As a party, we have long advocated a cooperative relationship between labour and capital rather than an adversarial and hierarchical one, where the investor, the manager, and the worker are partners in the industry.
Such a vision was expressed in our 1964 manifesto, with the statement:
“Employees must be given a share in the decisions and profits of the companies in which they work. [they] should be represented on the board of directors, or on a joint supervisory council”.
This vision has deeper roots in the Party’s history for in 1908, the Liberal government passed the Port of London Authority (PLA) Act, which mandated worker representation in the corporate governance of the PLA.
We should do more to revive this facet of ourselves, particularly with regards to co-determination.
We should have a detailed, comprehensive policy on this topic, and not be afraid to call for what the Alliance manifesto of 1983 deemed “industrial democracy”.
Rather than requiring “all UK-listed companies and all private companies with more than 250 employees to have at least one employee representative on their boards”, as our latest manifesto put it, we should be bolder and learn from our European neighbours, specifically Norway and to a lesser extent Slovakia and Slovenia.
In the case of the latter two, companies with over 50 employees (a medium-sized business by UK standards) are required to have one-third of their board members be made up of employee representatives. This makes co-determination more accessible to more workers, as even in medium-sized firms, many employees lack face-to-face interactions with their employer and thus any informal influence over corporate governance.
In the case of Norway, employee representation rises in parallel with the size of the firm. With 30 to 50 employees, there is one employee director. Firms with over 50 employees, one-third of seats are reserved for employee directors, and over 200, an extra employee seat.
I propose a synthesis of the two, whereby formal employee participation in corporate governance rises with the size of the company ( as measured by the current definition of micro, small, medium and large enterprises). One-third of members of company boards in firms with 50 employees should be elected by workers, with the share rising to half for firms with over 250 employees. Tax credits should be provided to small firms (10-49 employees), to encourage employee representation in their boards, as a way of gently shaping the corporate governance of larger small businesses to prevent sudden changes if they transition into medium-sized firms.
Employees should no longer be passive in corporate governance, as the 1945 manifesto put it “[The Worker] must become a partner and acquire economic citizenship”.
* William Francis is Chair of the Ealing Young Liberals
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21 Comments
Yes it is as you say, party policy, to have worker representation on boards.
I do think this is a feature of a co-operative relationship rather than a cause of one. An adversarial culture would make said boards dysfunctional, but with a co-operative culture it would make them stronger.
@Joe Otten
Culture is indeed important, but it is heavily influenced by institutions, and there is considerable feedback between the two. As such having worker representation on company boards may help foster such a culture.
That being said adversarial work cultures can and do exist in nations with co-determination, chiefly France.
I agree entirely with the approach.
A few questions. How would you ensure employee representation for local councils or government departments. And how about outsourcing, which means that the real decisions are being taken elsewhere as far as the outsourced employees are concerned.
@Tom Harney
Great questions!
Co-determination to the public sector ( except with regards to State-owned enterprises) is a rather neglected topic in public policy. As such I am a bit out of my depth. We could apply the same rules for the public sector as we do for the private sector, though am I unsure how it could be implemented in the context of government departments. For instance, would a passport inspector vote for a representative on the board of the Passport Office or Home office.
Off the top of my head outsourcing problem could be partly mitigated by categorising outsourced workers who work for a certain period of time at a firm ( measured in hours per month perhaps) as “de facto employees” for the purposes of elections for worker representatives. Perhaps firms with a large proportion of outsourced staff (or a have a large number of outsourced workers) could a have an elected seat on their boards reserved for outsourced workers.
Having worked for most of my life in businesses that provide outsourced services I would argue that the outsourced worker would want representation on the board of their employer, not the client where they may be working. Crucially pay and conditions will be set by their employer and by being on the board they would have influence on how the outsourcing business tenders for services, and what it stipulates in client contracts in favour of it’s employees.
@Tim Murray
“I would argue that the outsourced worker would want representation on the board of their employer, not the client where they may be working.”
Why not both?
When the policy of workers in company boardrooms was Labour’s it was “far left social engineering”.
When did that change?
@expats
Weirdly enough it was Theresa May herself who put that idea back into the public consciousness. Labour merely copied the idea. https://www.politicshome.com/news/uk/political-parties/conservative-party/news/77172/theresa-may-put-employees-company-boards
In any case, it wasn’t the Lib Dems (who had a codetermination policy during the 2019 election, as the article mentions) who said such things about Labour’s co-determination policy.
