Tag Archives: employment

Uber & Capital Abundance

Tim Roache the General Secretary of the GMB writes about the GMB success in the courts in having Uber’s business model criminalised. The courts state that Uber’s drivers must be treated as employees and not as self-employed contractors.

The GMB and the UK are not the first jurisdiction to go to court.  I looked at this last year, and made a storify,   … » Read more …

The Right to Work

At the Tory Party conference, the Chancellor, George Osborne proposes legislation that will allow employers to “buy” employment protection rights in exchange for shares.

Better read and experienced economists than I are writing about how the threat of dismissal will lead to talent leaving; it’s always the confident and good that go first. The Trade Unions are also quick to comment. I just want to mention four points which might otherwise be missed.

Will the difference in treatment between the very highly paid and those less well paid remain? At the moment, senior staff required to leave, sign a compromise agreement and walk into their next job laughing all the way to bank? I can’t see Osborne having made life more difficult for these people, and the preferential treatment of senior staff is an act of collusion between the Boards, the CxO and the remuneration committees. Empowering management is not going to change any of that. The fact is that one company’s board of directors, is another company’s remuneration committee is part of the problem of massive overpayment to CEOs.

I can’t see a small company wanting to dilute its shareholding, and most small companies are not quoted on an exchange i.e. they have no value! Furthermore, where small, particularly patron run companies pay significant dividend payments for tax efficiency purposes, they’ll now have to share these dividend payments with their workers. Those companies whose initial and second stage growth are funded by venture capitalists will also not want their ownership stakes diluted in this way.  Large companies don’t on the whole want to behave unfairly, its the redundancy commitments they don’t want to meet, although it seems that redundancy rights are included in what’s being “bought”. However, large companies have other strategies for the avoidance of paying for employment rights. Large companies avoid redundancy and other rights by outsourcing and employing contractors.

The attitude of both sides of this deal will depend upon if the employer is a succeeding or failing company. As suggested above a succeeding or growing company is unlikely to want to dilute its shareholding or share the dividend payments and needs to be a quoted company or will need a public offering plan to make their shares of interest to employees; but a succeeding company may be able to make this work. A failing or even a stagnant company which may be more likely to want such a deal will be much less attractive to the employees. If a stagnant or failing company is quoted, the risk on the value of the shares is high. i.e the sale price of the employee rights is uncertain, because the likely direction of the share price is downwards. In a failing company, this is a deeply unattractive deal. Also it is in the case of failing companies, that the opportunity to dismiss people for individual performance related causes, rather than undertake redundancy programmes becomes more likely; although on reading the speech, Osborne also plans to allow companies to   … » Read more …