We have called, in a submission earlier this month, for the idea that there could be a ‘right to request’ for employees to buy a firm that is threatened with closure. It is good news that the Liberal Democrats have picked up on the idea. Nick Clegg this morning calls for a ‘John Lewis Economy’.
The Deputy Prime Minister also focuses, according to media reports, on tax incentives. You have to say, though, that there are already significant tax advantages for employee ownership.
I believe there are in total around £1.2bn of annual tax incentives for employee share ownership. With the honorable exception of the Share Incentive Plan, the big disadvantage of this spending is that past schemes have tended to benefit people on higher incomes far more than others. One factor is the difference between capital gains tax and income taxation rates, when corporate executives benefit from ownership options as part of their packages. This makes employee share ownership a driver of rising top executive pay rather than one for wider staff economic participation.
That is not John Lewis. It is Goldman Sachs.
Surely, it is more interesting to look at how to use employee ownership to foster a more participative economy? Here are three suggestions as a starter for Nick Clegg.
1. Any executive compensation schemes that benefit from the taxpayer ought to be open to at least fifty per cent of the workforce. It ought to be open to all legal models for employee-owned co-operatives, rather than driving through taxation policy a preference for certain corporate forms.
2. The insolvency regime could be made more conducive to the rescue of ailing firms through employee ownership, taking on board some of the ideas set out by Anthony Jensen in his recent report, funded by Co-operative Action.
3. Italy’s Marcora Law, for example, makes it easier for people who are made redundant to package up their unemployment benefit to capitalise a buyout co-operative, moving from welfare to self-employment.