Monday, 16 January 2012
Socialism@Work from the Coalition
In the past few years it has benefited from many people who have kept their jobs in the recession having more disposable incomes as previously enormous mortgage payments have dropped from their monthly expenditures.
Now today, Nick Clegg is extolling that in fact, John Lewis, because it is owned by the staff is in indeed a better business. I do have some concerns here as to whether this is the case or ever sustainable on a grand scale.
Firstly, there used to be many Mutual Building Societies, these eventually all demutalised as the holders of shares wanted a short-term return. As it has turned out, due to rising costs of capital, mutuals that remained have done very badly in recent years and there have been numerous rescue mergers and busts. This are not rosy in this sector of stakeholder ownership.
Many companies too have big Save As You Earn schemes - Northern Rock and RBS amongst them. these too have not done their participants much good when their shares have been wiped out, often along with their jobs.
The idea of making a legal obligation on companies to offer their employees shares is its potential for risk concentration . You already get your salary from somewhere, now invest in it too, so that when things go wrong you lose everything.
This is an acceptable position if you are the owner/founding management and you stand to get rich if it all goes right - indeed the risk capital put in will have been hard to get hold of. But if you are say a secretary and your shares are only a tiny fraction of the business at best, even in a winning situation you won't have done that well. Whilst in a losing one, you will have done your savings as well as your job.
Capitalism has many forms and employee partnerships can be successful and compete against normal shareholder companies very successfully. Mandating this as a way out of our current problems is not really the answer though. The idea of responsible capitalism is a very political one and one with strong socialist routes. I have worked with 'Works Councils' in German companies; these councils are not the reason for German business success. Germans work longer hours than anyone else, have better training and a positive work culture - these things are much more important than how a company is structured.
Finally, a theme I mentioned last week. Shareholder owned businesses have to access the private capital markets, not the public ones. Mutualisation, as such, would in theory shrink the capital markets of the UK and make it harder for pension funds and other long term investors to find good investment opportunities. I can imagine this is what the economically illiterate Lib Dems want, but is this really a public good?
Posted by CityUnslicker