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The Weekly paper of the New Communist Party of Britain


by New Worker correspondent

ON THE EVE of its belated annual conference the Trades Union Congress (TUC) has published a curate’s egg of a report entitled Companies for People: How to make businesses work for workers, which is worthy of some attention.

On the positive side it sets out, in jargon-free language, much of what is wrong with contemporary British capitalism. None of that will surprise readers of the New Worker but many details will be interesting.

Unsurprisingly, it is as helpful as chocolate teapot when it comes to pointing out the way forward. There is certainly nothing in it to strike fear into hearts of members of the House of Lords, where outgoing general secretary Frances O’Grady will shortly be joining.

As if we did not know it, the report laments that “the benefits of economic growth are not shared fairly among its participants”.

It notes that since the 2008 financial crisis, shareholders have benefited from dividends growing over three times faster than wages. From 2008–2019, wages grew by 1.9 per cent and dividends 6.3 per cent per year in nominal terms, but in real terms, average wages fell by 0.3 per cent per year but dividends rose by four per cent annually per year. Had pay risen as dividends have, workers would have been an astonishing £16,400 better off in 2019, or in other terms UK workers would have received an additional £510 billion in wages.

In the Thatcher–Major–Blair years of 1987–2007 dividends grew by 10.4 per cent per year and pay by 5.2 per cent per year in nominal terms, or 7.4 per cent and 2.4 per cent in real terms respectively.

In this period dividends came to take an increasing share of profits, from 16 per cent in 1987 to 52 per cent in 2018. Although this fell during COVID 19 pandemic, it bounced back to 41 per cent in 2021. This rise has come at the expense of productive investment and wages.

The results of this for workers are clear: 4.8 million workers, or one in six of the workforce, are paid below the Real Living Wage. A Living Wage Foundation survey carried out earlier this year found that 38 per cent of people earning less than the Real Living Wage said they had fallen behind with essential bills in the last year; with 32 per cent saying they regularly skipped meals, 23 per cent had fallen behind with their rent or mortgage payments (wait till the more rates increase), with 17 per cent taking out a pay-day loan for essentials.

Even before the pandemic, in 2019, 14.5 million people in the UK lived in poverty, over half of whom, 57 per cent or 8.3 million, were in working households. As a result, 4.3 million children live in poverty despite having a working parent.

Shareholders Rule OK

The TUC wisely points out “that UK company law and corporate governance prioritise the interests of shareholders over those of other stakeholders”. That is a statement of the blindingly obvious, but the TUC laments that: “Institutional investors generally hold shares in hundreds of companies and do not have the staff capacity to analyse and engage with all the companies whose shares they hold.”

Ever since early Victorian times company law has been biased in favour of bosses. The 1844 Joint Stock Companies Act made it easy to set up companies and the Limited Liability Act of 1855 ensured that owners could separate their own personal assets from a failing company, so they only lost the value of their shares and were absolved from any wider responsibilities. Bosses did not follow workers into the poor house, and do not do so today.

not suffer

Having a spread of investments means they do not suffer greatly if one of their companies goes under, so the ‘reward for risk’ that bourgeois economists use to justify high profits for ‘entrepreneurs’ (a French word for chancers) does not apply to them. On the other hand, workers suffer most as they have only one job to lose.

To make things worse, most large companies have complex webs of holding companies and corporate structures so it is virtually impossible to know who owns whom. Instead of a company having different departments, it turns them into different companies that in theory trade with each other to reduce the profits on which tax needs to be paid.

The 2006 Companies Act has some pious clauses that mention directors being required to have regard to the interests of employees, supplier and customer relationships, community and environmental impacts, and company reputation – but as always, company law is only concerned with the over-riding objective of promoting the interests of shareholders who have the whip-hand in running the company by electing directors, attending AGMs, setting directors’ pay and appointing auditors, many of whom are at best useless or worse.

