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Worker democracy and the profession: Labour style

24th Sep 2018
politician businessman

The Labour Party has begun to set out firm plans to democratise the corporate world.

Currently, it is unclear quite how far this will extend with regard to the accountancy profession. At present, the talk is of companies and that would certainly include the small number of firms set up with a corporate structure but presumably also those that use service companies to pay employees ie most of the larger practices.

The present proposals will only apply to those employing at least 250 workers, although who knows whether, if the plan is successful, they could extend downwards in the not too distant future.

The bare bones are set out in an article published in City AM today.

"Under the new plans, companies with a workforce of 250 or more, regardless of whether they are public or private, would be required to reserve at least a third of positions in the boardroom for employee representatives.

"The change would force companies to have a minimum of two employee representatives regardless of board size, and stipulate that representatives would have to be members of a trade union."

Picking off one of the minor points, it might be hard for the accountancy industry to identify a trade union that would be appropriate for those employees who are most likely to get the nod from their colleagues to become employee representatives. I'm not sure that the Institute of Chartered Accountants in England and Wales or its equivalents would be that happy about being referred to as trade unions.

Putting that aside for the moment, the implications are fascinating, particularly as these new directors would have to be "paid at a level equal to other board members". That last point alone should cause significant controversy. I'd love to sit in on a board meeting at PwC, where they discussed giving (say) a popular junior and a janitor something in the region of £1m a year.

While typical companies might not be that concerned about having employee directors from a control point of view, since by definition they would be in a minority with little influence unless the other directors were at odds with each other, the same might not apply to partnerships.

In my experience, there generally tends to be a reasonable degree of democracy and a great deal of disagreement around management board tables in mid-size firms of accountants. In such a scenario, if the employee stakeholders chose to join up with one faction or other, they could literally affect the future of the firm, for example determining whether or not it sells out to a competitor.

The discussions over general pay levels would also be stormy one would imagine, once again possibly threatening the future of the business.

Looked at from a different perspective, I can only say that I feel great pity for anyone stupid enough to put themselves up for such a role. If my own Experiences anything to go by, partnership meetings are deadly dull.

The worthies who get themselves elected to these roles would be obliged to spend hours on end discussing the sizes of paper clips, bad behaviour by partners with rather too strong a taste for alcohol and the technical aspects of the latest auditing or tax edict from the Institute or, if the Labour Party does call a second referendum which goes the other way, the European Union.

Frankly, I'm almost tempted to vote for Labour since if the party gets into power, we will have fun times ahead of us.

Replies (7)

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By vstrad
27th Sep 2018 11:36

Terrifying misuse of the term "democracy". The trades unions would stitch up the employee director selection the same way they have been stitching up Labour parliamentary candidate selections for years, only now with added Momentum. Most unions' memberships are notoriously apathetic, leaving the futures of ordinary workers in medium sized companies to be decided by left-wing activists working on the instruction of Len McCluskey et al, rather than by the workers themselves.

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Replying to vstrad:
By keithas
27th Sep 2018 13:58

I just love it when those on the right preach about what is and what isn't democracy, and what is wrong with the Labour party.

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By Knight Rider
28th Sep 2018 09:14

Typical Labour. All compulsion no choice. Companies would simply organise in such a way as to fall below the thresholds or leave the UK altogether.

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Replying to Knight Rider:
By keithas
28th Sep 2018 19:54

I couldn't agree more: I too prefer the Tory way of legislation where they just suggest that we make certain changes. e.g. RTI and workplace pensions - thank god we all made the right choice to implement these wonderful innovations.
And as for the myth of companies leaving the UK. The banks and bankers all threatened to go if legislation was enacted to curb their excesses. We would all have been better off if they had gone and someone else had to bail them out. The truth is that the countries that could afford to bail them out wouldn't have them - they have enough of their own to bail out anyway - and most bankers (i.e. the backroom boys) are better paid here than anywhere else in the world, so they wouldn't leave.
I'm not saying I agree wholeheartedly with these proposals, but the general concept of more employee input at the top management level would improve most large enterprises. It would be really good if companies could embrace it and try to see the benefits rather than put their energies into avoidance, like you suggest.

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Replying to keithas:
By Knight Rider
03rd Oct 2018 10:16

I didn't agree with workplace pensions either but this legislation was quite tame compared to what is proposed here. This is nationalisation on a grand scale - no wonder the markets are jittery with these sinister fellows riding so high in the polls.

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Replying to Knight Rider:
By coops456
18th Oct 2018 14:07

Theresa May speechified about "worker representatives" a couple of years ago; surely Labour's proposal is simply an extension of this.

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By Agutter Accounts
02nd Oct 2018 06:35

The worst aspect of the Labour proposals is that they appear to cap employee dividends and pocket the rest as a backdoor tax.

Thirty years ago I worked for a company that introduced an Employee Share Ownership Plan. It was part of a management buy-out arrangement. The management retained control with 51% of the shares and employees were allocated shares based on length of service.

I don't know how that worked out because I left soon afterwards but the company was eventually taken over, and no doubt shareholders were paid out in the normal manner.

If you're going to make employees shareholders, fine. Let them have the same rights as other shareholders in the same class of shares.

Politicians have a terrible reputation for meddling with things they don't understand and end up making things worse not better.

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