Both workers and businesses will thrive under Labour Party plans to force large firms to give workers shares in the company, a Warwick Business School professor has said.
John McDonnell set out proposals to make large corporations give workers shares worth up to £500 each year as part of a radical shake up that looks to broaden ownership in our economy.
In his main party conference speech, the shadow chancellor set out plans for “inclusive ownership funds” as well as detailing how vast executive salaries would be trimmed and “the profiteering in dividends” would be ended.
Since its conference opened in Liverpool on Sunday, Labour has already announced plans for worker representation on company boards and to make employers provide up to 10 days’ paid leave for victims of domestic violence.
Under the “inclusive ownership fund” proposal workers would be given a financial stake in their employers and more say over how companies are run.
But according to Shainaz Firfiray, assistant professor of organisation and human resource management at Warwick Business School, the proposals are likely to benefit business just as much as workers.
She said: “The Labour Party’s recommendation to make all large firms provide shares to their workers is based on the premise that this can help build highly productive businesses while facilitating a more equal distribution of wealth.
“Research on employee share ownership schemes has shown firms that offer such schemes have grown a lot faster than they would have without them.
“Moreover, businesses offering ownership schemes grow fastest when employee ownership is combined with a programme that encourages employee participation. While ownership provides a strong incentive to work harder, opportunities to participate can improve a firm’s competitiveness by providing avenues for employees to contribute through their knowledge and skills.”