Carole Leslie

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The danger behind “Shares for Rights” proposal

May 1, 2013

Many of us in the employee ownership sector are rather bemused at the government’s intent to push through the much decried “Shares for Rights” legislation. This is a proposal in the Infrastructure Bill which creates a class of employee where certain employment rights are compromised (e.g. on redundancy and dismissal) in return for a negligible shareholding in the business. The government’s own consultation was dismissive of the idea, and the House of Lords rejected the idea on the first two readings, with an eventual passing last week. I was with one of Scotland’s leading lawyers last week who dismissed the notion as “irrelevant” -take up will be less than negligible. There might be a limited application for small high tech startups, but the reality is that models already exist which fit with these organisations which are probably more tax effective.

I agree with almost all of that. There is little danger that hundreds of employees will lose employment status in return for shares which might be worthless because the policy won’t get off the ground in the first place. A non event? Yes. Irrelevant? No.

The idea came from nowhere at a time progress on employee ownership was gathering pace. Following a comprehensive consultation, and led by expert Graeme Nuttall, the Nuttall report had been published in July making many recommendations to promote the employee owned business model. “Employee shareholder status” was not one of them. In April this year, the Chancellor announced a £50m annual budget for the development of employee ownership. Some of this money is to be allocated to tax incentives for owners who sell to their employees – a policy we have been pushing for a long time.

The whole nonsense idea has at best been a distraction to much of the good work going on to promote a business model that is better for our economy, our communities and our workers. At worst, it has tainted employee ownership with the tawdry brush of exploitation. Employee owned businesses tend to be better employers, with enhanced terms and conditions in comparison to conventionally structured firms.

“Shares for Rights” is not employee ownership. It is far removed from what our growing sector is trying to achieve. Let’s put the idea to sleep and focus on positive moves that will create and sustain good jobs and shared wealth.

Posted in: Employee owned business
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