Clegg’s company ownership plans: Employee owners are a good thing
If the wheel’s been invented and is being ignored, there’s no harm in re-inventing it. So don’t knock Nick Clegg just because he is a latecomer to employee share-ownership.
Giving workers a stake in the company that employs them is a good thing. It encourages responsibility, loyalty, understanding and productivity. And it gives them a share of their own endeavours. It might even make them more sympathetic to directors receiving share options.
“We don’t believe the problem is too much capitalism,” declares the LibDem deputy prime minister. “It’s that too few people have capital. We need more people with a real stake in their firms.”
But employee share ownership has been around a many decades. If Clegg wants more of it he needs to ask why it has not taken off yet.
Well, one reason might be that quoted company share prices are lower today than they were in the 1990s. Maybe wily employees just don’t think equities are a good investment. Most major quoted companies offer shares to staff but with limited take-up: Clegg wants to extend that to unquoted, but that makes the investment harder to sell and harder to value.
Even if there wasn’t a recession on, it is not surprising that workers would rather receive cash than paper that could fall in value and which they have to wait to realise. Employees, of course, think the shares should be as well as a pay rise, not instead.
Clegg cites John Lewis as an example of employee ownership but while the retailer is owned by its staff through a trust, each employee has no direct stake in the company. They cannot realise its value, whether it rises or falls. They receive a share of the profits, but even that is not equivalent to a dividend. It is a bad example, though it might be a model for giving the Royal Mail to its belligerent workers.
And he must be careful about encouraging people whose wages and future pension are tied up in one company to then put their nest eggs into the same basket. There is a prudent case for buying shares in any company other than your employer.
However, Clegg is opening a debate not closing it. His premise is that employee share ownership is good but he is open-minded on how to do it. His suggestion of a ‘right-to-buy’ for workers to demand shares from employers that don’t wish to sell is misguided and he should be wary of yet more tax-breaks to encourage people to go against their instincts, but his general approach is right. As he says, the question should be ‘Why not?’ - not ‘Why?’
