Letter: Co-partnership, Fact or Fantasy? (1962)

Letter to the Editors from the July 1962 issue of the Socialist Standard

‘John Lewis’ replies

Dear Sir,

In the article in your March issue on Co-Partnership—with particular reference to the John Lewis Partnership—there are so many statements which are not in accordance with the facts, that I should be grateful if you would publish this letter in order to correct the quite erroneous impression which your article might create.

The Partners—and the definition you quote is a perfectly happy one, “persons associated with others in business of which they share risks and profits’—are, in fact, joint owners. All the ordinary share capital—the equity—of all the companies is held, either directly or indirectly, by the John Lewis Partnership Trust Ltd. on behalf of all members of the Partnership. You say “the workers in the J.L.P. no more share the profits than do the employees of various concerns who have in recent years taken up the idea known as profit sharing”, This is palpably and demonstrably untrue. Several companies in recent years have issued shares to their employees as a means of profit sharing, but the number of shares so issued is fixed arbitrarily by the Board concerned and the balance of the profit is distributed amongst the holders of the ordinary shares, who may be, and usually are, members of the general public. In the J.L.P. none of the general public can own a J.L.P. ordinary share—they are all held in trust for the “Partners ’—and all of the profit that would otherwise go to ordinary shareholders goes, under irrevocable settlements in Trust, in one way or another to the Partners themselves.

You go on to say that ’’the so called profits are no more than part of their wages—a bonus and an incentive for harder work”. Entirely untrue. The J.L.P. pays wages which are at least as high, if not higher, than their competitors pay and this sharing of profits is something entirely additional and is given pro rata according to their salaries whether they work harder or not. This is pure profit which in most other businesses would go to outside shareholders. It is not irrelevant in this connection to note that last year profits distributed to Partners or applied; for their benefit amounted to £1,500,000—a sum of money which could, had the Founder of the J.L.P. —Mr. J. Speden Lewis—decided to retain the business himself, have gone into his own pocket or, had he decided to float the Company in the normal way, into the pockets of outside shareholders of ordinary shares.

You dismiss gaily the amenities which the J.L.P. offers on the grounds that most of the amenities are also offered—and sometimes bettered—by their competitors. This clearly is no place to go into the detailed merits of amenities offered, but it can be confidently stated that no other comparable organisation offers better or even as wide a scope of amenities. Virtually every type of leisure time activity both intellectual and sporting is catered for and subsidised, e.g.. music, drama, chess, painting, sailing and all normal sporting activities. In addition there are residential clubs at Cookham on the Thames, at Stockbridge in Hampshire and at Liverpool. Partners can also buy subsidised tickets for operas, plays and concerts.

You seem to find it strange that Partners should be prosecuted for alleged dishonesty. This is quite incomprehensible. If, for example a Partner steals, that Partner is stealing from his fellow workers—universally regarded as being one of the most despicable forms of anti-social behaviour. It is surprising that it appears that you take exception to such a course of action.

The committees and councils of the J.L.P. are, you say, “supposed to be democratic bodies but in fact have a large percentage of members nominated by management and in every case are nearly always biased in favour of management This is particularly true of the General Council of the firm". Here the figures speak for themselves. In the Central (Not General) Council of I36 members, 28 are “nominated” by the management and 108 are freely elected by the members of the Partnership.

Legal ownership of the Partnership is vested not in ’’the Board of Directors and the Chairman”, but in the Trustees of the Partnership, who hold it for all present and future members of the Partnership. The powers of the Chairman are certainly wide, but they are limited by a written constitution and a breach thereof on his part could lead to his displacement by the democratically elected Central Council.

Despite your remarks that “J.L.P. workers are. if anything, worse off than workers employed elsewhere”, it is a fact that of our 15.000 members. 55%, have been with us over 3 years and 41% over 5 years. They are all at liberty to go elsewhere anytime they please.