Its bizarre anyone would call co-determination “far-left social engineering”, given its history in the UK, even excluding the fact one could hardly call Jo Grimmond, Jeremy Thorpe, or David Steel (and David Owen), far left.
A formal co-determination policy was introduced via the Bullock report, under the auspices of the Wilson and later Callaghan governments ( who are seen as traitors to socialism by the far left) which was deeply opposed by the Marxist lead “Institute for Workers’ Control”.
https://en.wikipedia.org/wiki/Report_of_the_committee_of_inquiry_on_industrial_democracy
My essay in “The Wolves in the Forest”, published last year by the Social Liberal Forum, argues a detailed case for a structure of statutory representation of workers, including works councils as well as board membership. It also addresses participation in public and voluntary sector organisations. £9.99 from SLF website.
It looks back to Liberal Party policies as did Dr Stuart White’s essay in the previous publication “Four go in Search of Big Ideas”. SLF £9-50..
William Francis 19th Feb ’20 – 11:14pm………@expats…..A formal co-determination policy was introduced via the Bullock report, under the auspices of the Wilson and later Callaghan governments ( who are seen as traitors to socialism by the far left) which was deeply opposed by the Marxist lead “Institute for Workers’ Control”………………
As I remember it was the CBI, who opposed absolutely everything in the Bullock report, and the election of Thatcher’s (‘only capitalism matters’) government that ‘put the kibosh’ on any progress rather than a disparate group of Marxists..
It’s good that William Francis has raised this issue. The commitment of the Liberal Party to co-ownership in industry goes back to well before the 1964 election – “Ownership for all” was a party slogan developed by the Radical Reform Group in the 1950s and Donald Wade’s seminal 1961 booklet “Our aim and purpose” asked the question “why should labour not employ capital rather than capital always employing labour?”. Jo Grimond was very keen on the co-ownership concept and often praised the Mondragon projects that started in 1956 in in the Basque region of Spain. He persuaded the Jospeh Rowntree Social Service (now Reform) Trust to back “Job Ownership Ltd” started by the late Robert Oakeshott to assist companies practically to convert to co=ownership. On one occasion, at an election meeting in the Colne Valley constituency he was asked by a local socialist, “What are you going to do for the working class?” Jo replied, “I’m going to abolish it!”. He then went on to expound co-ownership.
It is just one policy unique to Liberals that we have abjectly failed to promote in recent years. Another is Land Value Taxation. We are appalling at stressing the key differences between Liberalism and other philosophies! It is, for instance, ridiculous that the Co-operative Party is affilated to the Labour party and runs joint candidates with Labour without any powerful challenge from Liberals.
We have neglected cooperation, co-ownership, mutual and non-profits: an important sector which has been squeezed over the past 40 years. For example, many charities have closed care homes, leaving what ideally should be a non-profit activity more and more dependent on profit-seeking financial owners. We should be putting this among our highest priorities in policy development.
It’s good to see William, Michael and Gordon championing the policy of employee participation and share ownership…. and yes…. it has been neglected in recent years.
Jo Grimond’s campaign was what first drew me to the party nearly sixty years ago in Spen Valley and Huddersfield……. but it goes back much further than that. Theodore Taylor (a one time Liberal M.P. who lived to be 102 until 1952) started the scheme in his mills in Batley and Birstall well over 100 years ago. I remember my Dad, who worked for him before the war, saying what a great old man he was.
It’s time to resurrect a distinctive liberal policy and for the party to rediscover some of its distinctive radical roots.
Employees should be encouraged to buy some shares in the companies they work for. However not too many as that over-concentrates their risk, since if the company fails their jobs are already on the line; having a large part of their savings in the savings in the same place is not a good idea.
The key thing if we want employees on boards is to be clear what their role is. The duty of the entire board is to promote the success of the company as a whole. If such employee directors are seen as “delegates for the workers”, it will not work.
For example. Are such employee directors willing to vote for the closure of their factory, if that is in the best interests of the company as a whole?
I do wonder how much less attractive companies will become to potential investors if they know that a large proportion of the directors owe their primary loyalty to the workforce, rather than to the long-term prosperity of the company.
Of course, you could argue that workforce representatives would be seek the long-term good of the company that employs that workforce.
But how does that work in a world where the company’s long-term success and even survival is very likely to be dependent on automation and cost reductions that will cost much of the workforce their jobs.
