Seekers for an alternative and more equitable model of how to do business this week struck gold. Julian Richer, owner of Richer Sounds, has at the age of 60 announced a succession plan that involves handing control of his hi-fi and TV retail chain to its 531 employees. Not only is Mr Richer, who founded the business when he was 19, selling 60% of his shares to a John Lewis-style trust that will hold them on behalf of the workforce, he is rewarding staff with bonuses funded out of the £9.2m he makes from the sale. Employees will receive £1,000 for each year they have worked for him: a total of £3.5m.
This won’t come as any great surprise to watchers of Mr Richer, who set out his business philosophy – that a contented, well-treated workforce offers a route to long-term success – in a 2001 book. But when insecurity and low pay have become the norm for so many workers, amid spiralling inequality caused by skyrocketing pay at the top and a growing gig economy at the bottom, the announcement is a timely reminder that it doesn’t have to be this way. Social responsibility can be more than a side project for businesses. It is possible to make money at the same time as developing a sense of obligation to employees that is not limited to paying them well.
The vehicle being used by Mr Richer, the employee ownership trust, was created in 2014 following a government review. But five years on, despite tax breaks and a growing body of research showing the social and economic benefits of employee-owned businesses, it is a long way from catching on. There are around 250 trusts, mostly small or medium-sized businesses with fewer than 250 employees, with another 50 on the way. Last year the Scottish government announced a target of a fivefold increase in worker-owned businesses, but UK ministers have no similar plans.
The John Lewis Partnership remains the famous flagship for the mutuals movement. The reputational disaster, for the sector, of the Co-operative Bank’s near-collapse has receded into the past. But any movement towards a more inclusive, pluralistic enterprise culture in the UK remains sluggish at best. Lush cosmetics, Riverford Organic Farmers and Aardman Animations are among a handful of well-known businesses that have embraced employee ownership. Among the motives for doing so is the wish to more firmly root a business in a particular place. But British business on the whole remains stubbornly top-down, with less employee representation on boards and far fewer employee-owned businesses than Germany, Italy or France.
Last year Labour announced plans to transfer a 10% stake in UK companies to their workers 1% at a time. Increasingly, radical ideas about transforming the economy are championed by the party’s grassroots. But support for such measures is not confined to the left. Even Theresa May promised to put workers on boards before changing her mind, while moves towards broadening company ownership in the US have bipartisan support.
Wealth is increasingly concentrated, and as long as the value of assets grows faster than wages, the gulf between shareholders and everyone else will only grow. Long-term, strategic thinking – not least about the environmental challenges that face us – is too often crowded out. Mr Richer’s grand gesture was born of particular circumstances, and the wish to secure his business’s future. But by not only handing over a share of profits but a controlling stake, his actions serve as a reminder of what is possible. Profitable businesses don’t have to remain in the hands of the very few.