Labour’s Employee Ownership Plan: not so inclusive after all

Two weeks ago I praised John McDonnell for plans to spread share ownership. Now more details have emerged and I’ve changed my mind. When I was with Labour Business speaking at their conference fringe 2 years ago I recommended a requirement for LARGE LISTED companies to set aside a percentage of their PROFITS into an employee shareholding trust which would act in the long-term interests of employees. This would align workers and shareholders interests with the long-term performance of the company and steadily build a long-term employee stake as has been done by Handelsbanken. McDonnell has now proposed that ALL companies with more than 250 staff must set aside 1% of EQUITY every year to an ‘Inclusive Ownership Fund’ (IOF). Some questions for Labour: • Why is the threshold set as numbers of staff not turnover? • How can you apply this irrespective of profitability or loss making? • Have you calculated the implications for ordinary people’s retirement income? • Why not focus on listed companies at least initially and leave well-run private businesses to make their own decisions? • Why a share of equity and not a share of profits? (The first is expropriation; the second would be sharing success.) • And what safeguards are there to ensure that the governance of the IOF would be focused on the long-term benefit of the employee shareholders and not on extraction of short-term rent? (If you are going to promote employee shareholders you should at least ensure they are long-termist ones.) I want to be open-minded but need to be persuaded that McDonnell and Labour have a stewardship rather than extractive view of the role of shareholders. So far, it sounds as they are more interested in dispossessing shareholders than creating a climate of shared wealth creation. If so using the word ‘Inclusive’ is an abuse of the spirit of Tomorrow’s Company which introduced the word into the debate about business 24 years ago.