Employees Owning Shares - a Way Forward?
John McDonnell’s project, presented at Labour Party Conference, for Inclusive Ownership Funds (IOFs) deserves careful attention. The plan is for all big companies with more than 250 employees to put aside 10% of their shares every year for the benefit of the workforce. This fund would be administered by the workers collectively. Employees couldn’t sell their share but would get up to £500 in dividends each annually. Any extra money would go to the government. The plan is intended to give the workers a stake in the firm and in capitalism.
The project bears an extraordinary resemblance to the Swedish Meidner Plan unveiled in the 1970s. That Plan has since disappeared without trace. We need to know why.
Meidner was a Social Democrat thinker. Sweden at this time was dominated by two big facts. Fifteen families dominated the economy. They were rolling in money. The Social Democrats, equivalent to the Labour Party, seemed to have been in power for ever. Meidner argued that wage earner funds should be created by law from the companies of the giant corporations. The funds would be administered by the Swedish trade union confederation. Eventually, it was envisaged, the workers would become majority owners of their firms. Bingo – a peaceful social revolution! What went wrong?
First the Social Democrats lost power in 1976 and didn’t retain office till 1983. Obviously the right wing parties had no intention of implementing the Meidner Plan. When the Social Democrats got back in 1983 business lobbying had done its work. What was left of the Plan was, in Meidner’s words, ‘a pathetic rat’. Meidner had hoped that giving workers a say might help to stimulate the economy. The 15 families saw their interests and those of the working class as irreconcilably hostile. They lobbied accordingly. The Plan, now watered down, was never going to inspire workers or transform society. The wretched remnants were abolished by the incoming right wing government in 1992.
We cannot say that the Meidner Plan failed as an economic measure. It was never tried. In fact it was strangled at birth. Its demise was down to political pressure from the ruling class.
That must be a warning to McDonnell and Labour. In 1833 the Nine Hours’ Act was promulgated. It proposed that no children under nine years of age should work in a factory. 9-13 year olds should work a maximum of nine hours a day. Employers shrieked that the economy would inevitably go to the dogs as a result. We have had a like reaction to every proposed advance in the conditions of working people ever since. Here they go again.
The main obstacle to the implementation of McDonnell’s IOFs will be resistance from the bosses. But there are problems that need to be sorted out.
What happens when a firm is forced to put aside 10% of extra shares for a worker-owned fund? There is no reason for us to expect the dividend to go up as a result, so the dividend will just be spread over more shares, meaning that each share will be worth less. This is called share dilution. The existing shareholders will not be happy. After all a share has no inherent value. It’s just a piece of paper. It’s ‘value’ depends on the expected future profitability of the company.
John McDonnell proposes that the maximum share-out for each worker will be £500.Every year employees will get an extra £500 on top of their wages and every year the IOF will swell. Workers may well get used to this and like it. Other workers will want the same. That is why it is a good idea for the bosses to try to smother the plan at birth. That is why they will scheme and plot to stop the project getting started.
McDonnell estimates there are about 11 million working in big companies who will benefit. How does the cap of £500 on their benefit from the scheme work? The IOF plan proposes that any extra should go to the government. Readers may feel that financing the NHS is more worthwhile than money leeching out to the other shareholders. But there are problems.
The Financial Times has run calculations on the top FTSE 100 companies, all of which would be subject to the scheme. They collectively employ 4.9 million workers. At present they pay out more than £82 billion in dividends. (Wow!) Workers would get 10% of this - £8.2 billion. Here is the objective basis for class struggle – we take £8.2 billion off them. How would the companies respond? Would they launch an assault on their employees to get ‘their money’ back through a reduction in wages? Private companies could reply by not paying dividends at all.
But with the cap set at £500 per worker, according to the FT only £2.5 billion would go directly to the workers. £5.9 billion would be clawed back by the Treasury. For this reason Tories have attacked the proposal as basically a tax on dividends. This is another reason for capitalists to be unhappy with the scheme.
Above all it needs to be understood that the class struggle can’t be legislated away. The boss class will resist this measure to the utmost of their ability and try to water it down. Together with the proposals for a nationalisation of the utilities, an enhanced minimum wage, and guaranteed rights for workers and trade unionists, Labour is proposing a major shift in the balance of power between the classes. Labour must be ready for ruling class resistance.