told me by an ex-employee of 1-2-1 when they started building their GSM network.
Its probably apocryphal, but its still a good one – at a staff meeting someone asked if their would be a profit sharing scheme for the staff, to which the MD responded something like “not unless we have a staff loss sharing scheme as well”.
The problem with the banks is not the bonus stuff or high pay per se – its that the bonuses and high pay are secured by barriers to entry to new competition and barriers to entry to new staff who want to get the £100k plus bonus deals. Banking does not resemble a free market, not for the companies, not for the employees.