On the latter point, the TUC laments that despite high profile cases such as Carillion and Patisserie Valerie, where dozy auditors failed to notice companies were on the brink of collapse resulting on huge fines being imposed, such as the largest ever audit fine of £14.4 million imposed in July on KPMG for misleading regulators in routine inspections of historic audits of Carillion, few shareholders oppose auditor appointment resolutions.

In 2019–2021 only 0.8 did so. The TUC laments that investors are not making good use of the rights they hold, rendering our current shareholder-oriented system ineffective even in its own terms.

The TUC also complains that investors to not intervene enough, citing the fact that they do not limit excessive executive pay, but this only means that investors approve of that. In any case, institutional investors care little about the long-term future of the businesses they invest them and drop the shares like hot potatoes when the dividends dry up.

With regards to executive pay, remuneration reports often see the highest ‘no’ votes at company AGMs. But it is as rare as hens’ teeth for a majority of shareholders to actually vote against remuneration reports or remuneration policy. It is often just a case of harmlessly letting off steam in a symbolic fashion.

As a result, FTSE 100 CEO pay rose from £2.27 million in 2009 to peak at £3.97 million in 2013 and 2017. At present, the ratio between median FTSE 100 CEO is 109 times the median earnings of a UK full-time worker in 2021.

The TUC is spot on about one matter: collective bargaining not corporate governance rights are what matters in securing workers’ rights, and it notes that things have got worse with the decline in trade union density and collective bargaining coverage from 54 per cent and 23.1 per cent respectively in 2021.

The TUC’s solutions to the problems of low pay and insecure work are timid however: It wants changes in company law to require directors to focus on long-term company success and balance workforce and shareholder interests, and to change the term “employee” to “workforce” in the Companies Act. A more seemingly revolutionary demand is for elected Worker Directors, who should be one third of boards at companies with over 250 staff.

This is not as good as it sounds. While it would benefit union officials looking for another cosy job, it also means that workers would find it difficult to oppose management decisions ‘their’ board members were a party to, however willingly or reluctantly. In Germany, where this process has gone furthest, it is often impossible to distinguish trade unionist directors from the shareholders’ nominees. Recently worker directors at Ford plants in Spain and Germany have been busy petitioning American bosses that rival plants should be shut down rather than their home plants, instead of co-operating with fellow workers.

The TUC piously hopes that unions should have access to workplaces to tell workers about the joys of trade unions, it wants processes for establishing union recognition simplified, and Fair Pay Agreements agreed by unions and employers to be established.

It also wants a system of strict liability for core employment law standards to be established so that organisations have a legal responsibility to protect basic workplace rights for workers in their UK supply chains. In true TUC tradition, it does not say what action should be taken. Perhaps the new general secretary could write to Santa Claus. Calling for mass action is a definite no-no for the TUC.

Insecure Work

Insecure work has increased greatly since 2008. By 2019 it reached 3.7 million workers or one in nine of the workforce. The rate only dropped slightly during the pandemic, and that was for the worst of reasons, namely, they disproportionately lost their jobs entirely. This figure includes agency, casual and seasonal workers, but not those on fixed-term contracts. In the UK there are no less than 935,000 people on zero-hours contracts (in 2006 there were only 70,000), 952,000 agency, casual and seasonal workers, and 1.9 million in low-paid self-employment, mostly of the fake variety where they are beholden to a large employer, rather than running small businesses. Fixed-term contracts, whilst acceptable for specific projects, are often used as a means of keeping workers on tenterhooks.

most desperate

Zero-hour contracts are another means of exploitation. It is a myth that zero-hours contracts offer ‘flexibility’ to workers. This is not the sort of flexibility where 9–5 can be swapped from 8–6 or 10–7, but instead allows bosses to cancel work at less than 24-hours-notice (without pay) or workers being told to take a job at similar notice. Only the most desperate accept jobs at such terms.

