English academic calls for legal reform following report into Phoenix Four at Rover

Sept. 13, 2009 - PRLog -- Sheffield Business School academic, Dr Rory Ridley-Duff, has identified Company Law and Employment Law reform, following the European model, as one of the ways to bring executive pay and conditions under democratic control.  In letters to UK broadsheets, he writes:

"If ever there was a case to justify wholesale reform of our business culture, surely that case is Rover ("Rover bosses attacked over payout", BBC News, 11th Sept)?  That no Rover executive broke the law is irrelevant.  Company and employment law is currently designed to legalise theft from the workforce, in the same way the MPs' expenses system was designed to legalise theft from the taxpayer.

The government missed its chance to radically reform our business culture when it gave in to pressure during the Company Law Review 2000.  We must now press all political parties to end 'shareholder interest' as the dominant arrangement, and build on EU laws that have introduced works councils.  Out must go HRM departments reporting to unelected executives and investor-led boards, and in must come HRM departments reporting (and accountable to) elected works councils.  Shareholder boards can retain their role raising investment in money markets, and play a partner role in strategic management, but the time to take democratic control over remuneration and conditions of employment has come.

We have much to learn from the most profitable, productive and accountable organisations in Europe - the members of the Mondragon Cooperative Corporation (MCC).  For the last 30 years, they have limited executive pay by asking the workforce (at a local level) what is acceptable as a ratio between the highest and lowest paid within each company.  The ratio of 6:1 has been stable for almost 30 years, and can only be modified by a further vote involving each workforce.  Only once has an executive group run a campaign to overturn this arrangement, and the proposal was defeated in all but one of the 150 or so member businesses.  The message went out loud and clear that if executives want to earn more, they must increase the remuneration of the lowest paid within the company.

Such workplace reforms do more to tackle social exclusion and poverty, and close the pay gap between rich and poor, than all the government schemes and initiatives introduced during the reign of the New Labour government.  Nor does it buck the market.  Executives can go to any company where the works council is so ineffective that it doesn't control pay and working conditions.

I will be looking for this commitment in the manifestos of the political parties at the next election and will vote for the one that includes it."

The case cited by Rory Ridley-Duff, the Mondragon Cooperative Corporation (MCC), is an example that more and more governments and social movements are looking at to generate ideas for social and economic reform.  It has been cited in key studies within the US, Australia, the UK, Canada, and was put forward as the preferred development model for Scotland.   At the MCC, after 50 years of development, over 90% of capital ownership remains in the hands of the workforce.  Almost half the workforce are women.  In industrial cooperatives, senior roles are dominated by men, but in the retail and distribution sectors, 76% of senior roles are held women (the highest percentage in a multi-billion pound business anywhere in the world).

The workforce has increased from 20,000 in 1980 to over 100,000 today (at the rate of about 10-12% per annum).  The early history of the corporation was recently made available when a BBC Education documentary The Mondragon Experiment was uploaded to Google (http://video.google.com/videoplay?docid=7565584850785786404#).  More up-to-date information can be found at the Global 300 website of the ICA (http://www.global300.coop/en/profiles/mcc) and the MCC's own website (http://www.mcc.es/ing/index.asp).

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