Nick Clegg: more warm words on employee ownership?

In a recent speech in the City of London, Deputy Prime Minister Nick Clegg called for more firms to follow the example of John Lewis by making their employees shareholders in the company. This belief in employee ownership was, he said, a ‘touchstone’ of modern liberalism that he hoped to see become a central feature of the British economy.

As I have pointed out in previous posts, both the Conservatives and the Liberal Democrats do indeed have a long history of advocating wider ownership, which has included a commitment to greater employee ownership. Many of the arguments that have been used to justify calls for greater industrial partnership in the past – which have included higher productivity, higher profits, higher wages, fewer strikes, the distribution of economic power, and the creation of more ‘capitalists’ – were reiterated in Clegg’s speech.

But if both coalition parties have consistently advocated employee share ownership, they have been equally consistent in refusing to legislate to make it a reality. While the Liberals have switched between legislative compulsion and voluntary approaches to employee ownership (as Stuart White pointed out in an article in British Politics) even the most enthusiastic of Conservative advocates have regarded industrial partnership as a remedy ‘which the State cannot dole out with a spoon’.

The sole exception to this came during the privatisations of the 1980s, when the Thatcher administrations coupled share sales with offers of free shares to workers in the industries concerned. Privatisation aside, however, neither party has had much success in making wider employee ownership a reality. Attempts to persuade firms of the wisdom of this course have generally fallen on deaf ears.

And these most recent proposals are unlikely to break that pattern. For while Clegg has proposed to give employees a right to ‘request’ shares, there appears to be nothing in his proposals that would compel employers to accede to that request. Seeking to encourage greater employee share ownership is a noble objective – but without legislation, encouragement is unlikely to lead to action.

Matthew Francis

2 Responses to “Nick Clegg: more warm words on employee ownership?”

  1. Mike Killingworth
    January 22, 2012 at 10:59 am #

    It’s important to distinguish between two kinds of employee share ownership – those where the shares are saleable on the open market, and those where they aren’t. When the centre-left talk about it, it’s the latter they mean. When Tories talk about it, they mean the former. Yes, employees did get cheap shares in BT and other outfits at the time of privatization, but they sold them at a profit, sharpish. It’s called “stagging” and the difference bwtween it and giving people money (usually called bribery if a politician does it, in or out of office) escapes me.

    Since you’re politics dons I’ve no doubt you can explain it to me!

  2. Matthew Francis
    January 23, 2012 at 11:53 am #

    The very short answer to that might be “not a lot” – and it is certainly the case that one reason for the share offers was to win employee support for privatisation against union opposition. That said, a number of Conservatives did genuinely believe in the power of employee ownership and wanted employees to hold onto their shares – they just couldn’t convince them to do so! People like John Redwood and John Moore were very impressed by the example of the privatised National Freight Corporation (which was sold to its employees) which they believed showed how ownership could change the attitudes of ordinary workers.

    Also, it’s not quite true to suggest that the right have always favoured that form of employee ownership. The very earliest Conservative supporters of employee ownership (such as Noel Skelton, who coined the term ‘property-owning democracy’ in the 1920s) favoured non-tradeable forms of ownership. They tended to see employee ownership as a means of reducing the tensions between capital and labour, and in the long run wanted employee representation on the board.

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