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Donkin on Work - Employee Share Ownership

November 1998 - Employee trusts

Supposing the chairman of your company gathered his top team around him and questioned whether management success could be rated beyond the usual financial measures. Supposing he asked them to focus on employee happiness. How would your management react?

According to Sir Stuart Hampson, chairman of the John Lewis Partnership, the department store and supermarket group, his fellow directors warmed to the idea and their weekly meeting to discuss their progress became known as the "happy hour".

The company remains closely aligned to the aspirations of Spedan Lewis, the son of its founder, who outlined its corporate aims in what today would be called a mission statement. "The partnership's supreme purpose," he wrote, "is to secure the fairest possible sharing by all its members of the advantages of ownership - gain, knowledge and power; that is to say, their happiness in the broadest sense of the word so far as happiness depends upon gainful occupation."

"How many mission statements use the word 'happiness'?" asked Sir Stewart last week at a London conference on leadership run jointly by the Centre for Leadership Studies at Exeter University, John Potter International and Core Events.

"We are in this role for the long term and I'm absolutely convinced that the only way to sustain success is to have a company with a happy workforce. Do they come in just for their pay or do they come to work because they identify with the business?" he said.

Spedan Lewis began his experiment in employee power-sharing during the early part of this century. After setting up a staff council, a committee for communication and a staff journal, he began sharing profits with employees. Thirty years later he made the ultimate gesture of anyone privileged enough to have run and owned a business, transferring his rights of ownership to trustees.

Thus employees, who call themselves partners, enjoy a relationship with their management that is difficult to match in other companies.

How many companies run a staff magazine allowing employees to comment anonymously on management decisions within the bounds of the libel laws? Just occasionally there is a need to edit out confidential commercial information. This is because the company opens its books to scrutiny by any of its 36,000 employees.

Then there are the staff benefits. The company has three golf courses and five ocean-going yachts. Membership of the company sailing club costs £1 a year and a day's sailing at the weekend costs £13.

It has holiday accommodation in the Lake District, on Brownsea Island, and a camp site on its 3,000-acre Hampshire estate, which also includes a stretch of the River Test, one of England's finest chalk streams for those employees who enjoy fishing. Employees can buy half-price tickets for the theatre through the company and this year the partnership has leased two out-of-season weeks on Lundy Island from the Landmark Trust for staff holidays. The subsidised prices range from £12 to £66 per person for the week.

There are 20 company-based special interest clubs, covering such pastimes as skiing, riding, pottery, gliding, drama, photography and gardening. Not only that, if you make it through five years with the company, your job is as about secure as any job can be.

So what's the catch? There is no catch. This is not a trendy company. It does not believe in management by committee. There is a hierarchy and some are paid much better than others. Profit bonuses are shared out on the same percentage of basic salary.

John Lewis is not the only employee-owned business in the UK. A similar trust was set up at Baxi-Boilers in Preston when Philip Baxendale passed over his shareholding. Tullis Russell, the Scottish paper milling company, also has many similar features of employee involvement. Shares in Tullis Russell were bought from family owners in a complex purchase scheme designed to transfer ownership to employees.

It is not just the ownership structure of these companies that is different. Their whole culture is different, reflecting a tacit understanding by management that the employees are integral to the business.

Spedan Lewis died somewhat embittered that his ideas did not catch on across industry. Perhaps they were ahead of their time. Tax breaks are available in the US for those wishing to transfer their shareholdings to employees.

But the movement needs some greater incentive or encouragement if genuine employee ownership is to become more widespread. Surely a system that shares profits among everyone who worked to create them is a more acceptable face of capitalism than that which is engineered by remote owners whose only concern is with a management's ability to squeeze out maximum profits year after year before they sell their shares to the highest bidder.

© 1998 Financial Times. All rights reserved

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