Indeed, the 2010 Marmot Review of Health Inequalities found that whilst unemployment was a major factor in causing poor health, a low quality or stressful job can be even more damaging, arguing that “Getting people off benefits and into low paid, insecure and health-damaging work is not a desirable option”. It might be for bosses, of course.

That Review pointed out job insecurity and instability were commonly associated with low levels of control by workers; high levels of demand; lack of supervisor and support; and more intensive work and longer hours.

Perhaps unsurprisingly, this results in a wide range of mental and physical health impacts, such as depression, cardiovascular disease, coronary heart disease, musculoskeletal disorders and metabolic syndrome.

The TUC also points out that: “Insecure work also has the effect of further weakening worker power. If you are reliant on the whims of a boss for your next shift you are far less likely to complain about conditions, let alone ask for a pay rise. It blights the lives of millions of workers who deserve better.” That will not be news to many.

Who Owns Whom

The TUC also laments that whilst the share of the FTSE 350 held by asset managers has doubled since 2000 from 20 per cent in 2000 to over 40 per cent today, these asset managers do not “analyse and engage with all the companies whose shares they hold” and that they are “reluctant to vote against company management and most AGMs pass with little or no investor dissent”.

At the same time the proportion of UK company shares held by UK owners has declined, with the majority of UK shares now held by overseas investors.

figures refute

In 1990, 12 per cent of UK shares were held by overseas investors, it rose to 56.3 per cent in 2020. At the same time the proportion of UK shares held directly by UK pension funds fell from nearly a third in 1990 to less than one in 50 (1.8 per cent) in 2020. Even if we add in indirect ownership, UK pension funds hold only six per cent of UK shares. These figures refute that common argument that workers have an indirect stake in British capitalism.

It is also worth noting that the average holding period of UK shares has declined from around six years in 1950 to less than six months, sometimes shares are owned for a fraction of a second as City whizz kids or their computers buy and sell shares in response to tiny movements in share prices rather than any long-term considerations about a company.

Mergers and takeovers also provide incentives for companies to strategise to keep share prices high rather than invest in long-term, organic growth. For Companies’ dispersed shareholdings, the best way of protecting themselves against a hostile takeover is to keep their share price high so that a takeover will be too expensive for bidders to contemplate.

As a result, many companies pay dividends unjustified by company performance. Between 2014–2018, in 27 per cent of cases returns to shareholders were higher than the company’s net profit, including seven per cent of cases where dividends and/or buybacks were paid by loss-making companies. In 2015 and 2016, total returns to shareholders came to more than total net profits for the FTSE 100 as a whole. Trebles all round as P45s are handed out.

In theory shareholders should suffer when profits decline, but this does not always happen. Whilst total profits ranged from £53 billion in 2015 to £150 billion in 2017, a variation of £97 billion, with a fall between 2014 and 2015 and a sharp rise in 2017, the returns to shareholders only varied by £48 billion, which means the money still rolls in regardless.

An examination of 182 companies in the FTSE 350 from 2009–2019 found that the top 20 per cent of companies (in terms of shareholder returns to net income) paid out 178 per cent of their net income to shareholders over the period and also had the lowest productivity increases, lowest growth in R&D, lowest profitability and investment, and highest debt-to-equity ratio.

This shows that these companies are paying dividends funded by borrowing, rather than funded by sustainable profits generated by investing in organic growth. When the bubble bursts the shareholders will have fled the scene. Even the banker’s Bank, the Bank of England, thinks this is undesirable.


In short, the TUC offers some modest suggestions for improvements in the management of British capitalism. It wants directors’ duties to be rewritten to remove the present requirement for directors to prioritise shareholders’ interests and be required to “promote the long-term success of the company as their primary aim, taking account of the interests of stakeholders including the workforce, shareholders, suppliers, customers and the local community and impacts on human rights and the environment”, but in the very next sentences of the reports it points out that this has been done before, in the pious bits of the 2006 Companies Act, and does not seem to have made any difference. It merely wants to change the word “employee” to “workforce”, which would include indirectly employed workers.

Workers need to demand much better!