Boss: Right, if you could just read your final list of demands, please gentleman. Hawkins, take note.
Union official: First, we ask for the graduated power-sharing scheme, then the reduction to a 35-hour week by 1981, the upgrading of differentials with regard to other settlements made … and finally, myself and Mr Stewart would like to sleep with your wife.
– Not the Nine O’clock News (BBC TV 1979-1982)
Worker share ownership was pushed by the Liberal Party in the 1970s as one way of making strikes less likely, by better aligning the interests of employers and employees. So enamoured was Margaret Thatcher of this idea that, in 1982, her Government privatised National Freight Corporation (think Pickfords) by selling it to its own workers.
The compulsory appointment of worker-directors to the boards of companies with 2,000 or more employees was proposed in a 1977 report by the Right Honourable Lord Bullock, inter a lot of alia vice-chancellor of Oxford University.
Charging companies some sort of ‘social dividend’ to compensate society for the educational, infrastructural and other public investments from which they benefit is an idea that has been doing the rounds, again in liberal circles, in one form or another, for years.
Such is the not-wildly radical genealogy of three of Labour’s most eye-catching economic proposals at its annual conference. The lack of radicalism may not matter, however, if the ideas work. Did they?
National Freight Consortium (as it became) was floated on the Stock Exchange in 1989, ending seven years of employee ownership. Various parts were sold off and the rump of NFC is currently part of a logistics company called Exel.
The Bullock Report recommendations, unsurprisingly, died with the end of the 1974–79 Labour period in office. But they had already been hamstrung by a lack of enthusiasm from the party’s trade union allies.
As for the ‘social dividend’, this has never got off the ground, not least because business can, not unreasonably, point to Corporation Tax as fulfilling, in part, the same function. It is paid only by incorporated entities as ‘persons in law’ and means that the ‘natural persons’ behind the company – the owners or shareholders – are, effectively, taxed twice.
So much for the practice. What about the theory?
Let’s start with worker share ownership. John McDonnell, the Shadow Chancellor, explained the policy thus:
We will legislate for large companies to transfer shares into an ‘inclusive ownership fund’. The shares will be held and managed collectively by the workers. The shareholding will give workers the same rights as other shareholders to have a say over the direction of their company.
And dividend payments will be made directly to the workers from the fund.
In other words, the ‘workers’ will have precisely none of the rights of the other shareholders, at least not as individuals. These include the right to sell their shares, the right to vote their shares as they personally see fit and the right to enjoy in full the dividend payments arising from the shares (as we shall see, part of these will be diverted elsewhere).
What is being proposed is a pot full of confiscated stock that will be overseen, presumably by trade union representatives, and from which employees will get a truncated dividend payment. This isn’t share ownership in any recognisable sense, not even in the amended form in operation at NFC, where stock could be sold only on an internal market to other employees, an understandable attempt to reconcile ownership rights with the character of an employee-owned company.
On to employee directors, who, according to Labour leader Jeremy Corbyn, will be imposed on both private and public companies with a 250-strong or larger payroll. Such companies will have ‘to set aside at least one third of places at the boardroom table for worker representatives, with a minimum of two’.
What would be the role of such directors? To promote the interests of the company and its shareholders, which is the duty of conventional board members; to represent their fellow workers, or to promote some sort of State-approved agenda of which we know, as yet, nothing?
It is worth remembering that trade unions themselves have long been suspicious of the whole notion of worker-directors, for three main reasons, ranging from the infantile to the self-interested to the sensible.
In order, these are that the workers’ role is to engage in all-out struggle with the bosses, not to join them round the boardroom table; that worker-directors would have a power base among the workforce that would rival that of union officials; and that employees and particularly trade union representatives simply have no business getting entangled in running companies.
Finally, the social dividend. This would be merely the part of the inclusive ownership fund dividends swiped from the ‘worker-shareholders’ and ‘transferred back to our public services’, according to John McDonnell.
In other words, it is a dividend tax.
Taking the package as a whole, it is striking that – along with the intellectual inconsistencies – there seems no understanding of how its strictures may provide perverse incentives. If 250 employees marks the starting point for compulsory worker-directors, keep the firm below that level. Or spin off bits into allied but technically distinct businesses, each with fewer than 250 employees but with cross-shareholdings.
Already, UK companies have had quotas of female directors, in effect, imposed on them. The more politically mandated appointments have to be made, the less will real power reside at board level. It will become like the Privy Council, while ‘executive committees’ multiply behind closed doors.
There will, presumably, be some cut-off point below which smaller firms are not required to hand over shares to their employees. Stand by for company size to be ‘gamed’ in the same way as is likely with regard to employee-directors.
Finally, there seems no understanding that plenty of workers have no desire to be either directors or shareholders. As the Labour movement once understood, and has apparently forgotten having been colonised by activists and graduate professionals, they would probably prefer more pay and shorter hours.