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