Coming out on the anniversary of Lehman Brothers' collapse, the report says more diverse ownership structures could help counter another crisis, driven by the 'speculative excesses' that Alan Greenspan warned of this week.
Reinventing the Firm argues that companies' obsession with short-term performance measures such as share price and quarterly profits made many banks and other firms act irresponsibly and helped pave the way to economic ruin a year ago. It says alternative models of ownership that have been neglected - such as employee ownership, mutual finance and public interest companies - would diversify the economy, make firms act more responsibly and spread profits to employees.
William Davies, author of the report, said:
"There are clear benefits of encouraging more democratic workplaces - performance, profit and happier employees. Yet share ownership is too often seen as an elite privilege reserved for senior company executives. It should be made available to all staff.
"But this is about much more than economic performance; it requires us to explore the social importance of employment and gives us a chance to rebuild the economy around these ideals."
The report's recommendations include:
Re-mutualise Northern Rock to begin the process of diversifying and stabilising the financial sector as a whole.
Restore tax advantages for business owners to transfer ownership to employees. The tax incentives for Employee Benefit Trusts that existed before 2003 should be re-established. Greater knowledge of employee ownership on the part of those who advise business owners - such as accountants, lawyers and Business Link advisers - would also spread awareness.
Extend employee share ownership to all staff, not just senior management. External investors and internal investors with more than 5 per cent equity benefit from tax breaks through CGT entrepreneurs’ relief and the Enterprise Incentive Scheme; employees who want to invest small amounts of capital should enjoy the same tax relief.
Expand co-owned public services. The public sector should continue to explore the use of co-ownership in the delivery of public services. Foundation Trusts are one model. Experience of co-ownership in the delivery of care services such as home help for the elderly and community nursing indicates that it engages users and empowers public servants. Hybrid organisations, co-owned by government, employees and users need piloting in the areas of health, education and transport.
Set up a public venture capital fund for mutuals and employee-owned businesses to help to open up access to finance and yield a return for taxpayers.
Government should commission in-depth, comparative, quantitative research on the relationship between ownership and the levels of health, well-being and civic engagement of employees.
Reinventing the Firm also argues that in knowledge economies like the UK, employee ownership can significantly increase productivity. The Employee Ownership Index outperforms the FTSE by an average 10 per cent annually and Government employee share ownership schemes can deliver a 5 per cent productivity increase.1 It also says that spreading asset ownership more widely encourages prosperity and more democratic workplaces increase the well-being of employees.
The report urges government to look at ways of spreading the benefits of ownership to all staff, not just senior managers, including tax incentives. It points to France, where profit-sharing is mandatory for firms with more than 50 employees.
The report includes case studies of three employee-owned firms: Make architects; Parfetts, a cash and carry business in the North West of England; and Quintessa Consultants, a specialist scientific consultancy.
Notes to editors
Reinventing the Firm by William Davies is published by Demos on Friday 11 September, 2009.
Nigel Mason, Policy Director, Employee Ownership Association, can be contacted for comment on 07778 490933. The Employee Ownership Association (www.employeeownership.co.uk) is the membership body for employee-owned companies, representing a sector with aggregate revenues over £25 billion and employing more than 200,000 people. Members range from well-known businesses like John Lewis Partnership, Unipart, Arup and Mott MacDonald to smaller businesses in every sector of the economy.
For more information or to discuss interview and broadcast possibilities please contact:
Beatrice Karol Burks,
020 7367 6325
(07929474938 out of office hours)
Peter Harrington
020 7367 6338
(079 3966 4133 out of office hours)
This project was supported by the John Lewis Partnership.
1 Field Fisher Waterhouse, Dec 2008 and Oxera, Tax advantages and employee share schemes: analysis of productivity effects - Report 2: Productivity measured using gross value added (Oxford: 2007)