:00:12. > :00:16.Zuwara. -- centred in. One of Britain's Aldous retailers,
:00:16. > :00:21.John Lewis, is very popular at the moment. Not only what shoppers but
:00:21. > :00:25.the British Government. It says it wants to create a John Lewis
:00:25. > :00:29.economy. A new form of capitalism where employees have more of a
:00:29. > :00:35.stake in their business. The thinking is that like the
:00:36. > :00:39.department store, everyone would come together in tough times. Under
:00:39. > :00:49.its written constitution John Lewis even asked to worry about the
:00:49. > :01:12.
:01:12. > :01:17.happiness of its staff. Is it the And the street, often too HARDtalk.
:01:17. > :01:23.-- Andy Street. What is so great about the John Lewis way of doing
:01:23. > :01:29.things? What is special about John Lewis is that we like to think is
:01:29. > :01:37.that everyone is in it together. Everyone shares the success of the
:01:37. > :01:43.business. All of your staff own the business? Indeed, everyone owns the
:01:43. > :01:51.business. Everyone receives a bonus when we declare our annual profit.
:01:51. > :01:59.The same percentage for everyone in the business. This year it was 14%
:01:59. > :02:03.of salaries. Correct. You do not have any shareholders. But you must
:02:03. > :02:12.have a decision made at some level of how much of your profits you put
:02:12. > :02:22.back in your business and how might is allocated to the our -- your
:02:22. > :02:23.
:02:23. > :02:28.staff. Indeed. It is decided by a board. It has been roughly 50-50.
:02:28. > :02:32.The interesting thing about the structure is the board itself. Five
:02:32. > :02:37.members of the board are elected partners. The partners themselves
:02:37. > :02:41.are taking that decision. That is why it is different from the way a
:02:41. > :02:46.company runs. I am wandering in the ways of the conversations you have
:02:46. > :02:53.about the interests of the company how it differs from shareholders
:02:53. > :02:57.worrying about dividends. I like to think that the difference is the
:02:57. > :03:04.discussion in John Lewis is all about what is in the long-term
:03:04. > :03:09.interest of the partners. There is no conflict of interest between the
:03:09. > :03:15.shareholders and the workers. That is what I mean by it is all in it
:03:15. > :03:18.together. You say long-term interest. Does a company with
:03:18. > :03:25.shareholders have a shorter term it is looking at? You can probably say
:03:25. > :03:35.that. What I can definitely say is that John Lewis is not trying to
:03:35. > :03:41.protect a short-term share price. We looked after our customers. We
:03:41. > :03:46.rebuild profits. One of the counter arguments is that you cannot move
:03:46. > :03:52.as quickly. You are constantly worried about her staff. That is
:03:52. > :03:59.the allegation put against conventional co-operative movements.
:03:59. > :04:04.But John Lewis has an executive management had takes decisions. We
:04:04. > :04:10.move desperately as any retailer in the last decade. -- moved as
:04:10. > :04:18.quickly. I do not accept your allegation. Your argument is that
:04:18. > :04:24.we have to be aware of them. Exactly. It is not a perfect
:04:24. > :04:29.democracy. These are active management decides. What we are is
:04:29. > :04:36.accountable to all of our partners. But I have seen you say that this
:04:36. > :04:44.model has weathered the downturn, but I have also seen you quoted as
:04:44. > :04:50.saying a model is too costly. Absolutely. That is not because the
:04:50. > :04:55.model is not competitive. We have just not taking the tough decisions
:04:55. > :04:59.before the recession to get our cost sustainable long-term. The
:04:59. > :05:04.great news is that the recession encouraged us to do that. We have
:05:04. > :05:10.done some tough things. That is why our numbers have been good. What
:05:10. > :05:16.sort of decisions are we talking about? Talking to partners in some
:05:16. > :05:23.areas and saying that your job is no longer required. We have looked
:05:23. > :05:32.into the efficiency of how many people we employ. But that his
:05:32. > :05:37.surely as a result of the model itself. I do not believe that. The
:05:37. > :05:44.management has to take the tough decisions. It was not that our
:05:44. > :05:48.owners were holding the manager's back. We have not been forced by
:05:48. > :05:51.the economic realities to take those decisions. Even if it is
:05:51. > :05:55.written into your constitution that you have to maximise the happiness
:05:55. > :06:01.of staff it can hardly be in the happiness of the people that you
:06:01. > :06:05.were sacking. What the last cheers have revealed is that this is not
:06:05. > :06:12.about the happiness of one individual partner, but the
:06:12. > :06:20.happiness of the whole organisation. 80,000 people got behind the
:06:20. > :06:29.efficiency drives. You'll retard director so that we do not operate
:06:29. > :06:37.at the peak of efficiency. -- Euro Retail Director said. He said that
:06:37. > :06:47.we could make decisions more or urgent plea. -- urgently. It was a
:06:47. > :06:49.
