Employee Ownership: better for business, individuals and society.

Will Davies delivered a storming argument in favour of alternative business models at this week's launch of the CASS Business School research paper on the sustainability of employee owned businesses.  The report was jointly sponsored by John Lewis Partnership and the Employee Ownership Association and you can read the full report here. Davies is Research Fellow at Said Business School and published a seminal work on alternative business models last year "Reinventing the Firm".

Will Davies stated that the pursuit of shareholder value as a corporate aim is wrong, as is the constant focus on increasing the share price as always in the best interests of the company. The company share price is not a true reflection of a firm's real worth. Rather, the share price reflects market sentiment.

This pursuit leads to management decisions whcih inflate short term share prices at the expense of long term competitiveness, and can be used by unscrupulous managers to inflate their own rewards at the expense of shareholders, employees and customers.  Moreover, the social impact of this can't be underestimated.  Ignoring the relationships and employee voice within the firm causes stress, unhappiness and ill-health.

Davies asserted that neglect of the firm's social dimension leads to the firm's neglect of society.  Work related stress, and consequent absence is rising.  He quoted some shaming statistics. Since 1979, income equality is rising faster in the UK than in the other OECD countries, including USA.  The ratio of CEO to average employee pay in FTSE 100 companies is 66:1.  When you add stock options that becomes 98:1.

Will Davies proposes employee ownership as a business model that respects firms as social institutions.  It's a concept of ownership which accounts for political and psychological dimensions and fits with the idea of employee autonomy.  Employee owned firms can focus on long term success rather than short term gains.

The result of this is that employees become financially literate and take responsibility for their asset.  Both management and employees benefit from higher levels of information sharing and transparency throughout the business. There is lower staff turnover and longer term decision making.

Will Davies presented a very strong case for wider adoption of employee ownership. It's good for business, better for individuals and is better for society.