Labour's worker share giveaway: Questions raised
Labour wants to give workers more of a stake in the companies that employ them.
The debate over corporate governance in the UK does need reinvigorating. You don't need to share the economic philosophy of shadow chancellor John McDonnell to think that progress in how we encourage companies to consider the interests of a broader range of so-called stakeholders has been pretty timid.
But the way Labour is suggesting doing this seems to raise more questions than it answers.
Of course, the finer details of the plans aren't yet available. But according to reports, any company with over 250 employees would have to hand over a 10% stake - over time - to its staff.
The stake would be built up gradually over 10 years and would be managed by a dedicated fund. Employees couldn't buy or sell shares - but they would benefit from dividends paid by the company up to a limit of £500. Payments above that limit would go to the government.
The first question to ask is whether this really looks like share ownership at all. Equity - by its nature - involves an ownership stake with potentially unlimited upside (and the risk of unlimited downside).
If workers are unable to sell their shares, it's not clear that they would directly benefit from share price appreciation (or the shares going up in value).
Dividends meanwhile are paid at the discretion of the company's board (and not all companies choose to do so). Fast-growing companies may prefer to reinvest their profits in future growth, not pay out dividends.
Assuming that the workers' dividends are paid from the same pot as other investors, it's not clear what - if anything - the workers at those companies would receive.
Conversely, what happens if a company pays a special dividend after a particularly strong year? Even if the government's take goes into a socially-motivated wealth fund, the workers could miss out on the full rewards on offer to other shareholders.
The sense that this involves giving workers a type of second-class equity leaves the proposals open to another criticism: that this is just another tax on business, albeit one that comes with a worker bonus scheme attached.
In fairness, Labour's proposals on ownership go hand in hand with other ideas, notably that a third on the seats on company boards would go to workers' representatives. And the funds managing employees' shares would have a voting stake alongside other investors.
But advocates of greater employee ownership told Newsnight that the devil would be in the detail. How you structure this type of policy affects whether you reap the wider potential benefits in terms of improved productivity and longer-term thinking.
One group welcomed the idea of broader equity ownership in the UK (with only about 12% of UK company shares currently owned by individuals) but said there might need to be more thought to guard against workers being "locked in" to underperforming firms, rather than benefitting from better performance elsewhere in a sector.
Another said they feared that this proposal "missed the point".
Business groups were - of course - quick to condemn the idea. The CBI suggested it would "only encourage investors to pack their bags".
It is undoubtedly true that the prospect of handing over 10% of the company will be unappealing to current investors. (Their ownership stake would be diluted, or cut slightly, as the shares are issued to workers).
To the extent that this is seen as a quasi-government stake, it could also impact UK-listed companies valuation versus international peers.
But it is also worth asking how many loopholes there will be for companies to structure their way around such a requirement.
The 250 employee threshold where the requirement kicks in could act as a deterrent to growth (or as an incentive to set up smaller offshoots). It would likely be impossible to force such a measure on privately-owned companies that aren't listed on the stock market.
The Financial Times reported that foreign-listed companies with substantial UK workforces would similarly not be obliged to give shares to their employees. (And London's capital markets are home to plenty of companies who do virtually all their business, and have the vast bulk of their workers, overseas).
The Labour party has said it intends to launch a consultation on the details of its employee ownership proposal.
That may help determine whether this is a radical corporate governance proposal aimed at recasting the relationship between UK society and its largest businesses. Or a government revenue-raising initiative in disguise.