Of course, you could respond that the company SHOULD prioritise the maintenance of the workforce over the company’s long-term success and even survival.
But in that case those jobs may not be around for long anyway.
And if the business is far less attractive to new investors, that too makes it far more difficult for the company to survive in difficult conditions.
And of course if the business does fails we have seen how often it can take the workforce’s pensions down with it.
@Mohammed Amin you raise some interesting points. Company Law (Companies Act 2006) as currently constituted has the prime duty of directors towards the company as being to act in the best interests of members (shareholders) as a whole, which would seem to cover that point. It also requires them to avoid conflicts of interest and to consider the needs of employees in pursuit of that goal.
Where employees are also members, the separate interests become more muddied, of course.
Congratulations to William Francis for raising this vital distinction between us and “top down” confrontational Labour, and for digging into our history to give some details of our long-term commitment to democracy in the workplace. Thanks also to Michael Meadowcroft, Gordon Lishman, William Wallace and David Raw for adding “further and better particulars” from their experiences.
The pioneer profit sharer Theodore Taylor of Batley, whom David Raw mentions, came to address us at school on his 100th birthday. He advised us to be good and work hard. Employees at Taylors’ Mills (as with with David Raw’s dad) shared in the enterprises’ profits and many of them did very nicely out of it. There was, however, no share in the decision making, but it is worth noting that Taylors’ survived for longer than most mills in the Heavy Woollen District.
When I first contested the Batley (and Morley in those days) seat in 1970 our policy was, as far as I remember, that one third of the board should be employee representatives, one third shareholder representatives, and one third represent the community. But, as pointed out above, this doesn’t necessarily fit all organisations, especially national and local government services. There is no “one size fits all.”
As Liberals we appreciate the value of variety (again in contrast to Labour) and should be keen to explore different mixtures which will enable all concerned to share in the organisation and success of the enterprises in which they are involved.
If we prioritised employee involvement, it would increase the squeeze on Labour something that might improve our electoral standing and facilitate other policy areas where cooperation is essential.
@ expats
“As I remember it was the CBI, who opposed absolutely everything in the Bullock report, and the election of Thatcher’s (‘only capitalism matters’) government that ‘put the kibosh’ on any progress rather than a disparate group of Marxists..”
Never claimed it was the far left that crushed discussions on co-determination, only that’s its pretty absurd to say co-determination is “far-left”.
Co-owneship requires sharing the pain in the bad times as well as the upside in good times as the recent experience of John Lewis in cutting the 2019 staff bonuses to 3% (the lowest level in 65 years) shows https://www.ft.com/content/b3a4e5f8-4016-11e9-b896-fe36ec32aece
Bonuses had already declined sharply, from a peak of 18 per cent of salary in 2011 to just 5 per cent in 2018. These are big decreases in take home pay for John Lewis staff.
Charlie Mayfield, chairman of the parent company John Lewis Partnership warned that more tough times lay ahead and said: “We have to live within our means.” Competitive and economic pressures would continue into 2019, he added, so the group would need to maintain high cash reserves. Sir Charlie said staff increasingly faced a choice between having money today in the form of bonuses or, at a later date, as a pension. “You can’t have it twice,” he said.
There have been a number of tax incentive schemes tried over the years for profit sharing and employee share schemes, but they have had limited impact.
I would concur with Michael Meadowcrofts comment “It is just one policy unique to Liberals that we have abjectly failed to promote in recent years. Another is Land Value Taxation. We are appalling at stressing the key differences between Liberalism and other philosophies! It is, for instance, ridiculous that the Co-operative Party is affiliated to the Labour party and runs joint candidates with Labour without any powerful challenge from Liberals.”
However, the devil is in the detail. A stakeholder approach to corporate governance requires more than simply worker representation on the board. Moving companies away from a defined objective of maximization of shareholder wealth and a greater focus on corporate social responsibility, requires a wholesale cultural realignment that may begin with bringing executive remuneration any employee relations under the control and scrutiny of a wider group of stakeholders than a remuneration committee made up of non-executive directors and union representatives.
Social Liberals have supported the ideas of “co-determination” and “co-ownership” for decades. Lets hope that Liberal Democrats can develop these ideas to help give employees and home dwellers more control over their own lives. We have long supported co-ops, employee partnerships, mutual societies, social enterprises and employee reps on Boards of Directors. Lets move forward with these policies for a more democratic future!