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Any successful company ignores the value of its workers and employees perilously
In any organisation, you have to wonder whether the employees are valued, apart from a mechanism for the shareholders of that company to generate a profit.
Yesterday, Marks and Spencer reported that it had still made a profit. The company made an underlying pre-tax profit of £706m, but it was down from last year £714m.. Marks & Spencer was once Britain’s most profitable listed retailer, and the first to ever make more than £1bn in a year but it now makes less money than Tesco, J Sainsbury, Wm Morrison and Kingfisher, the owner of B&Q.
According to an article in the Telegraph by Harry Wallop yesterday, Marc Bolland, the chief executive, said:
“Marks & Spencer performed well in a challenging economic environment, growing group sales by 2pc and holding market share. We also made good progress with our strategic plans.”
He further said: “We are making good progress but successful execution of our strategy requires us to adapt to both market opportunities and current market conditions. In November 2010 we set out a target to grow our revenues by £1.5bn to £2.5bn over the next three years. As a result of the deterioration in the economic environment since we set out our plan, we now expect to achieve £1.1bn to £1.7bn increase in revenues. While conditions in the UK are predicted to be more difficult than originally forecast, we are on track to deliver both international and multi-channel targets.”
In 2008, in “Personnel Today“, it was reported that Marks & Spencer’s (M&S) HR director “categorically denied there will be any job cuts despite the retailer experiencing falling sales”. Shortly later, Sir Stuart Rose claimedthat, “M&S boss Stuart Rose has told Sky News the company is “just being sensible” in axing 1,200 jobs and closing 27 stores.” However, Sir Stuart remained optimistic, reported later in the article: “Sir Stuart told Sky he did not see the economy improving until spring 2010 – and could not rule out further job cuts and store closures.” At that stage, it had described its half-year profits had fallen by 44%, but it was still in profit.
This leads me to the hugest tragedy of all. Companies can get focused on ‘cutting costs’, including laying off employees, while still being profitable. It will be noted that Marks and Spencer has continuously blamed in part external economic conditions. Sir Stuart Rose was one of a plethora of business leaders who wrote in the Telegraph:
“SIR – Between us we run some of Britain’s largest companies and employ over half a million people. We are responsible for ensuring that our businesses and our employees come through the recession in good shape. The Government’s proposal to increase national insurance, placing an additional tax on jobs, comes at exactly the wrong time in the economic cycle. In a personal capacity, we welcome George Osborne’s plan to stop the proposed increase in national insurance by cutting Government waste. In the last two years, businesses across the country have cut their costs without undermining the service they provide to their customers. It is time for the Government to do the same.”
In May 2010, the Government took a conscious decision to engineer a serious of steps which directly culminated in the ‘double dip recession’. They starved the construction industry of investment (for example through scrapping ‘Building Schools for the Future’), they squashed consumer demand by increasing VAT, they started public sector cuts without the private sector being able to take up the slack; unemployment went up, tax receipts went down; unemployment benefits went up, and the UK doubled its deficit in one month earlier this year.
Unsurprisingly, the IMF, amongst many others, has been urging the economically incompetent Government to try to encourage growth through any means possible, and improving consumer demand must be one of the mechanisms (reported yesterday).
Companies which fail to understand the value of workers, for which we have trade unions, to ensure that they are not exploited by shareholders wishing to maximise their shareholder dividend are living dangerously. Corporate investors are becoming increasingly concerned about corporate social responsibility, and this indeed has been unilaterally championed by Ed Miliband as an important theme of his opposition (for example here). The Conservatives failed to win a majority in 2010, and yet they are with unjustified optimism and arrogance trying to force the agenda into an environment where even Vince Cable has warned they are in dangerous territory in an article yesterday:
“Vince Cable warned that controversial “fire at will” proposals would “scare the wits” out of workers before the plans were even published yesterday. The Business Secretary’s remarks highlighted deepening divisions between the Liberal Democrats and their Conservative Coalition partners over the issue. LibDem MPs lined up to attack the proposals by venture capitalist and Conservative party donor Adrian Beecroft, which were condemned by the STUC as an “attack on employee rights”. But Conservative MPs and business leaders defended the recommendations, warning reform was necessary because business red tape was costing thousands of jobs.”
Will opposites attract?
I am posting this following a recent tweet this afternoon. Incidentally, my article got a very hostile reception the first time around, Sundeep and Neil!
Lawyers in training often become bewildered as to how parts of their course ultimately gel together. This possibly contributes to their uncertainty in choosing which part of the law to specialise in. For example, how on earth does constitutional law, including the rule of law and human rights, relate to the different specialisms of law, such as immigration or housing? And what have they got to do with the big powerhouse corporate law firms, if anything?
A surprising fusion of these ingredients could hold the key to solving a different problem that has been vexing English and Welsh law for several decades, at least. That is, the issue of what to do about the provision of legal aid.
A community law centre, where the lawyer might examine a sensitive landlord-tenant dispute, may seem ‘worlds-apart’ from the work of a corporate lawyer, who may be advising on a multi-billion-pound, headline-grabbing deal. However, it is possible that these circles might mix more in future, due to the current circumstances.
Access to the law: back to the basic constitutional law
One of the very first things that law students focus on in their constitutional law courses is the ‘rule of law’. Indeed, the rule of law underpins the work of both ‘divisions’ of lawyers: the barristers and the solicitors.
In 1977, the influential political theorist Joseph Raz identified several principles that may be associated with the ‘rule of law’ in some (but not all) societies. Some of Raz’s principles include the fact that the courts should be accessible, i.e. no man should be denied justice, and that the principles of natural justice should be observed, particularly those concerning the right to a fair hearing.
