The 2012/01/24 at 06:50
Stéphanie Salti, in London
In a speech given in mid-January, Liberal Democrat Deputy Prime Minister Nick Clegg expressed a desire for British employees to benefit from the right to request shares in the companies in which they work, in order to settle “the standing feud between capital and labour”. This proposal may be matched with a certain number of measures to reduce tax for this type of company which, rather than falling in the framework of listed companies, would be in line with privately-owned companies not listed on the London stock exchange. During his speech, Nick Clegg called on a necessity to create what he describes “a John Lewis economy”, in reference to the economic model of the British department store. This brand, one of the most profitable in British retailing, has long been a management model. The history of this store goes back to the principles coined by its founder John Spedan Lewis, who bequeathed control and ownership of his company to two trusts last century.
With 76,500 employees, the John Lewis Partnership or JLP is one of the rare British companies to have a written constitution, placing the happiness of its partners at the centre of a successful business. Its governance also relies on two distinct pillars: the Partnership Council whose role is to hold management to account and to make governance decisions, and the Partnership Board, similar in structure to the board of directors of a listed company, which also includes a certain number of manager employees. With the exception of a proportion set aside for reinvestment in the company, the employees share all profits: for the 2010-2011 tax year, 194.5 million pounds (232.77 million euros) were thus redistributed.
At a time when British banks, as well as a certain number of the country’s major companies, are out of the public’s favour due to their unbridled race for profits, the employee share ownership model stands out as an attractive alternative to outrageous profit-swelling, favouring instead straight profit-making. In a recent survey, the Employee Ownership association, in charge of employee share ownership in Britain, highlighted the short- or mid-term slant of current business strategies: in 1960, shares were kept by shareholders for a minimum of five years, compared with a period of eight months in 2007. Despite the benefits of the employee share ownership model, certain observers remain sceptical about the extent of its application. Flattered by Nick Clegg’s comment, Charlie Mayfield, Chairman of John Lewis Partnership, has nevertheless acknowledged in the columns of The Financial Times that his model is “not right for everybody”.