Sunday, 6 September 2009

Bravo, Engelhardt

In a recent statement, the boss of Admiral and has criticised the huge earnings of most of his fellow-directors running other FTSE100-listed companies. His companies are run on a profit-sharing basis. “I am a founder-owner of the company, so it’s not just my salary which keeps me going," he said, “there’s food on the table, every night, it’s true. But I do think it’s amazing when you see some of the pay packages put together.

“What can a [chief executive] do to warrant the kind of packages put together compared to the other people working in the organisation? I do think things should be spread about a bit more.”

He is following in the footsteps of John Spedan Lewis, who wrote: "Capitalism has done enormous good and suits human nature far too well to be given up as long as human nature remains the same. But the perversion has given us too unstable a society. Differences of reward must be large enough to induce people to do their best but the present differences are far too great.

"If we do not find some way of correcting that perversion of capitalism, our society will break down. We shall find ourselves back in some form of government without the consent of the governed, some form of police state."

His solution (not original, but apparently reached independently of other workforce-involvement schemes) was that residual profits should be distributed annually to the employees - thenceforward known as "partners" - in proportion to their pay in the form of non-voting shares carrying a fixed dividend which they would be free to sell without affecting the control of the business.

It is noteworthy that the John Lewis group (which includes Waitrose) is one of the few British corporations to thrive during the recent economic crunch. Ironically, eight years ago there were some senior John Lewis partners who felt that the organisation was behind the times, that it should demutualise in search of expansion and higher profits - much as permanent building societies were doing. Fortunately, they were advised that it would take an Act of Parliament to do this and JLP survived.


Anonymous said...

I thought we were already living in a police state? Look at the items of legislation that's been introdued under the current Labour Administration.

Anonymous said...

Unfortunately, we haven't got a Waitrose in this part of Wales, the closest is in Barry, then Pontprennau, Cardiff. One in Abergavenny and Caldicot.

Frank Little said...

I thought we were already living in a police state?
Note that Lewis wrote the piece I quoted in 1958 at the latest, and probably in "Fairer shares : a possible advance in civilisation and perhaps the only alternative to communism" (1954).

Frank Little said...

It has been suggested that Waitrose can afford to take a high moral line because it trades only in affluent areas.

However, the Coop is also thriving to the extent that it has taken over Somerfield (ex-Gateway).