:06:49. > :06:56.fair challenge. I would put you that since that quota from 2010
:06:56. > :06:59.what we have done is demonstrated that we have taken tough decisions
:06:59. > :07:06.and shown to our customers' eyes that we are on the leading edge of
:07:06. > :07:12.the move to online shopping. We have been anything but slow. So you
:07:12. > :07:17.would say this is not down to the structure. I would. The trouble is
:07:17. > :07:20.that this is a structure that was put in place back in 1929 when the
:07:20. > :07:27.son of the person who found the company said I would hand it all
:07:27. > :07:32.over to the staff. It is not exactly something that has been
:07:32. > :07:37.repeated many times since. If it is so successful, here you are still
:07:37. > :07:44.decades after it happened representing a tiny part of the
:07:44. > :07:49.whole of the British economy. is correct. That is one of our
:07:49. > :07:53.frustrations. There has not been more adoption of this over the 80
:07:53. > :07:59.years. We would argue that the longevity of you were John Lewis
:07:59. > :08:05.model shows the value. It seems to be more relevant than it was before
:08:05. > :08:14.the market crash. That is why we are welcoming what the government
:08:14. > :08:24.said. The British government really loves you. But there are other
:08:24. > :08:27.
:08:27. > :08:35.examples. Other companies were not saved by their employee focus.
:08:35. > :08:39.were not and truly employee ownership. I do not accept the
:08:39. > :08:44.comparison. That is the critical factor. A majority of the company
:08:44. > :08:50.has to be owned by its staff. about a complete model rather than
:08:50. > :08:58.a little bit. Why has there not been more up of the John Lewis
:08:58. > :09:03.model? People have tried small part of it. But no-one has taken the
:09:03. > :09:09.balance between a strong executive accountable to all of its partners
:09:09. > :09:14.through the ownership structure. Realistically, how much of an
:09:14. > :09:23.insight cannot seriously be? The rest of the economy runs in a
:09:23. > :09:31.different way. Not true. It is unlikely that a conventionally
:09:31. > :09:39.owned company will do exactly what John Lewis did back 19 from T9. --
:09:39. > :09:49.1929. But more companies can be set up on our faces. Perhaps managers
:09:49. > :09:54.can think of how they pass it on. There can be more diversity.
:09:54. > :10:01.does it affect pay? We talked about bonuses. He made the point they
:10:01. > :10:09.were 14%. The bosses are still paid an awful lot more than the staff.
:10:09. > :10:15.What dissatisfaction in the firm at my fear the? -- might there be.
:10:15. > :10:21.would have to put that to my partners. Managers are paid more
:10:21. > :10:26.than the staff but there is more relativity. We have a role in our
:10:26. > :10:32.constitution which says our best paid partner will be paid no more
:10:32. > :10:38.than 75 times the pay it of late selling assistant on our shop for.
:10:38. > :10:47.75 times is still a massive multiple. But compared to other
:10:47. > :10:53.companies or US companies it is still much smaller. There is a
:10:53. > :10:59.regulator. Do you think that is the acceptable more to pull. It is
:10:59. > :11:06.impossible to say what is the acceptable more trouble. This is
:11:06. > :11:10.not a numbers game. There has to be an essential ideal of fairness.
