Bright Blue, the independent think tank for liberal conservatism, has today published a new report, Mind your business? Expanding democratic business in the UK, which examines the nature of, history of, advantages from, problems with and policies for democratic business.
The report defines and describes democratic business, which includes co-operatives, employee-owned businesses and community businesses, and outlines the benefits of them – for employees, employers and the wider economy.
The report is based on an extensive domestic and international literature review and interviews with MPs, business leaders, government advisers and former civil servants.
The report offers ten policies for increasing the presence of democratic business in the UK economy, guided by three key principles: fiscal realism; incentivising, not mandating; and the importance of communities.
Bartek Staniszewski, Senior Researcher at Bright Blue and lead author of the report, commented:
“There are many reasons why this Conservative Government in particular should be interested in democratic businesses. A ‘property-owning democracy’ – the dream of many on the centre-right – comes into its own through democratic businesses, as people acquire greater control over and a stake in the economy they live in. Democratic businesses are also often grounded in their local community, exemplifying levelling up at the most micro level. They are the middle ground between the ruthless individualism of right-wing laissez-faire libertarianism and the centrally-mandated collectivism of left-wing economic policy.”
Policies to support the democratisation of ‘conventional’ business
- Introduce the right for employees to access recorded information held by one’s employer.
The Government should introduce the right for employees to access recorded information held by one’s private employer. This is beyond the right of access introduced in the UK General Data Protection Regulation (GDPR), which only allows individuals to access a copy of their personal data. Furthermore, currently, the 2000 Freedom of Information Act only makes provisions for the disclosure of information held by public authorities or by persons providing services for them, and not for the disclosure of information held by any private institutions.
Exemptions would apply if the information is needed for any one of: the prevention, detection or investigation of a breach of company law; internal security; the assessment or collection of company taxes; employee appointments and contracts. The request for access could also be refused on grounds analogous to those in the 2000 Freedom of Information Act: if employee interest in non-disclosure outweighs the employee interest in disclosure, or if it is likely to cause distress or irritation without good reason.
The involvement of those affected by the business in the business’ decision-making process can be controlled or reduced by withholding relevant information from them. For example, the employees of a company are unable to oppose the company engaging in unethical practices unless they know that the company is indeed engaging in them. As such, promoting freedom of information in businesses is key to achieving greater levels of democratisation in the economy.
- Introduce the right for employees of companies numbering over 2,000 employees to request a binding referendum on employee representation on boards.
The UK Government should grant employees in companies that number more than 2,000 a right to request a referendum on employee representation on the company’s board.
Should a petition to host such a referendum be signed by at least 5% of the company’s employees, the company would be legally required to either (i) host a referendum among all of the company’s employees on whether the employees of the company should have the right to elect one of the company’s board members, or (ii) give the employees of the company the right to elect one of the company’s board members.
Once such a referendum is held, the company would not need to host another one for the next four years, so as to prevent repeat petitions mandating an unreasonably high number of referenda.
If a supermajority of 66.6% of those who vote in the referendum votes in favour of the employees of the company having the right to elect one of the company’s board members, the company should be legally required to grant its employees said right. We suggest a supermajority instead of a simple majority to ensure that a company is only mandated to grant its employees the right to elect one of the company’s board members if there is very widespread support for the measure amongst the employees. It is worth noting that, even if a supermajority is not achieved, but a large proportion of employees show their support for the measure nonetheless, a company may opt to grant its employees the right to elect one of the company’s board members nevertheless, voluntarily.
It should be noted that employee representation on boards is mandated across a large number of European countries, including Germany, the Netherlands, Ireland, Austria and France.
- Create a non-departmental public body for the accreditation and promotion of democratic business.
It is crucial that democratic businesses are championed and distinguished apart from their non-democratic rivals. While some of this work is already achieved by organisations such as Co-operatives UK and the Employee Ownership Association, the presence of a governmental organisation that conducts this work and cooperates closely with central government could make said work more effective and give it more legitimacy in the eyes of the public.
To achieve that, the Government should set up a non-departmental public body (NDPB) for democratic business. This would be classed as a transparency body – a body to give facts, figures and forecasts to politicians and the public – as opposed to an advice or enforcement body. Besides acting as a champion of democratic business, liaising between democratic business and the government and promoting the brand of democratic business, the NDPB would introduce and manage an accreditation scheme for democratic businesses.
