My new report, All Of Our Business: Why Britain needs more private sector employee ownership, is published today by the Employee Ownership Association. To accompany it, I had an article in The Sunday Telegraph yesterday laying out its main arguments. And today, Nick Clegg seems to be taking this agenda seriously, as part of the (overdue) political movement towards questioning ownership and control in the private sector, and not just the public sector.
The central argument of the report is this:
[The report identifies] two rival philosophies of economic value, that businesses can embody. The first privileges the power of ‘exit’, and rapid turnover of all stakeholders, including shareholders, management and employees. Its proponents argue that this philosophy breeds efficiency, dismantling obstacles to innovation and profit. But in the last four years, it has become mired in a legitimacy crisis, as it appears to lead primarily to the personal enrichment of those who enforce and facilitate this model.
The second philosophy privileges the power of ‘voice’ and institutional memory, such that relationships between owners, managers and employees are sufficiently strong that information can be shared, and difficult economic times can be weathered. This can be difficult to realise in our culture of short-termism and distrust, but the argument made in this paper is that it is substantially easier in situations where the owners are also employees, and the employees are also owners. Employee ownership is a ‘commitment device’, which can save businesses from their own worst tendencies.
The employee-owned sector is not currently large enough to bring about a wholesale change in the character of the British business model, although the mutuals and co-operatives sector at large (which includes building societies, credit unions and consumer co-operatives) can make a significant contribution to alleviating many of the malaises of corporate governance, especially in the financial sector. They are also more numerous and high-performing than many policymakers appear to realise. The point that this report seeks to stress is that it is not only employees who suffer from a model of short-termist, earnings-obsessed business, but also shareholders, entrepreneurs and businesses, whose long-term interests are frequently neglected by the ethos of profit-maximisation. Eventually, society and public services are impacted negatively by business models and business culture that take such a narrow view of human psychology, as has prevailed in the UK over the past thirty years. The spill-over costs of bad workplace relations are now increasingly falling on the NHS. Viewed this way, it’s not clear that dominant notions of ‘efficient’ business practices are really as efficient as all that.
I'll try and blog a bit more about this in the coming days.
Update: British readers can hear Charlie Mayfield, Chair of John Lewis Partnership, and I discussing employee ownership on Radio 5 yesterday evening, at 2:24mins here.