A while back Demos published a report called Reinventing the Firm which advocated employee ownership as a preferred model in place of the present dominance of the one that is focuses on building shareholder value. These arguments are old hat to Liberals in Britain who have been lonely advocates of such reforms for generations. Nevertheless we should be pleased to see a renewed interest in this issue especially in the aftermath of the financial crash. as Demos says:
Reinventing the Firm argues that companies' obsession with short-term performance measures such as share price and quarterly profits made many banks and other firms act irresponsibly and helped pave the way to economic ruin a year ago. It says alternative models of ownership that have been neglected - such as employee ownership, mutual finance and public interest companies - would diversify the economy, make firms act more responsibly and spread profits to employees.
Any LibDem looking for a check list of policy measures that the Government could take to redistribute wealth , democratise our society and build a stability into our economy could do worse than look at the reports findings. Some of these issues have already been taken up but there is still lots to do and it could be done under our flag. Robert Oakeshott who has previous for promoting good ideas is a long term advocate of empoyee ownership and was a founder of the EOA.
The report's recommendations include:
Re-mutualise Northern Rock to begin the process of diversifying and stabilising the financial sector as a whole.
Restore tax advantages for business owners to transfer ownership to employees. The tax incentives for Employee Benefit Trusts that existed before 2003 should be re-established. Greater knowledge of employee ownership on the part of those who advise business owners - such as accountants, lawyers and Business Link advisers - would also spread awareness.
Extend employee share ownership to all staff, not just senior management. External investors and internal investors with more than 5 per cent equity benefit from tax breaks through CGT entrepreneurs’ relief and the Enterprise Incentive Scheme; employees who want to invest small amounts of capital should enjoy the same tax relief.
Expand co-owned public services. The public sector should continue to explore the use of co-ownership in the delivery of public services. Foundation Trusts are one model. Experience of co-ownership in the delivery of care services such as home help for the elderly and community nursing indicates that it engages users and empowers public servants. Hybrid organisations, co-owned by government, employees and users need piloting in the areas of health, education and transport.
Set up a public venture capital fund for mutuals and employee-owned businesses to help to open up access to finance and yield a return for taxpayers.
Government should commission in-depth, comparative, quantitative research on the relationship between ownership and the levels of health, well-being and civic engagement of employees.
Reinventing the Firm also argues that in knowledge economies like the UK, employee ownership can significantly increase productivity. The Employee Ownership Index outperforms the FTSE by an average 10 per cent annually and Government employee share ownership schemes can deliver a 5 per cent productivity increase. It also says that spreading asset ownership more widely encourages prosperity and more democratic workplaces increase the well-being of employees.
The report urges government to look at ways of spreading the benefits of ownership to all staff, not just senior managers, including tax incentives. It points to France, where profit-sharing is mandatory for firms with more than 50 employees.