For me, a central question in post-capitalist thinking is: which models of business ownership are most conducive to social flourishing? I put the question to Simon Zadek when he was a fellow of the Harvard Centre for Business and Government. He replied that it was a "really leading edge question/issue... worthy of a major conference."
My central observation is fairly obvious. PLCs - publicly limited companies, which are owned by shareholders who buy and sell their ownership shares on the stock market, are, to put it simply, bad. Other ways of owning and financing companies are better.
The problem with PLCs
PLCs are a really great mechanism for taking wealth from the many and amassing it with the few.
They receive money from the consumer and time from the employee - the many, the 99% perhaps.
From that income, they maximise surplus (profit) as much as possible.
Then they give that surplus to shareholders - the few. The more shares you have (ie, the richer you are), the more you receive - the richer you get.
It's just fantastic. I really couldn't think of a better way of taking a little bit from everybody, systematically, every day, piling it up, and giving it to wealthier people.
Let's compare, for example, the plc Thames Water with the 'no-shareholder' Welsh Water. In 2007-8 (sorry, did this research a while ago but it's still relevant), Thames' profits of £419 million (overcharging?) were taxed and distributed among shareholders - a mixture of European pension funds and private equity firms in Australia and Canada. (1)
In the same year, Welsh Water's profits of £41 million were taxed, some were re-invested in the company, and the remaining £27 million was sent back to customers who each got a £21 deduction on their next bill.
£21 isn't a lot, but if we were to combine the impacts on wealth distribution of plcs providing water, gas, electricity, housing, insurance, banking, food, clothing, sport, leisure and so on, we would start to see vast, consistent swathes of wealth moving daily from the '99%' to the '1%'. And I haven't even started on banking. Where do you think the interest on your mortgage, if you have one, goes? (3)
To be fair, it's not entirely one way. The authors of The New Capitalists argue that more than 75% of the shares in the UK stock market are held through collective investment vehicles like pension funds. So we are all owners and potential beneficiaries of stock market gains, they say.
The problem is, the more you invest in your pension, the more shares you own, and the greater slice of the pie you usually get back (unless the value falls.) The overall effect remains: the rich get richer and the poor stay poor through our current pension and stock market systems.
Personally, I have a pension with The Co-op bank which is "ethical," which means they invest in pharmaceuticals instead of arms. I set it up when I was 26 because my Dad told me it was time to get one. But I'm not happy about my future security being entirely reliant on a volatile, unjust and unsustainable stock market. I'm thinking about stopping payments and perhaps trying to buy land instead. It feels more... grounded.
What's better than a plc?
Lots of things.
Waitrose, part of the John Lewis partnership, is a great example. It's entirely employee owned. That means you don't get this problematic distribution of wealth effect that plcs create. There's also another important benefit: the localisation of power - ie, employees make the decisions - leads to more ethical company behaviour. Waitrose for example frequently takes a chunk out of profits and does something cool with it, like creating the Leaf scheme that supports farmers in the transition to organic.
The employee-owners have an enduring relationship with the company they own, so they take pride in using its power for good. It's very different when a company is owned by shareholders who have no connection with the company, and will sell shares in an instant if they lose a little value. It puts all the focus on a single bottom line. And we know clearly that single bottom lines don't serve present or future generations. Tomorrow's Company also argues that they don't serve the employees of single bottom line focused companies, who tend to have a bit of a horrible time at work.
Some also argue the plc model is also a nightmare for leaders. It's a nightmare for everyone! Let's leave it behind!
“How can anyone run a business when hedge funds trade big chunks of their equity every day?” asked C4s then Chief Executive Luke Johnson in 2008. “There is another victim of the credit crunch: the publicly traded model of ownership. The near-collapse of many of the large banks in perhaps a dozen countries shows that such corporate structures do not work.” (4)
So. Employee ownership is one great model that, I think, has a place in a post-capitalist economy.
The second is the co-operative model. This is where employees and customers own the company. That's good too for similar reasons.
The third is small businesses. Again, these avoid the wealth distribution problems that big plcs create.
It was, famously, part of Adam Smith's vision of capitalism - a nation of shopkeepers, an abundance of small businesses trading with each other, competition between them keeping prices low and quality high for the customer.
Further reading about good company ownership models:
What this means for us
Most people have three obvious roles in relation to plcs.
1) we are customers - eg of Boots, Sainsbury's, HSBC etc (all plcs)
2) we might be employees
3) we are investors, perhaps. Often through pension funds, sometimes more directly.
What we can do as customers
Don't buy things from plcs.
Waitrose, The Co-operative, local shops and markets. I'm not sure about food box schemes. I think Abel and Cole, eg, was recently bought out by a bigger company and I don't know how they're owned. You could enquire if you have a veg box.
The Co-op, Building Societies like Nationwide and Cheltenham & Gloucester, Credit Unions
I don't really know! Let's find out. I know that about half of British pubs are owned by very big pub companies. I guess it's nice to try to drink at independent pubs. We can find out by asking. I think I'm going to become more vigilant about this.
What we can do as employees
If you work for a plc, quit! If you're looking for a job, don't get a job with a plc!
What we can do as investors and pension holders
Really tough one. Requires some good social innovation I think. My gut feeling is that investing in land is better than investing in the stock market. 70% of Britain is owned by less than 1% of the population. We could probably address that alongside addressing the pension reliance on a stock market that doesn't serve us, if we developed land-based pension schemes. Let's think about that one.
(1) Thames Water Utilities Limited, Annual Report and Financial Statements for the year ended 31 March 2008.
(2) Welsh Water gives £27m back to customers. The Guardian, 12th June 2008
(3) A few years ago I considered doing a PhD on sustainable models of business ownership and finance. I spent a few days in the British Library to see if anyone had calculated in any kind of mathematical way the impact of plcs on the distribution of wealth. The closest thing I found was an article identifying the dynamic and describing the insight I was looking for as "a major challenge for future research." Perotti, E and von Thadden, E.L (2006). Corporate Governance and the Distribution of Wealth: A Political Economy Perspective. Journal of Institutional and Theoretical Economics, Vol 162, No.1, p217
(4) Johnson, Luke. Why public ownership is a failed model. The Financial Times, 14th October 2008