Labour has unveiled proposals under which larger companies would be required to put up to 10 per cent of their shares into a form of employee ownership fund. These “Inclusive Ownership Funds” are being compared to the John Lewis model, as employees would not hold shares directly and would not be able to sell them, but would benefit from dividends and have an ability to influence shareholder votes. While increasing employee ownership is widely thought to boost productivity and plans to increase it benefit from widespread support, the current proposal would see the dividends payable to employees limited to £500 per person.
The rest of the dividends paid on the shares in the fund (which could clearly be a very substantial amount) would go to a “Social Investment Fund” that would be used by the government to fund public services. The thinking is that this means public sector employees and others will also benefit from these proposals. But wouldn’t it be better to address that issue separately? The current proposal is also a bit “one size fits all”. Ideally companies would have some choice as to how they increase their employee share ownership. Shouldn’t credit also be given to those companies who have already encouraged high employee share ownership, through existing share incentive plans?