Wednesday, 9 May 2012

Oh! Lord Oakeshott-what about the workers when it comes to dealing with top pay?

A tale of two Oakeshotts (Robert and Mathew) and how together their impact would be stronger..........

What about the workers? I found myself demanding of the radio last week. The shareholders revolt over top pay was the topic under discussion. Now the problem I have with shareholders-a problem shared with most Liberals for the last hundred years-is that their interests are solely getting the biggest return on their capital. They are here today and gone tomorrow-or even quicker than that if the shares are bought and sold on line in the twinkling of an eye.

Liberal have always argued that employees and share holder should have equal status . The party's Co-Ownership plans-which Richard Wainwright called the holy grail of Liberalism- would have amended Company law so that both shareholders and employee appeared together on a common register to elect the board of Directors and removed the obligation to build shareholder value as the chief responsibility of the Directors.

Cameron refuses to accept even one lone token worker on a sub committee of a Board to look at pay. We have championed equal representation! That would sort out top people's pay and re-orientate businesses away from the destructive risk taking options associated with the dogma of 'building shareholder value' and instead concentrating on building long term businesses and growing jobs

I know that I am not alone in welcoming Lord Oakeshott's increasingly frequent appearances on the media to champion the Liberal cause -particularly when the topic under discussion is economics but adding this arguemnt to his undoubted financial expertese would be most welcome

But let me digress a moment. Oakeshott was the Lib Dem Treasury spokesman in the Lords and Oh how we wish he had been consulted during the formation of the coalition-indeed we wish any economist of note had been -but sadly the thinking in Whitehall and amongst those around the table was dominated by fear of the markets and the impact in the city ,rather than on the impact on men and women far removed from those interests.

I doubt few of us realise the extent to which the negotiating teams failed to take advice until David Howarth (former Lib Dem MP for Cambridge) wrote a review in the Spring Edition 2011 of the Journal of Liberal History :

.............the Liberal Democrat leadership took no external advice about the issue, or about the separate issue of accelerated deficit reduction. Both the Treasury and the Bank of England would have reinforced the acceleration view, given half a chance, but that view is built into their nature. Others took very different positions on the optimal path, from the NIESR’s moderate caution to David Blanchflower’s jeremiads. The puzzle is not that the party took one view or another, but that it did so on the fly without consulting specialists. Has the party of Keynes lost touch with economics as a discipline?

Lord Oakeshott is on the Management Committee of the afore mentioned NIESR and I chanced to notice a press release from them last week on the outlook for the British economy:

The unemployment rate will r ise to about 9 per cent this year and remain high throughout the 
forecast  period. Elevated unemployment for such a long period is likely to do permanent 
damage to the supply side of the economy, with large long-run economic costs.

It remains our view that fiscal policy could be used to raise aggregate demand in the economy 
with little to no loss of fiscal credibility. We have never and do not now advocate scaling back 
the government’s medium- to longer-term policy of fiscal consolidation. However, the UK 
also suffers from a lack of demand in the short term. As we noted in our January Review, a 1 
per cent of GDP increase in government investment this year would boost GDP by around 0.7 
per cent, assuming no reaction by the MPC. A temporary boost to net investment, which has 
been cut extremely sharply, would have no direct effect on the government’s primary fiscal 
tar get of balanc ing the cyclically-adjusted current budget in 2016–17.

Ah well, let us return to Top peoples' pay. Oakeshott M was arguing that shareholder needed to be given more power to control the pay in the Board room. There is much talk of binding votes and the revolts at the AGMs of Barclays and Aviva have been much in the news. It all sounds good stuff but I have a problem with the premise. I rather tend to the view that it is the dominance of this form of ownership-ie the share owning plc-that is part of the problem and giving yet more power to shareholder who already have the Ace of trumps and all the Royals in their hands many not be the best solution. You need labour and capital to make a good business. As the report from Kellogg College said after the financial collapse:

..........the UK financial services sector is dominated disproportionately by a single business model, namely the large, shareholder-owned plc. This domination of the shareholder ownership model – whose purpose is to maximise financial returns to the shareholders – proved a lethal combination with the financial deregulation, the creation of new financial instruments and the subsequent rising levels of debt over the past twenty years. Ever greater risks were taken to drive up financial returns and ‘shareholder value’, culminating in the global credit crunch of 2007-2008 which in turn created the first global  recession since the 1930s, during 2008-2009, from which the UK and global economies are only slowly recovering.

There are, of course, other models of ownership. Here we come to Robert Oakeshott the John the Baptist of the Employee Ownership model who with Grimond set up what is now the Employee Ownership Association. Together they had visited the Mondragon Co-operatives in the 1970's and came away to campaign for than business model in Britain Grimond was particularly impressed with the Workers' mutual Bank the co-ops set up which provided the capital for the massive expansion. Today there are over 100 co-ops and 100 000 employees. No wonder it has been describe as the most successful entrepreneurial support system ever!

The idea is catching on and there is regular media coverage of new initiatives and research studies showing the economic advantages

The Liberal ideal-as Richard Wainwright frequently told the Liberal Assembly is one in which labour hires capital.


  1. I really like this article on co-ownership Iain, some great political content that reminds us of the big important political issues and how old ideas may help us build a better, fairer economoy.

    I also liked the historical perspective on the Southport election results, publicity for good Lib Dem results, some good Southport local and political history.

    You've put up the Southport stats, have you seen anyone put up total figures for the whole of Merseyside as to how the parties and other candidates performed in terms of votes?

  2. Thanks Kiron, I'm pleased you like our employee ownership argument. It is a key way of redistributing assets in society as well as enhancing citizenship.

    I have not seen any other Merseyside election stats other than the ones on Liverpool Post blog for the Mayoral elections -and of course most people in Southport do not regard themselves as Merseysiders!


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