And what of the actual reality of today, in England and Wales?
“The Government strongly believes that access to justice is a hallmark of a civilised society. The proposals set out in this consultation paper [on the reform of legal aid] represent a radical, wide-ranging and ambitious programme of reform which aims to ensure that legal aid is targeted to those who need it most, for the most serious cases in which legal advice or representation is justified.”
‘A brief history of legal aid’
Legal aid in England and Wales was originally established by the Legal Aid and Advice Act 1949, with the aim of providing equality of access and the right to representation before the law. The scope of legal matters covered in 1949 was very tightly drawn.
However, today legal aid in England and Wales costs the taxpayer £2bn a year – a higher per capita spend than anywhere else in the world. It is argued that the current scheme is available for a too wide a range of issues, including some which should not require any legal expertise to resolve. The provision of legal aid is now governed by the Access to Justice Act 1999 and supplementary legislation.
The possible effect of the proposed legal aid reforms
Many civil cases will no longer be eligible for legal aid, and fees paid in civil and family cases will be cut by 10% across the board, according to Ministry of Justice plans set out in the consultation paper, “Proposals for the Reform of Legal Aid in England and Wales”, released in November 2010.
The UK government has estimated that, under the plans, £350m will be saved from the Ministry of Justice’s budget by 2014/15, if its proposals are implemented in full.
Ken Clarke QC MP, the Secretary for State for Justice and Lord Chancellor, has said in an interview that,
‘I believe that the taxpayer should continue to provide legal aid to those who need it most and for serious issues. But the current system can encourage lengthy, acrimonious and sometimes unnecessary court proceedings, at taxpayers’ expense, which may not always ensure the best result for those involved. The proposals I have outlined suggest clear tough choices to ensure access to public funding in those cases that really require it, the protection of the most vulnerable in society and the efficient performance of the justice system.’
Reaction from the solicitors
The cut in legal aid may offend the rule of law. For example, the Law Society Chief Executive, Desmond Hudson, has warned that:
‘If the government persists with these proposals, it would represent a sharp break from the long-standing bipartisan consensus that effective access to justice is essential to underpin the rule of law. Legal aid clients are some of the most vulnerable in society and good legal representation where required is essential if they are to obtain justice. The Society will now consider the green paper in detail.’
The effect on the high street – the community law centres
‘Law Centres’ employ solicitors and case-workers who specialise in debt, discrimination, housing, employment, welfare benefit, community care, mental health law, and immigration and asylum law. Their initiatives are truly inspirational.
In an open letter dated October 2010, Julie Bishop, Director of the Law Centres Federation, provides a very interesting description of the impact that the financial recession – a possible driver in the need to cut costs in legal aid services – has had on the high street legal services:
“We serve 120,000 clients every year. The recession is hitting our clients hard. Already, the Employment Tribunals Service has recorded an increase from 10,800 to 19,000 in the number of cases related to unfair dismissal over the past year [October 2009-10]. ACAS has recorded a 13% increase in enquiries for conciliation services. Law Centres have experienced a 30% increase in clients assisted with employment and discrimination cases.”
An example of where the Law Centres have made a substantial impact is in Brent. Brent Community Law Centre stated that the cuts to legal aid will leave two options for those in poverty on Jobseeker’s Allowance: “a move from poverty to extreme poverty, or possession or eviction if they do not pay their rent.”
They cite that a single person living in a one-bed flat paying £180 per week will have to contribute £18 to the rent out of a weekly income of £65.45, leaving £47.45 for all other expenses including fuel. A separate (but linked issue) which compounds vulnerability is the proposed capping of housing benefit. It is estimated that this will cost claimants in Brent an average of £8,817,844 per year. This loss is to be shared among 1,988 claimants. If their rents are not reduced, they will have to pay £4,436 per household out of their own income. Currently, the Brent Law Centre is able to advise on this issue.
Brent Law Centre argues there will inevitably be far more possession cases in the county court because landlords, whether council or private, will bring court action for rent arrears. In addition, they believe that the impact on costs for other departments, such as social services and child protection need to be assessed.
Brent Law Centre, only through the goodwill of an army of unpaid volunteers, is currently able to provide legal advice and assistance for residents of Brent on a range of legal issues including education, employment, housing, immigration, mental health, public law and welfare benefits.
An unlikely solution?
It has not gone unnoticed that one of the effects of losing £350m from the existing £2.1bn budget may be to put corporate law firms under greater pressure to contribute to the provision of legal aid.
High profile pro-bono interventions by the household names in corporate law can become tied to big international events – such as helping out at the Sierra Leone war crimes tribunal (Weil Gotshal & Manges), or representing wounded soldiers in compensation cases against the Ministry of Defence (Hogan Lovells).
Nonetheless, doing pro bono has become attractive to graduates in an increasingly competitive job market, where law firms are keen to attract the best graduates, and graduates are keen to demonstrate their social awareness.
However, it is true that many newly-qualified graduates do contribute much time for free to the local community, often in very deprived areas, but find the work immensely fulfilling. This is despite the fact that their Managing Associates and Partners will not tolerate any compromises in their professional ‘day job’.
Who knows where this is heading?
The ideal outcome might be for a restructuring of legal aid services, such that the public and lawyers have a clear idea where the money is going to, and which enables fair access to legal services for the public. The crunch question inevitably becomes: “where this money is coming from, if it’s not the taxpayer?”
Brent Law Centre is just a single example of where professional lawyers give their skills free-of-charge for the benefit of the community, but it would be tragic to see a situation where lawyers cannot even do this because of the ‘system’.
It might be, even, that the corporate lawyers have a crucial part to play for the benefit of society, in contributing towards the maintenance of legal aid in the high street law.