Under the scheme, democratic businesses would be able to display, on their premises and online, an accreditation promoting the fact that a business is democratic, analogous to the Food Hygiene Rating Scheme. For example, it would grant a superior accreditation for businesses that open their shares to their employees through the SIP and SAYE scheme and that hold regular and meaningful general meetings for their employees. The accreditation would also have different layers, discriminating between non-democratic business, ‘conventional’ democratic business, mutuals and co-operatives. This would help to distinguish between mutuals embracing a genuine mutual culture and ‘conventional’ businesses that merely adopt mutual branding. The NDPB for democratic business would be tasked with ensuring that the accreditations are awarded fairly and on the basis of reasonable evidence
- Strengthen the ‘Community Right to Bid’ to include a broader range of assets, preferential treatment for the bid for the seller of the asset and stamp duty exemption for the purchaser of the asset.
Policies to support mutuals
- Introduce a statutory definition of a co-operative in UK law, which is in line with the principles outlined by the Rochdale Society of Equitable Pioneers.
- Establish a tax-incentivised ‘indivisible reserves’ scheme to promote mutual business stability and investment.
- Ensure that a minimum of 28% of the assets of a co-operative are maintained under co-operative control in the event of the co-operative winding up.
- Amend the Levelling Up Fund Assessment Framework for assessing, scoring and shortlisting bids to include a positive consideration for bids made by local authorities that, as a part of their bid or otherwise, privatise municipal services into public service mutuals.
Policies to support democratic business generally
- Introduce the right and provide finance for a minimum number of employees of a limited by shares company to give a counter-offer for the purchase of the company’s controlling stake whenever a takeover bid is made.
- Reform the Community Ownership Fund and the Community Housing Fund to support a broader range of community projects.
John Penrose MP, Co-Chair of Bright Blue’s Economics and Employment Community, commented:
“Mutuals and other democratic businesses are an often-overlooked part of capitalism, but Bright Blue’s latest report offers some intriguing thoughts on how to get staff and citizens more engaged in the business of business, with a more powerful economic stake in their employer’s future”.
The Rt Hon Alun Cairns MP, Conservative MP for Vale of Glamorgan, commented:
“This comprehensive report from Bright Blue brings to light a fundamental truth: expanding democratic business across the UK is and essential part of the mix for greater productivity, improved innovation and superior business resilience.
Moreover, important for this Conservative Government, democratic businesses exemplify levelling up at the most micro level, fostering an environment of shared ownership and responsibility. If we want people to have a stake in our economy, the fundamental principles of democratic business will both allow and encourage that to happen.
Supporting democratic business is not just about economic success; it is a fundamental element of growing the economy and facilitates working people to have a stake in their futures. The recommendations put forward by Bright Blue do just that.”
Bob Blackman MP, Member of the Levelling Up, Housing and Communities Select Committee since March 2020, commented:
“In recent years, we have seen our politics, economy and society change dramatically. Fundamentally, we need to embrace ideas that ensure that more people have an opportunity to gain more of the capital of this country. Unless we do that and spread the ability to access wealth more widely through business, we will marginalise many workers and isolate them from the economy we want to create. For the centre-right, it is crucial that more people can own property and have capital so that the economic and societal benefits – from greater productivity to stronger community cohesion – are magnified. Bright Blue’s excellent new report demonstrates the urgent need to embrace democratic business to improve the opportunities of many to hold capital and have a greater role in our economy. This is an urgent step.”
Ailbhe McNabola, Deputy Chief Executive of Power to Change, commented:
“Communities want to have more control over the decisions that affect their lives, and that is as true in the economy as it is in our politics. More democratic forms of business, such as community business, are crucial to achieving this. It is important that debates about a more democratic economy are not the preserve of one political tradition, rather it should be a debate about who has the best ideas to increase the number of democratic businesses in this country. This report by Bright Blue is a welcome contribution to that debate.”
ENDS
Notes to editors
To arrange an interview with a Bright Blue spokesperson or for further media enquiries, please contact Emily Taylor at emily@brightblue.org.uk or on 07841 419316.
- Bright Blue is the independent think tank and pressure group for liberal conservatism.
- This report is kindly sponsored by Power to Change. Bright Blue has had complete editorial control over the report. The report does not necessarily reflect the views of our sponsor.
- Bright Blue’s Board includes Diane Banks, Philip Clarke, Alexandra Jezeph, Richard Mabey and Ryan Shorthouse.
- Our advisory council can be found here. We also have 228 parliamentary supporters. Members of our advisory council and our parliamentary supporters do not necessarily endorse all our policy recommendations, including those included in this press release.