The Founder of the John Lewis Partnership has said that the Partnership is a possible advance in civilisation and perhaps the only alternative to communism. Could it be that the success of this experiment has got “under the skin” of the Socialist Standard?

Yours faithfully.

H. C. Pugh

Public Relations Department.

John Lewis and Company Ltd.

Our reply

Mr. Pugh says “there are so many statements which are not in accordance with the facts” that the article on co-partnership might create an erroneous impression. In fact, the only error was our reference to the Central Council as the General Council.

Apparently Mr. Pugh is happy to accept our definition of “partners" taken from the Concise Oxford Dictionary, but he has ignored the important qualification which we were careful to stress. So, let us repeat that partners have definite—tangible-legal ownership in Capitalist enterprises and in the surplus value extracted from their employees. If this is borne in mind, it is quite clear that J.LP. workers have no stake in that concern.

Even accepting the definition from the Concise Oxford Dictionary without any qualifying statement, however it is still impossible to fit J.L.P. workers into the category of “partners" unless you want to go into an “ Alice in Wonderland " realm of fantasy and double-talk. For years now the J.LP. has referred to its employees as partners, even though they have come and gone as in any other capitalist concern and in all that time have had no legal ownership in the firm any more than workers have for example in the nationalised industries.

The fact is of course that the J.L.P. workers, like workers anywhere in the world, sell the only thing they have to sell, their ability to work. The wage they receive for expending their energies on behalf of the J.L.P. takes into account not only the actual money received, but includes the various amenities referred to by Mr. Pugh, and part of this wage is the so-called "profits" which we repeat are but a bonus and an incentive to harder work; it is actually referred to by the J.L.P. as a “general bonus" in various issues of their Gazette. Profit is unearned income—money which is realised by investing in industry and it only goes to those who have the necessary legal title. In other words, to those who possess stocks and shares etc. This obviously has no relevance to the mass of J.LP. workers.

Dividends

Mr. Pugh says that “none of the general public can own a J.LP. ordinary share . . ." by which he presumably means that no one can hold any of the 612.000 deferred ordinary shares of J.L. Partnership Ltd.. 6,995 ordinary shares of the Odney Estate Ltd., and 75 shares of the Leckford Estate Ltd. These are held by the J.L.P. Trustees who are also represented on the J.LP. Board. The implication to be drawn from the above statement apparently is that there is no exploitation of the workers in the J.LP. But Mr. Pugh does not mention the £287,000 paid out as dividends upon the preferred ordinary and preference stocks of the company and its subsidiaries, and no mention is made of the actual amount of debenture interest paid out in 1961. According to the Gazette of 3rd June. 1961 Loans and Debentures amounted to £10,227,619 and the interest of Outside Stockholders in Subsidiaries amounted to £6,841,389.

Mr. John Bedford. Chairman of Debenhams Limited, in an interview given to the Gazette touched upon this. He was asked about the efficiency of the Partnership by comparison with Debenhams. He said he thought "his own group's profitability was higher, but it was difficult to make a comparison without knowing exactly what capital was tied up to produce the Partnership’s results. Debenhams made a return to the Stock Exchange giving such information; the Partnership, he thought, did not."

We have already touched upon amenities, but as Mr. Pugh maintains that no other "comparable organisation offers better or even as wide a scope of amenities", it would be as well to deal with some of his figures. 55% of the 15,000 staff have been with Lewis's over 3 years and 41% over five years. “They are all at liberty to go elsewhere any time they please". Apparently they do so, for these figures from another angle show that out of 15,000 staff, 45% have been less than three years with the J.LP. and 59% have been there less than five years. Making allowance for normal wastage for retirement and other reasons it would seem that quite a large numbercome to Lewis's, find they do not like it, and go elsewhere. If on balance pay and conditions are so favourable in the J.L.P. they should be able to maintain a labour turnover much lower than this.

