In favour of common sense capitalism

The chair of John Lewis Partnership has spoken of the need for businesses to give something back to their communities, saying it makes business sense.

 

Should business be a force for social good? Yes, according to Dame Sharon White, Chair of John Lewis Partnership.

She told a meeting of the Resolution Foundation yesterday that it made business sense in part because people want businesses to walk the talk and be more active socially. Only 9% of the public think business is over-reaching itself, she said, adding that trust in business has never been lower, partly as a result of the aftermath of the 2008 financial crisis.

While some critics think businesses should just be about jobs and wealth creation for shareholders, others argue that doing good and business can go hand in hand. Indeed, White said a study of 100 leading companies with a focus on social purpose showed they performed better over two to three decades than their peers. She cited Larry Fink, head of BlackRock, on stakeholder capitalism as being driven by a mutually beneficial relationship between serving customers and the community. White said this was ‘common sense capitalism’.

Indeed, she said, there has been a link between business and social purpose since medieval times when landlords provided food and housing to workers. She also mentioned the co-operative movement and 19th century companies such as Cadbury’s which provided housing for its workers in the West Midlands.

Nevertheless, White rejected calls for a change in legislation that would require firms to advance the interests of society and the environment as well as deliver returns for shareholders. She said: “Is there a case as some have argued for companies actually changing their fiduciary duty to extend not only to shareholders but to workers and to society? My own view is that that is a step too far.” Her remarks came despite John Lewis Partnership being listed as a “supporter” of the Better Business Act campaign, which is fighting for the Companies Act to be amended along these lines.

A partnership model

White spoke too about the evolution of John Lewis’ ethos from its early days as a private company which paid its workers as little as possible, resulting in a strike and mass exodus. When the original founder’s son, John Spedan Lewis, took over he did so with an alternative vision. He felt it was wrong to make a profit at the expense of workers and proposed the partnership model where employees are shareholders in the company.

His vision took 35 years to achieve, but the aim was also to give workers certain benefits, such as access to healthcare [before the NHS was set up], housing, subsidised hotels and democratic channels of communication, including a newspaper which encouraged free speech. Spedan Lewis saw the partnership model as an alternative to Communism. White said he was very astute and aware that he was not running a charity – the partnership made business sense.

Nowadays that partnership model is a means of making the world happier, said White, which makes for a happier business. She cited the company’s recent equal parental leave policy of six months’ paid leave and its paid leave policy for pregnancy loss, which are both a first for the retail sector and contributed to the company winning the workingmums.co.uk’s Top Employer Award for Family Support. She added that the company is also working to support young people from a care background into jobs in the business.

The partnership model has helped the business through Covid, said White, with its mission encouraging people to go above and beyond to provide good customer service. Waitrose’s online business has quadrupled in size as a result, John Lewis was able to function wholly online during lockdown and many workers opted not to go on furlough. The model has meant the company can innovate, for instance, through the creation of an automated warehouse and has been able to pioneer online retailing. It is now branching out into financial services and housing, areas where White says trust matters.

The future of retail

The meeting, which was also addressed by MP Jesse Norman, was hosted by the Resolution Foundation as part of its Economy 2030 inquiry.

It is interested in the future of the retail sector – a sector where women predominate – in response to the growth of online shopping which is squeezing retailers’ profit margins. Covid is likely to increase the trend towards online shopping. The Foundation’s statistics also show that retail has relatively low productivity, low pay and shrinking employment and that workers in the sector tend to be younger, although it is older generations who are the bigger consumers. The workforce is also less mobile than in the past, with people changing job and changing sector less than in the past. The inquiry continues.



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