Nick Clegg in a muddle over John Lewis

After writing yesterday about Helen Weir joining the John Lewis Partnership (JLP) as finance chief a reader suggested I have a look at Nick Clegg's impassioned plea for more companies to be like the department store that is "never knowingly undersold".
Clegg said back in January: "The 1980s was the decade of share ownership. I want this to be the decade of employee share ownership. We need more individuals to have a real stake in their firms, more of a John Lewis economy."
There was a glaring problem with Clegg's statement, my correspondent claimed. He didn't understand what he was talking about.
I didn't give it much thought at the time, so I decided to have a look. And it seems Clegg had his corporate wires crossed.
The problem is this. There are no shares in John Lewis. It's a partnership structured around a trust which owns the business for... its partners - the employees. No shares. Anywhere.
So when Clegg argues for more employee share ownership, while at the same time holding up John Lewis as the shining example of worker engagement, he's actually talking about two very different structures.
Share ownership is share ownership. You have your stake and the board stays in charge. Your capital is there but it's liquid and disposable. Arguably its also about short term gains in the share price, rather than the long term prospects of the company. That's not what happens at JLP where you become a partner on joining and begin to take a share of profits by way of an annual bonus. Partners also have direct influence on the way the business functions through the Partnership Council. Eighty percent of the 80 or so council members are directly elected by the staff, and the council also elects five of the directors on the JLP board. Direct influence see.
Shareholders would be lucky if they got an annual report through the post these days. They remain at a much greater distance from the board. Their stock would be in the mix along with the stock of institutional shareholders and everyone else and they could sell up and walk away as, and when, the fancy takes them. Not so easy to chuck in your job/partnership. Share holders might receive dividends, if they're lucky, but that is probably in the gift of the board anyway. 
JLP partners receive their salary and a share of the profits. Everyone, from stockroom boy (I don't really know if JLP has those) to the managing director, gets the same percentage share, though obviously based on different salaries. There are hotels owned by JLP for staff, generous store discounts and after a couple of decades with the business, six months paid leave.
So, when you look at it, the really radical option for UK business is the John Lewis structure. But that's not what Clegg was describing when he talked of shares. He was talking about something else. It's difficult to say how he got confused. But he has conflated two options for the future of UK business leaving us not really sure what he wants. Where's the vision? What is Clegg banging on about? Sadly, we have another example of government failing to bring clarity to the table when it attempts to articulate a future for UK business.
The question before Clegg is whether he really would back John Lewis as a model. Big tax breaks for new companies owned by its employees through partnerships where membership of the partnership is universal to nearly all employees would be an intriguing move. Sadly, I suspect expanded share ownership, which Clegg seems to want, would leave us in much the same position that we are currently in. At the very least it's hard to see it would provide the kind of commitment and motivation in the way the JLP partnership does. Clegg, seems to be in a muddle when he strives to find a model for, then form policy to achieve, his "responsible capitalism".

*Of course there are other partnerships around. It's interesting to speculate how accountancy and law firms might develop if, instead of restricting partnership to a select few, they expanded partnership to more junior employees. But that's being provocative. 


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