It can happen, of course, that a firm competes for labour by offering a combination of pay and amenities which really are above the average. What happens in that case is that they get a large number of applicants for vacancies and are able to pick the best: best qualified, best trained, and best from a health point of view. They are, therefore, paying above average wages but getting above average efficiency. The other side of the picture is that some other firms cannot or do not want to compete in this way, so they get the least efficient workers and pay wages below the average. Whether the J.L.P. fits into the latter category is anybody’s guess, but one thing is certain and that is that they do not fit into the first category; the staff wastage figures make that crystal clear.

Special Facilities

Mr. Pugh gives information about the special facilities offered to J.LP. staff. Different firms of course use different attractions. Some offer their employees four weeks holiday, luncheon vouchers, and so on. Other employers are able to offer free or cheap travel. Some workers have free or very cheap accommodation, food, clothes, shoes etc., or loans for house purchase at very low interest rates. But it is only necessary to look at the consequences to see that these are not additions to wages. It is obvious that free travel for railwaymen is a necessary accompaniment of low money wages, and the same thing can be found elsewhere.

Mr. Pugh says that we “seem to find it strange that Partners should be prosecuted for alleged dishonesty." But he has again missed the point we were trying to make. A man cannot steal from himself and the very fact that prosecutions take place means that someone else is the legal owner of the stolen goods, not the J.L.P. workers. Apparently Jones Bros, of Holloway (a member firm of the J.L.P) are under no such illusions as Mr. Pugh. They have installed a buzzer theft trap and anyone caught between two white lines near the staff exit when the buzzer goes, is asked by the watchman to empty his pockets, or may even be taken to a private room to be searched. (See Observer 22-4-62).

Regarding the Councils, in particular the Central Council. Mr. Pugh himself tells us “In the Central Council of 136 members. 28 are ‘nominated’ by the management and 108 are freely elected by the members of the Partnership." The nominated members amount to just over one fifth of the Council; in other words, one in five are there on behalf of the management. In actual fact, as many as a third of the members of the Central Council could be appointed by the management, according to the J.L.P. rules. This still doesn't take into account the very high percentage of management members amongst the "freely elected”. A quick glance through the Gazette reveals that this year's council is no different from previous councils, the majority of them being management employees.

Council representation and the percentage of nominated councillors have in fact been the subject of some discussion on the Central Council only recently. The following was reported in the Gazette of 25th November as part of the discussion of the Central Council:—“Ex-officio members are also a matter of concern to a number of Councillors. Need they be so large a proportion? ” "While they could number over thirty in the Central Council when Rank and File Councillors only numbered thirteen the situation was appalling, said one Councillor.” It can be seen from this that our statements in the article on co-partnership were perfectly correct and that Mr. Pughs’ phrase “freely elected” amounts to precisely nothing.

Says Mr. Pugh “Legal ownership of the Partnership is vested not in the Board of Directors and the Chairman, but in the Trustees of the Partnership . . ." What we actually said—we were referring to the Councils at the time—was that the Councils have no real power and that this is vested as in all capitalist concerns in the people who have legal ownership represented in this case by the Board of Directors and the Chairman. The Central Board and its Chairman have the real power; the real decisions are taken by the Central Board. Surely we do not have to cite the various decisions taken by the Board which are printed so regularly in the Gazette?

In conclusion Mr. Pugh along with Mr. Lewis apparently thinks “that the Partnership is a possible advance in civilization and perhaps the only alternative to communism" and that the success of this experiment has got "under the skin of the Socialist Standard." To which we would say that co-partnership, like nationalisation both at home and abroad, and in Communist Russia in particular, is just another way of running capitalism. One can certainly not consider co-partnership therefore as a “possible advance in civilization”. That will only come with Socialism.

In the meantime' no amount of word juggling is going to conceal the degrading business of the exploitation of the working class even though it may go under the guise of co-partnership and claim to he an "advance in civilization”. We say again that co-partnership schemes have nothing to offer the working class.

JONQUIL.