Hot topic: Worker share schemes
Andrew Pendleton and Mike Spicer, November 09, 2018
Shadow chancellor John McDonnell recently set out plans that would oblige large firms to offer worker share schemes
The amount of share capital available would be capped at £500, with the remainder funding public services and welfare. Could such share schemes provide a welcome boost to worker voice and the UK’s productivity? Or do the plans go too far?
Andrew Pendleton, director of policy and advocacy at the New Economics Foundation, says:
"The New Economics Foundation first introduced inclusive ownership funds this year. We found that businesses that are part of the co-operative sector (including mutual, employee-owned, and co-operative businesses) are, on the whole, more productive and profitable, with happier and better-motivated employees and members. But not everyone wants to work in a co-op and not every business is going to become a John Lewis.
"So we propose inclusive ownership funds, which transfer a proportion of annual profits in the form of shares into worker-controlled funds. This gives workers more influence over business strategy and a greater share in the added value they help create, spreading the benefits of co-ops more broadly.
"There are a variety of ways this could be structured but the aim is the same: more control and fairer rewards. Lack of control and fairness is partly why the UK economy suffers from low productivity and short-termism."
Mike Spicer, director of research and economics at the British Chamber of Commerce, says:
"Labour’s proposals are a major overreach into the way many companies are run and will raise considerable concerns among the UK’s business communities.
"Employee ownership and participation have a positive impact on the many firms that choose to adopt these business models. While this approach should be encouraged it should not be enforced by government decree. Imposing a rigid policy is not the answer.
"In the current climate of uncertainty and change, both parties of government should be doing all they can to boost business confidence and improve the domestic business environment. Right now the UK wants to encourage new investment, and government interference in boardrooms and business models does not send the right message to investors about the attractiveness of the UK."
Check back on Monday for part two of this hot topic