Magazine article The Spectator

Fair Dos All Around

Magazine article The Spectator

Fair Dos All Around

Article excerpt

Fair dos all round

Geoffrey Owen


by Robert Oakeshott

Michael Russell L35, pp. 710

Most people accept that an industrial enterprise is likely to perform better if the people who work in it have a personal stake in its success and some say in the decisions which affect them. The problem is how to reconcile the promotion of employee loyalty with the need for managers to do things - for example, the closure of a loss-making factory - which may be extremely painful for the workers concerned.

One approach is the German system of co-determination, whereby, in large companies, workers or their trade union representatives fill half the seats on the supervisory board; this ensures that employee interests are taken into account in major corporate decisions. In Britain and the US, many companies encourage employees to buy shares. The hope is that, as investors, they will have a better understanding of the company's affairs, as well as a stronger incentive to work hard on its behalf.

A much more radical solution, advocated by Robert Oakeshott in this illuminating and strongly argued book, is employee ownership. Between 1979 and 1999 Oakeshott was executive director of Job Ownership Ltd, a London-based consultancy which advises firms on how to handle the transition from conventional arrangements to employee ownership and control. This book is a distillation of his experience.

Of his 22 case studies, the star of the show is John Lewis, the British retailer. This company has been owned by its workers since 1929, when John Spedan Lewis, son of the founder, sold the shares to an employee trust. Since then it has developed an elaborate structure of worker participation, the centrepiece of which is an elected Central Council. The Council provides five members of the 12-person executive board, and has the power to remove the chairman from office.

Despite a recent downturn in earnings, John Lewis has an impressive record of growth and profitability. There is no way of proving that this is due to the partnership system (although the exceptionally low levels of absenteeism and pilferage appear to reflect a company-wide ethos), but it does at least show that employee ownership is not incompatible with success in the marketplace.

The same can be said of Tullis Russell, a Scottish paper-maker which since 1995 has been majority-owned by its employees; it had previously been controlled by the Russell family. Part of the family's motivation in making the transfer was to ensure the company's independence, but they also believed - rightly, to judge by its subsequent performance - that employee involvement would be good for the business. …

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