:11:10. > :11:16.have referred to other companies being out of control. Are they out
:11:16. > :11:24.of control? I believe that some are. If you look at the Wellcome
:11:24. > :11:30.packages that some of our competitors offer I do not believe
:11:30. > :11:36.that can be justified by the performance of one individual.
:11:36. > :11:40.the way to solve what has become a problem, I know you said the
:11:40. > :11:45.Government should not be interfering. My view is that the
:11:45. > :11:50.remuneration committees of organisations should be interfering.
:11:50. > :11:58.It is the corporate governed mechanism at must ensure that an
:11:58. > :12:05.organisation exists in a sustainable way. But they are not
:12:05. > :12:15.having enough of an effect to make a difference. Last year the pay of
:12:15. > :12:15.
:12:15. > :12:23.executives went up by 149 %. -- 49%. My own view is that that has
:12:23. > :12:29.reached a critical point. It is beginning to slow quite rapidly.
:12:29. > :12:33.We're past a tipping point. enough has been done? The issue has
:12:33. > :12:37.become significant enough for those responsible for the image and
:12:37. > :12:47.reputation of companies to be saying, do we want to make a stand
:12:47. > :12:50.
:12:50. > :12:56.on this? The defence of high pay is put by the likes of of those who
:12:56. > :13:04.say that we have to be prepared to pay the amount of money does
:13:04. > :13:10.executives can get elsewhere in the world? Is that right? It is right.
:13:10. > :13:18.They should be able to get a good salary. This is not a UK problem.
:13:18. > :13:24.The US is even more extreme. We need to be competitive. I cannot
:13:24. > :13:33.believe that is inconsistent. wonder how that applies to John
:13:33. > :13:40.Lewis. If you pay so much less as you suggest, how can you get...
:13:40. > :13:44.pay the market rate for a base pay at all levels. What do you be a
:13:44. > :13:51.cashier for what the EU be a director. What we do not hate is
:13:51. > :13:59.the individual bonuses. The bonus should be shared collectively.
:13:59. > :14:04.that limit to you can go to? It is the bonuses that send the figures
:14:04. > :14:09.to massive levels. Yes it does. It commits us to those people who
:14:09. > :14:13.believe her model is fairer. I say that is a good thing. It has not
:14:13. > :14:23.prevented us recruiting talented people who want to make a great
:14:23. > :14:26.
:14:26. > :14:32.contribution. You mean it is So the people you have signed up to
:14:32. > :14:35.it? Absolutely. They believe in our business model. If they are not
:14:35. > :14:39.committed, I do not believe they would be successful leaders of our
:14:39. > :14:42.business. They might be very successful elsewhere, but it would
:14:42. > :14:47.not work in our business. We are talking about how this is a model
:14:47. > :14:51.for the UK Government. We have heard countless times, the John
:14:51. > :14:55.Lewis economy, which I am sure you would love. I wonder how the
:14:55. > :15:00.Government could apply it elsewhere. How does it apply to other
:15:00. > :15:05.companies? First of all there is a public sector and private sector
:15:05. > :15:13.around this. The public sector are working on a number of pathfinder
:15:14. > :15:17.projects, which are taking small parts of the public sector and
:15:17. > :15:21.develops more examples. For example, we are working on a health service
:15:21. > :15:25.project, where we are taking a small part of the health service in
:15:25. > :15:29.Swindon to actually say it, how could we form a group that have a
:15:29. > :15:37.financial reward if they achieve a more efficient model than they
:15:37. > :15:39.previously had. And in the private sector? The private sector is about
:15:39. > :15:43.encouragement of for new business start-ups, passing on between
:15:43. > :15:47.generations and also for thinking about moving from one ownership
:15:47. > :15:55.structure to another. What tax incentives are there for employee
:15:55. > :15:59.ownership? So they can do things to encourage more diversity. You, as
:15:59. > :16:04.one of the people on the Prime Minister's Business Advisory Group,
:16:04. > :16:09.had his here on this, don't you? do not think they talk about just
:16:09. > :16:11.that. But we have been able to lobby the Government around the
:16:11. > :16:16.virtues of employee ownership, just as we did with the previous
:16:16. > :16:19.governments as well. Are they going to change the tax system to
:16:19. > :16:24.encourage it? There is no commitment yet, but in the last
:16:24. > :16:27.Budget there was a commitment to explore it. When you are lobbying
:16:27. > :16:34.the Government, did you also advise them that they should get rid of
:16:34. > :16:39.the top income rate of the tax? did not lobby on that. Certainly,
:16:39. > :16:43.businessman and companies have said, this is damaging to British
:16:43. > :16:53.interests because it is affecting the way that business operates.
