Deputy Prime Minister Nick Clegg has called for employees to be given the right to request shares in their firm.
As the debate on how to tackle what is becoming known as crony capitalism mounts, Clegg’s intervention aims to redistribute capital, and by extension power, to help undermine the danger of the economy becoming “monopolised by a minority”.
In a speech to the Corporation of London today, Clegg said the economy is in danger of serving only the narrow interests of a few “immensely powerful vested interests” at the expense of the majority.
He said: “We do not believe the problem is too much capitalism, we think it is that too few people have capital. We need more individuals to have a real stake in their firms.
“That is the core of responsible capitalism, power in the hands of the people.”
All three main parties have moved onto the political battleground of creating a more responsible capitalism, with the Coalition to set out plans for shareholders to have a binding vote on executive pay and Labour calling for a company’s main shareholders to be given responsibility for appointing board members.
Employment relations minister Ed Davey and Treasury chief secretary Danny Alexander – both Liberal Democrats – are working on proposals for the Coalition. Extending the various tax reliefs on the Enterprise Investment Scheme from external investors to employees and restoring tax breaks to employee benefit trusts are both being examined.
CMS Cameron McKenna partner Nicholas Stretch says firms will be wary that if Clegg’s plan is made compulsory, it might end up becoming a burden on firms.
He says: “The imposition of compulsory pension savings, for example, has come at a significant cost to employers. Companies would be concerned if they had to make share scheme awards to all employees without having flexibility to reduce cash earnings. This would amount to an across the board pay increase, which they may not be able to afford.”
In his speech, Clegg also attacked the FSA’s “spectacular failure” to properly regulate the City.
He said: “Regulator’s are meant to guard vigilantly against industry excess. But they turned soft – either captured by or intimidated by those they were supposed to keep in check. And, just like the politicians, just like the industry, the FSA ignored the alarm bells ringing.