Give workers greater say on pay, urges thinktank

A thinktank close to Nick Clegg has challenged David Cameron to give workers a greater say in the running of companies. In a sign of divisions within the coalition over how to tackle “crony capitalism”, the CentreForum thinktank called for employees to be given a seat on remuneration committees. On Sunday the prime minister dismissed the idea as a gimmick and tokenistic. The report was warmly welcomed by Clegg a week before he delivers a speech to the thinktank on responsible capitalism.

CentreForum called for immediate legislation to ensure employees are represented on remuneration committees of company boards that employ more than 250 people. “Efforts to change behaviour without legislation have proved ineffective to date, and hence firmer action may be required,” the report said.

On BBC1’s Andrew Marr Show, Cameron did not rule out the idea but said he was more interested in ensuring greater participation by shareholders. “The key thing is reforming remuneration committees to make them work better, I think making sure there’s shareholder representation. But let’s look at what will work. I’m not interested in gimmicks. I’m not interested in tokenism. I’m interested in what will actually work to correct this market failure,” Cameron said.

The report also called for variable tax rates to reward companies that empower employees. It cited Ed Miliband’s speech to the Labour conference last year in which he raised the prospect of more favourable tax rates for “producer” companies and higher rates for “predator” businesses.

CentreForum endorsed the thinking behind Miliband’s idea. “There are many examples where government has sought to influence the behaviour of individuals through the tax system, eg a lower tax rate for unleaded compared to leaded petrol, alcohol and tobacco taxes etc,” it said. “If an incentivisation approach were to be pursued then our initial view is that using national insurance would be a better approach than using corporation tax as it would give a larger incentive to more labour intensive firms.”

The idea of variable tax rates for different business behaviour was rejected by the prime minister when he mocked Miliband’s conference speech. The thinktank said varying the rate of employer national insurance contributions would be more effective than setting different rates of corporation tax.

The report, written by the CentreForum director Chris Nicholson and researcher Patrick Briône, said its ideas were in line with Cameron’s “big society”. “The case for employee empowerment has long been made by liberals and by some within the labour tradition. It is also increasingly finding resonance in the ideas of Conservative thinkers and the concept of the ‘big society’ …with its stress on mutual association and participation and empowering communities to take control of their own affairs from external power structures.”

It called for a “nudge” approach – the philosophy championed by Cameron’s guru Steve Hilton of encouraging behaviour – to be adopted in every area apart from remuneration committees. “As it will be important to secure a cultural change among both employers and employees for employee participation to be fully effective, simply legislating to secure employee voice is unlikely to be successful on its own. For this reason we advocate that, at least initially, an approach is adopted which draws on behavioural economics, commonly known as ‘nudge’ theory to secure change.”

The report showed the influence of Clegg’s office by quoting extensively from John Stuart Mill. Richard Reeves, one of the key intellectuals in Clegg’s office, wrote a biography of the liberal philosopher. In welcoming the report, Clegg said: “Increased employee participation in how companies are run has been a longstanding Liberal Democrat principle, and CentreForum offers some radical proposals for how this can be promoted. Their paper deserves serious consideration.”

Ed Davey, the Lib Dem business minister, said: “There is strong evidence that the combination of employee empowerment and employee share ownership can help boost company performance. The CentreForum paper makes a powerful case for why this should be embraced as part of the coalition government’s growth strategy of long-term suppy-side reforms.”

In a sign of the closeness of Lib Dem thinking in this area with Labour, the founder of the Compass thinktank welcomed the report. Neal Lawson, who launched a high pay commission, said: “It is high time we treated employees as grown-ups and gave them a voice as workers, just as they have a voice as consumers and citizens. This paper shows not only how this can be achieved but that we are starting from a broad base of
political support for greater employee empowerment.”

Taken from the Guardian online

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