The Deputy Prime Minister, Nick Clegg, is urging companies to unlock potential growth by offering shares to its employees.

This would create what he calls a ‘John Lewis economy emulating that department store group, which is owned by its employees who all receive a share of the profits as a consequence.

And there are possible tax breaks on offer for those companies that adopt such a scheme.

Talking at a City of London Corporation and Centre Forum think tank hosted event at Mansion House he said that "We don't believe our problem is too much capitalism – we think it's that too few people have capital. We need more individuals to have a real stake in their firms. More of a John Lewis economy, if you like. And what many people don't realise about employee ownership is that it is a hugely underused tool in unlocking growth. I don't value employee ownership because I believe it is somehow 'nicer' – a more pleasant alternative to the rest of the corporate world. Those are lazy stereotypes. Firms that have engaged employees, who own a chunk of their company, are just as dynamic, just as savvy, as their competitors. In fact, they often perform better. Lower absenteeism. Less staff turnover. Lower production costs. In general, higher productivity and higher wages. They weathered the economic downturn better than other companies."

Labour’s shadow business secretary, Chuka Umanna, said that the Deputy PM was just following Labour’s lead on ‘responsible capitalism’. "If Nick Clegg wishes to follow Labour's lead in promoting shareholder activism and engagement, that is welcome." he said.

The Deputy Pm said that he wanted to get employee ownership, which was the ‘touchstone’ of his party’s thinking, ‘into the bloodstream’ of the UK economy.

Liberals believe strongly in the virtues of the market. But only if it is a market for the many, not a market for the few. Our economy is in danger of becoming the latter, monopolised by a minority, serving narrow and sectional interests.” He said.

There are though pros and cons.

Nick Clegg

Nick Clegg

Employee share ownership may foster a more committed workforce, but it may also bring about a risk where employees’ savings are too tied to the company and bring about a situation where a company failure wipes out employees’ savings, despite their hardest efforts to keep it going.

One would therefore expect employee ownership shares to be backed up by some sort of government bail-out procedure akin to the Financial Services Compensation Scheme and the pension protection arrangements.

And don’t expect the tax regime for it to be any less complex and onerous than the ones currently in place for employers.

Nick Clegg’s speech can be read in full at politics.co.uk HERE.

Image by World Economic Forum from Cologny, Switzerland [CC-BY-SA-2.0 (www.creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

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