Employee ownership is the antithesis of broken capitalism
As we welcome yesterday’s policy paper from IPPR which looks to redress the in balance of wealth and its effects on the UK economy it joins the voices of many across business, society, the media and politics that capitalism MUST start to deliver more than simply financial value to senior executives and corporate shareholders.
Those organisations with behaviours focused on generating short term, executive wealth, rather than protecting long term business health, are increasingly being called out as examples of ‘broken capitalism’.
The questions about the current structure of capitalism include; Who should benefit from it? What does good capitalism look like? And what is its role in delivering good work?
As a non-economist, I think it’s clear; for capitalism to endure, it must evolve – by becoming more inclusive, having wider impact and being more responsible.
Ultimately, I believe a healthier form of capitalism has far less self-interest.
This debate matters hugely to the employee owned sector, as employee ownership is the antithesis of broken capitalism.
Instead of the short term, self-interest of a small number of corporate shareholders, there is long term, shared purpose amongst all employee owners.
Instead of the selfish greed of senior executive remuneration, there is all-employee recognition and reward of collective effort.
And instead of the secrecy of corporate and executive self-preservation, there is transparency, trust and respect.
As far as the objectives of the EO sector are concerned, the current debate about capitalism couldn’t be better timed.
For during this year, the EOA has been leading a new national conversation about the relevance, value and opportunity of employee ownership to the UK economy.
With the generous support of lead partners, the eaga Trust and the John Lewis Partnership, expert guidance from Cass and Alliance Manchester Business Schools, leadership of chair Baroness Sharon Bowles, I’m delighted that we have been able to reach out across the UK, engaging with over 100 businesses at 7 separate oral hearings and via an online consultation to gather the most in-depth evidence ever about this sector.
We were also delighted to attract the involvement of a Panel of 22 leading business organisations which included the IOD, IFB, FSB, ICAEW, Law Society and CMI. This key group heard all of the evidence and is now in the process of finalising the Inquiry recommendations, with the final report due to launch in the first half of next year.
Ahead of that launch we can reveal that this is a sector of the economy that is growing and diverse. Employee owned businesses can now be found across the entire UK, in every sector and in all sizes of business. And unsurprisingly, that diversity means that the models of employee ownership also differ, with indirect, direct and hybrid models all present.
Secondly this is a business structure and culture which is delivering important economic benefits of stronger performance, and doing this with more robust corporate governance resulting in better employee engagement.
Evidence from those that have moved to employee ownership in the last five years in particular, showed the enhanced financial performance in terms of increases in turnover and profit, identified as a result of the impact on the individual in terms of the additional discretional effort, added responsibility and strategic accountability of employees now acting as owners.
In considering where and when employee ownership might therefore contribute further to the UK, the Panel has agreed the following two key areas of opportunity:
At a regional place level, where there is demonstrable evidence of the positive impact of employee owned businesses on economic resilience and growth.
And With individual SME and family businesses where employee ownership is evidenced as a solution to effectively manage succession and scale up.
We look forward to revealing more and working with organisations such as the IPPR in 2018 on broadening ownership in the UK economy.