Workers’ Councils – one way to take back control of our economy

When Theresa May suggested that businesses ought to set up workers’ councils, she was said by many commentators to be moving to the centre ground, perhaps to hoover up centrist voters put off by Labour’s leftwards drift. Whatever the political motivations, it is an extremely interesting idea. Is it one that liberals should support? Absolutely, because it can help people take back control — in a meaningful way.

A lesson from the EU referendum was that many people are dissatisfied with the economic system. The slogan “Take Back Control” was vague to the point of meaninglessness, but psychologically potent for people who perceive their work to be meaningless. There could be no greater symbol of a loss of control than a zero-hours contract. Modern capitalism leaves many people feeling that their lives are controlled by uncaring bosses.

Arguably the reason many of the regions which received most in EU funding votes Leave was also because they resent being the recipients of charity. All those shiny buildings with the EU flag on them were glaring symbols of people’s inability to help themselves. Their lack of control.

Workers’ councils would be a great way for people to take back control of their lives, by giving them a say in their places of work. It might also make them better businesses. In Germany, where workers’ councils have been legally required in certain businesses since 1952, 43% of all employees in the West of the country and 35% in the East work in businesses with them. In businesses with over 500 employees, the figures rises to 89% across the country.

There are lots of reasons that Germany’s economy is flourishing, but one is that workers’ councils press for long-term planning, which makes firms more risk-averse. This makes them more able to weather downturns, so that they lay off fewer workers in tough times. Indeed, employment trumps profits in many cases. Workers might feel that have more of a say over how the businesses they work in are run.

Some might argue that such government forcing firms to create workers’ councils would be illiberal. Existing shareholders would naturally protest that their power was being watered down, and that the businesses they own might are fundamentally being changed.

The solution? Rather than trying to retrofit old companies, government could look at new businesses. The government is involved in all sorts of programmes to create new clusters, such as the Catapult scheme. Why not encourage the founders of those businesses — the world-beating British firms of the future — to adopt a philosophy that values employees? It is easy to imagine a policy that would nudge business creators to embed other aims into their businesses, for example by giving tax breaks to those who have workers’ councils.

For decades business the “Anglo-Saxon” model of business has prioritised profit above all else, adopting the spurious idea that a business’s only aim is to maximise shareholder value. The free market should not be impeded, goes the argument. We’ve seen where that gets you. Now could be a good time to us to take back control of our economy.

* Jeremy Hazlehurst is a journalist who writes for the FT and Management Today. He recently joined the Liberal Democrats.

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17 Comments

  • Gosh a Liberal Democrat that gets it – you have to intervene in your own orthodoxies to move forward.

  • Peter Bancroft 27th Jul '16 - 12:19pm

    I do think that greater levels of employee involvement can be said to be inherently liberal, but the issue I have with works councils (as specifically regulated for in Germany) is that having worked with a number of them they have a track record of delaying investment and holding back productivity improvements. One such example was the council’s veto on a new customer problem management system which in the UK brought the time to solve the average issue down from a week to just 10 minutes. The status quo was not acceptable, so in the end those German roles simply got moved to the UK.

    What is interesting is whether the general principle of greater employee engagement and involvement could bring about both economic as well as social benefits. Employee engagement is often now tracked as a leading internal KPI. A number of companies in the UK have been experimenting with putting employee representatives on the Board which seems to have been received very positively.

  • Peter Bancroft 27th Jul '16 - 1:13pm

    One idea I think that could be worthwhile looking at would to beef up the role of employee representation on the board, but do so alongside representation of the customer.

    This covers two potential issues:
    Firstly, employee representation often puts themselves squarely in opposition to efforts to improve the service to the customer – much more often then they are opposed to the mgt’s interests. Having customers alongside them would allow an open debate about the benefit of a certain improvement (as the CRM example above), or a discussion as to what costs the client is actually willing to pay for
    Secondly, when employees and customers are aligned it would be a strong indication that an idea should be reviewed. One example could be offshoring or outsourcing part of the business. I could see a negotiation with employee and client as being very productive to coming to good decisions. You’d expect the employees to oppose, but it’s probably only to be a good idea if you can get the client on board with the explanation that you will retain service and cut costs. If not (and it’s often not), then perhaps the idea is more tactical than was first suggested.

