Chris Nicholson: Boosting employee share ownership would show that we're all in it together
Chris Nicholson is director and chief executive of CentreForum, the liberal think tank. The CentreForum paper "Employee empowerment: towards greater workplace democracy" can be accessed here.
The papers this week are full of discussion about boardroom pay. The Financial Times is even running a series on "capitalism in crisis". Party leaders seem to be falling over themselves to advocate "responsible capitalism". But it is significant that not even Ed Miliband is challenging capitalism itself - despite this so called "crisis".
There is however a long way to go before it is clear what "responsible capitalism" looks like. Conservatives like Jesse Norman are making efforts to do so by promoting co-operatives and attacking monopolies and "crony capitalism". But one area of this debate where there currently seems to be a blind spot among Conservatives is the promotion of employee share ownership and participation. There shouldn't be.
In a CentreForum report, published on Monday, Patrick Briône and I argue that promoting employee share ownership and participation should be be an integral part of the coalition's supply side reforms. There is good research evidence that employee share ownership and participation has a positive impact on company performance. It also leads to greater long termism in company decision making and is shown to have a positive impact on workers’ wellbeing. But there is also the political case: employees should have some say over the decisions which affect their lives - and few affect them more than decisions made in the workplace.
Many continental European countries such as Germany and Sweden involve employees much more in the way that companies are run and their economies benefit as a result. I do not favour transplanting any one of those systems wholesale to the UK. It is wrong to be prescriptive about the form of participation – not least as this could cut across many of the good examples of employee participation that already exist.
For some companies it may be appropriate to have workers on boards; for others not. There are some excellent examples in the UK of leading companies, such as BT and Tesco, having well developed systems of employee participation. This would be worth building on, not supplanting. We propose in our report how a more flexible principles-based system could be introduced or one based on the flexibility inherent in European Company Act status.
And why has the government been so silent about employee share ownership (except where there are spin-offs out of the public sector)? Margaret Thatcher's government pushed an agenda of wider ownership of wealth through the "right to buy" programme and privatisation. The last Labour government on the other hand did little to promote wider share and asset ownership. Surely boosting employee share ownership is one way of showing "we're all in it together"?
So yes, let’s tackle runaway boardroom pay but if we want to bring about "responsible capitalism" that should only be the start. Greater employee share ownership and participation in the way our companies are run needs to follow on close behind.