Click to listen highlighted text! Powered By GSpeech

Home » Law » Does the 'dividend obsession' allow Ed Miliband to put people before profit?

Does the 'dividend obsession' allow Ed Miliband to put people before profit?


Labour’s history with business can best be described as: “it’s complicated.”

Goldman Sachs recently boasted on Twitter of their involvement with Chuka Umunna, the Shadow Secretary for Business, Innovation and Skills. And in the past Lord Mandelson has claimed to be ‘intensely relaxed’ about business.

Labour’s ‘track record’ on “inequality” still fuels discussion. Tony Blair’s ‘Journey’, an autobiography possibly as exciting as Morrissey’s, doesn’t mention the word “inequality” once.

British Gas announced today that it is to increase prices for domestic customers, with a dual-fuel bill going up by 9.2% from 23 November. The increase, which will affect nearly eight million households in the UK, includes an 8.4% rise in gas prices and a 10.4% increase in electricity prices.

Labour therefore wishes to be seen to encourage wealth creation. It perceives any message that it is ‘anti-business’ as dangerous.

There is no doubt, however, that Labour instinctively wishes to be seen to be on the side of the employee/worker too. The evidence is that Labour warns about a growing number of people in part-time employment. They have also held their nose while the current Government have tried to implement the ‘Beecroft’ proposals. For the employer, an ability to sack an employee is seen as ‘flexibility’, so that a business plan can adapt easily to changing circumstances. For the employee, the ‘readiness to fire’ is seen as an indication that employers don’t actually give a stuff about employment rights, and the threat of insecurity for staff.

This is why the Fabian Society, in their analysis of why Gordon Brown became so unpopular, tried to hang their thoughts on the ‘aspiration vs insecurity’ scaffold. Interestingly, Ed Miliband has wished to emulate the ‘aspirational dream’ of Margaret Thatcher. Margaret Thatcher once claimed that, for every socialist who woke up, there had to be a Tory who woke up an hour earlier to work.

Any business these days needs to have due regard to its environment and its workforce. This is called ‘sustainability’, and this comprises the ‘people, profit, planet’ mantra of corporate social responsibility. It is a well established concept, which far precedes the ‘responsible capitalism’ now belatedly “accepted” after Miliband’s famous “high risk” conference speech in Liverpool in 2011.

The Conservatives have thrown everything but the kitchen sink at this attack on energy prices. The problem for Cameron is that this lunge is not only popular but populist. It frames the question ‘whose side is the government on?’ in an unappealing fashion. Error after error has seen the notion of a Conservative-led government being ‘out of touch’ being reinforced. This has perhaps been symbolised ultimately by Tory MPs simply re-tweeting on Twitter press releases from energy companies.

Whilst leadership theories both here in the UK and US are well articulated, the literature on the involvement of stakeholders in business is relatively embryonic. Freeman and Mendelow are generally accepted to be the ‘fathers’ of ‘stakeholder theory’.

But the tension of who runs the company in English law is noteworthy in two particular places. One is section 172 of the Companies Act (2006) which attempts to draft a primacy of shareholder dividend with regard to ‘stakeholder factors’. The second is the relative ‘paralysis of analysis’ which can occur with too many conflicting opinions of stakeholders, in relation to shareholders, in relation to the business plans of social enterprises.

Ed Miliband used the following as symbolic as the war against energy companies, which is perhaps more accurately described as a war against unconscionable profitability of shareholders. Cue his quotation from “SSE dividend information” this week in Prime Minister’s Questions:


The Right continue to argue that the war is a phoney one, given that Ed Miliband introduced these ‘green taxes’ in the Climate Change Act in the first place. A problem with this is that David Cameron voted for these taxes. The Right continue to argue that the market is ‘not rigged’. A problem with this is that David Cameron wishes to encourage the ability of a customer to ‘change tariff’, which presumably would be totally unncessary if the market were not ‘rigged’?

The unconscionable profits, in economic terms, come about because it is alleged that the competitors, relatively few of them that there are, act in a coordinated way to set prices amongst themselves. It is further alleged that the competition regulators currently are unable to regulate this oligopolistic market effectively. Miliband’s ‘price freeze’ gives the Labour Party also some ‘breathing space’, in which to tackle the OFGEN problem.

Fundamentally, Miliband’s narrative is extremely uncomfortable for the Conservatives. Far from being ‘liberalising’, in Miliband’s World, the markets end up fettering the behaviour of citizens. And this is a problem if citizens in Cameron’s World increasingly become mere consumers. If the market doesn’t work for Cameron’s consumer, the whole ideology collapses.

The Tories superficially may worry that the Hayek’s ‘Road to Serfdom’ has become a ‘Road to Slavery’, but ultimately their success depends on delivering a programme which benefits the big business and the City. Why else would Boris Johnson wish to go to legal war against Europe about banking bonus caps?

The narrative that Ed Miliband wishes to pursue of ‘putting people first’ is theoretically an amicable fusion between social democracy and socialism. While there are still clear faultlines in the approach, for example the maintained marketisation and privatisation of the NHS, this narrative could prove to be even more popular and populist yet. Cameron’s World may just have been disrupted.


CV here

  • A A A
  • Click to listen highlighted text! Powered By GSpeech