  • Richard Warren 27th Jul '16 - 2:04pm

    Didn’t we propose worker directors on boards back in the 1970s, along with the minimum wage and freedom of information? I suppose we ought to be glad the Tories and Labour finally come round to supporting these things. How this country needs a Liberal Democrat government.

  • Sue Sutherland 27th Jul '16 - 3:10pm

    I think the SDP also had this as one of their policies. Don’t let anyone give the credit for the idea to May or Labour.

  • I am definitely a fan of these. I would argue that ensuring there is proper, respected, input from workers, that boards can better understand the realities of their business model, and what is or is not possible, thus aiding innovation and boosting profits. Ensure workers have the right to a proportion of profits if you are worried they need a bit of extra motivation.

    It’s too easy to fall into the trap of thinking that workers’ rights, or the environment, are an impediment to profit, but very often, they are a route to better efficiencies.

  • So are these instead of, or as well as, unions?

  • Robert Wootton 27th Jul '16 - 9:00pm

    Unions came into existence to ensure that workers are treated with respect by management. But the unions have been emasculated the 80’s Tory government.

  • Robert Wootton 27th Jul '16 - 9:03pm

    According to Ken Clarke, Margaret Thatchers greatest achievement was New Labour. Ref. chapter 2 in the book “How To Dismantle the NHS in Ten Easy Steps”.

  • Conor McGovern 27th Jul '16 - 9:17pm

    Absolutely agree with this, we need stronger trade unions also – up to European standards would be great for workers. A major expansion of workplace democracy too – wasn’t this in the original SDP/Lib Alliance manifesto or am I wrong? 😉

  • @ Conor As a matter of fact it was in the 1959 Manifesto – when the Liberal Party was a real radical party under Jo Grimond.

    I know ‘cos I was there.

  • nigel hunter 27th Jul '16 - 9:57pm

    These ideas, first thought of by the party in the 70s should be discussed on social media AND pointed out that it has taken the others over 40 years to talk about them.

  • “For decades business the “Anglo-Saxon” model of business has prioritised profit above all else, adopting the spurious idea that a business’s only aim is to maximise shareholder value.”

    Shareholders are the actual owners of the company. Some of those shareholders may at some point have taken a considerable risk in investing their own cash in a business. Other shareholders are you and me by proxy via our ISAs or pension funds. Why is maximising shareholder value a “spurious” idea? Surely the owners of a business are entitled to maximise the value of their business, provided they are acting legally?

    To suggest otherwise is akin to telling people they should sell their house for less than it’s actually worth in order to help poorer people onto the housing ladder.

    I’m not saying that to excuse the likes of Sports Direct (who have probably been acting illegally anyway). Good companies who are sucessful in the long term tend to be the ones that treat their employees well, consult and involve them, and reward them appropriately.

    Wouldn’t it be better to encourage cooperatives and employee share ownership schemes, so that the employees are the owners/shareholders too, and so are maximising value for themselves?

  • There’s nothing new in this world. One of the first co-ownerships and profit sharing schemes was set up by one Theodore Taylor (1850- 1952) a Liberal MP from West Yorkshire who lived to the grand old age of 102. I well remember his mill at the Smithies in Birstall (tragically very close to where poor Jo Cox lost her life).

    I also just about remember my Dad pointing out old Theodore too when I was a child.

    Of course the John Lewis partnership is run on the same basis. It is a distinctive policy and it’s time we put some beef into it (apologies to all veggies).

    I believe William Wallace wrote on the subject back in the fifties – as did Donald Wade in 1958 who was the Liberal MP for Huddersfield (it was produced by the party and someone may have a copy somewhere.)

  • Katerina Porter 28th Jul '16 - 12:34pm

    Sam Watson a trade union leader told my husband (back in the fifties?) that we had established worker participation (on the boards?) in our Occupation Zone in Germany, and unfortunately would not be able to get it through back home.

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