Ethical capitalism

We have waxed long and hard on these pages about CEOs acting like pigs at the trough, robbing their businesses, the golden geese that should be improving the lot of all in society, by paying themselves huge unjustified pay and bonuses and maximising their share prices (and hence their shareholdings) whilst paying their employees the bare minimum and investing little for growth

At the same time, we’ve often applauded the John Lewis retail chain, in particular Spedan Lewis, founder of the company – his aim was: “Solely to make the world happier and a bit more decent” – JL now has 400 shops and 83,900 employees, called partners, who share profits made in an annual bonus scheme – this has obviously increased employee motivation levels, improved their attitude towards colleagues and customers and been a significant factor in their success

Now, another splendid example has hit the headlines

Julian Richer founded his eponymous TV and hi-fi chain Richer Sounds in 1978 – the company has a gross turnover of about £200m, is worth £9.2m and has 522 employees:

  • He is to give control of the company to an employee trust i.e. a 60% share of his company
  • And a further £3.5m as a cash bonus so each employee will receive £1,000 for each year of service – an average of £8,000 each
  • And all this on top of giving 15% of profits to charity

Apparently, Richer regularly monitors his employees’ morale by asking them for their ratings from one to ten – he also calls anybody suffering a bereavement or health treatment – and 70% of his employees use his 12 holiday homes at least once a year, funded (he says) by ‘reduced internal theft’

Overall, he says: “Companies should be encouraged, not forced, to act in a similar way”

Richer explains: “I am increasingly angered by what I see elsewhere – disreputable people running their companies in a way that involves taking as much as they can from society and then sneaking their profits out of the country”

The Times says:

  • “Richer’s decision shows a laudable commitment to the company’s employees and an acute understanding of how capitalism rests on public-spiritedness rather than avarice
  • Companies have more obligations than the enrichment of their shareholders, and acknowledging this can be a route to business success
  • The good company owes profits to its shareholders, secure jobs for its employees, good products or services to consumers, and an obligation to society – it’s how the market economy can serve the many, not the few
  • There are a mere 350 employee-owned businesses in the UK – aligning the interests of employees and owners is good for business by stimulating productivity”

Conclusions:

  • Nowadays, many bosses are more concerned with feathering their own nests than building their own companies for the benefit of all – they display what Prime Minister Ted Heath called ‘the unacceptable face of capitalism‘ – how do they get away with it? – “Because they can” according to President Barack O’Bama
  • Richer’s whole attitude towards his employees is key to his own financial success – he not only ups their pay and ownership status but treats them as equals and shows genuine concern for their welfare, both at work and at home – no wonder Archie Norman consulted him when boss of ASDA and is doing the same now he’s boss of M&S
  • Too few managers realise the potential lying dormant within their teams, not least because of them
  • Some believe most teams could perform at least 30% better if only their bosses thought and acted like Spedan Lewis and Julian Richer

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