:16:53. > :16:53.
:16:53. > :16:56.John Laws, not - -- as an organisation, did not lobby on that.
:16:56. > :17:02.Personally, I think they did the right thing. Britain has to be
:17:02. > :17:06.competitive. What he has done is cut the top rate of tax from 50% to
:17:06. > :17:14.45%. Is that fair play and we are all in it together? When we are all
:17:14. > :17:18.meant to be sharing the burden of austerity? Or George Rose Burn also
:17:18. > :17:25.did -- what George Osborne did was take a lot of people at the bottom
:17:25. > :17:28.of the tax scale out of paying tax at all. The fact that he did top
:17:28. > :17:32.and bottom together seems to be an acknowledgement that he was trying
:17:32. > :17:39.to make it has competitive as possible. I appreciate that you
:17:39. > :17:43.want to talk about a John Lewis perspective that, but you do have
:17:43. > :17:47.this role in the group and we are looking at the whole way it affects
:17:47. > :17:54.the economy. We had this situation where we have a model that could
:17:54. > :17:57.affect companies and could affect pay. And yet, the John Lewis
:17:57. > :18:01.economy, from all that I can understand, it might affect the
:18:01. > :18:11.public sector but it really does not seem to have any way apart from
:18:11. > :18:12.
:18:12. > :18:15.new business start-ups of affecting it. It is about a fairer form of
:18:15. > :18:19.capitalism, which does not necessarily mean taking all
:18:19. > :18:22.elements of the John Lewis model and imposing those on business.
:18:22. > :18:27.Let's have a look at what other things are in there. People say to
:18:27. > :18:31.me, why is John there was loved? It is about a number of things. It is
:18:31. > :18:35.about our commitment to suppliers, our commitment to the communities
:18:35. > :18:38.that we work in, how can amendment to be a good employer, our
:18:38. > :18:42.commitment to take the people from the ranks of the long-term
:18:42. > :18:46.unemployed and put them into work. What I think Nick Clegg was talking
:18:46. > :18:49.about was not a modern the cells on John Laws in terms of the ownership
:18:49. > :18:54.structure, but to take features that are enshrined in our
:18:54. > :18:58.constitution and apply them to your business. And as far as you're
:18:59. > :19:02.taking long-term unemployed, do you make certain commitments on that?
:19:02. > :19:06.We have an awful lot of young people leaving school and you could
:19:06. > :19:11.presumably parked the cream of the crop. Benny illustrate that with a
:19:12. > :19:15.little story. We have just opened a new store at the East End of London.
:19:15. > :19:18.We made a commitment two years before we opened that we would work
:19:18. > :19:28.with the agencies in the area to take a quarter of the people we
:19:28. > :19:32.employed from the ranks of the long time unemployed. We took 273 long-
:19:32. > :19:36.term unemployed staff members. We did that rather than taking the
:19:36. > :19:40.cream. That is what I mean by a socially responsible business.
