John McDonnell’s proposed to compel large companies to move towards 10 percent employee ownership, but CBI says it will reduce productivity. Contributor Chris Blundell, Partner – MHA MacIntyre Hudson.
It is surprising that the CBI’s immediate reaction to Labour’s employee ownership plan is that it is a “diktat” or an imposition and will reduce productivity not increase it. For a start employee ownership is a policy of the Conservative party too. Indeed it was they who brought in Employee Ownership Trusts in 2014 to facilitate this.
The CBI’s argument is that the imposition of employee ownership would reduce quoted company share prices which would in turn reduce their ability to raise funds. This would reduce the amount available for the investment they need to increase productivity which would ultimately lead to reduced real wages for employees.
This is only a sound argument if you think encouraging employee ownership has no impact on productivity at all. And yet many studies show that it has a positive impact. If the CBI is going to stand against employee ownership it seems to ignore all this evidence just to do what the general public might plausibly always suspect it does: protect big business against the interests of the common man and woman.
Organisations like the CBI need to understand the changed public mood that “austerity”, voting for Brexit and the financial crash of 2007/8 has brought. It is far from impossible that Labour may get elected. So rather than standing against whatever Labour says because it is a Socialist/Marxist party the CBI and others should be considering how they can engage with Labour to help them adjust their proposals to be workable if they think they aren’t. To do otherwise is naive.
There is a very strong case for supporting employee ownership given evidence shows it can significantly improve productivity and it is to be hoped more organisations will think about moving towards a John Lewis type employee ownership business model.