:19:40. > :19:43.Another argument you have made is that private companies should be
:19:43. > :19:46.stepping into the public sector steps back. There is an example the
:19:46. > :19:53.John Moores has talked about using itcommunity groups for charities to
:19:53. > :19:58.meet. -- John Lewis. That is another example of a good public-
:19:58. > :20:05.spirited business. Across the UK we have provided a space for community
:20:05. > :20:08.groups to meet, free of charge. wonder it is much more you should
:20:08. > :20:12.be doing. The number of spaces is not going to be much, given the
:20:12. > :20:18.number of stores you have. Is there much more that you could, and
:20:19. > :20:22.should, be doing? What we should probably should be doing is giving
:20:22. > :20:25.contributions to charitable causes. That's all overseen by the business
:20:25. > :20:30.in the community in the UK. We would be in the top few companies
:20:30. > :20:35.in terms of proportion of their private given to charity. I am not
:20:35. > :20:37.saying one thing the journalist has set it aside, but what I think the
:20:37. > :20:42.spirit of our approach is that it is sustainable, responsible and
:20:42. > :20:46.that is what my Clegg is getting out. The Government has been
:20:46. > :20:50.criticised for not doing enough to boost growth. Companies are in
:20:50. > :20:55.trouble and there needs to be some help. One of the things that Ed
:20:55. > :21:01.Balls has suggested is you have a temporary cut in VAT. Wouldn't that
:21:01. > :21:04.be a fair and fast way to boost growth? It would be a quick thing
:21:04. > :21:09.to do because it put spending power back in the hands of consumers. My
:21:09. > :21:13.own view is that it is not the right thing to do. The origins of
:21:13. > :21:17.this downturn is not a weakness in consumption, it was a weakness in
:21:17. > :21:21.the other parts of the UK economy, which are about competitive
:21:21. > :21:25.businesses. I actually believe that although it might be attractive in
:21:25. > :21:29.the short-term, it will not solve any of the underlying issues.
:21:29. > :21:32.Should the Government been doing more in other ways to boost growth?
:21:32. > :21:36.Of course it should be. The things that it should be doing is looking
:21:36. > :21:41.at infrastructure investment, investment in skills so that on the
:21:41. > :21:51.supply side of the economy it is making us a more competitive place
:21:51. > :21:51.
:21:51. > :21:59.for business to be conducted. A widespread agreement has been
:21:59. > :22:03.holding back business of other decisions. Your chairman said in
:22:03. > :22:09.January that he was cautiously optimistic about the economy. This
:22:09. > :22:14.was after a Christmas that was better for some people. Since then
:22:14. > :22:20.there have been some difficult giggles. I wonder where you are now
:22:21. > :22:24.on how much longer the downturn will last? I am still in the
:22:24. > :22:29.cautiously optimistic state. The reason for that is, particularly
:22:29. > :22:35.for retailers, it is all about how much money consumers have. What is
:22:35. > :22:38.consumer expenditure likely to be? With inflation coming down, the tax
:22:38. > :22:42.increase is being passed, it looks as though it when we go into the
:22:42. > :22:45.second half of this year, consumers will have a little bit more money.
:22:45. > :22:49.Retailers can have their sales will move forward this year. You would
:22:49. > :22:58.expect consumer sales to improve? To begin to improve and get
:22:58. > :23:03.stronger through the year. So in terms of what that will mean for
:23:03. > :23:07.growth? That will be a good contribution indeed. I am wondering
:23:07. > :23:13.how... It is still only small. I am not a professional economist, but
:23:13. > :23:20.we have to look at this bordering a planning. It is about 1% movement
:23:20. > :23:25.in the year. It is a positive number, though. For you in terms of
:23:25. > :23:28.the International opportunities, it is one that is online. You have
:23:28. > :23:32.expanded into 33 countries with your online sales. The whole point
:23:32. > :23:39.he is with the British economy facing a long period of slow growth,
:23:40. > :23:45.many retailers have got to say, how can we get export opportunities? We
:23:45. > :23:51.have taken our mind facility to 33 countries. The best performing
:23:51. > :23:53.countries - France, Australia. it only a matter of time before
:23:53. > :23:58.there is a John Lewis department store in France or Australia?