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CORPORATE rules allowing shareholders to gorge on profits while workers bear the brunt of economic uncertainty cannot continue into a post-coronavirus world, a think tank said today.
Research by the left-wing organisation Common Wealth has revealed that Britain’s biggest firms paid out £400 billion in dividends between 2011 and 2018 — equivalent to 68 per cent of the firms’ net profits over the same period.
This stream of cash towards shareholders’ pockets and away from reinvestment or workers’ wages has undermined the resilience of businesses and weakened them heading into the crisis, the report claims.
Common Wealth — which has worked closely with Labour on manifesto policies — points to recent examples of failing rail and airline firms determined to dish out dividends while pleading for public money to fund emergency bailouts.
This included EasyJet, which paid shareholders £174 million while appealing for taxpayer support and asking thousands of staff to take three months of unpaid leave.
The research also draws attention to soaring executive pay, showing that 700 executives at 86 of the companies held a collective £6bn in shares at their firms, representing nearly £8.5m per director.
Common Wealth director Mathew Lawrence said that shifts in rules over the years had “turned the corporation into an engine of wealth extraction for senior management and shareholders.”
This had left businesses less resilient and more unequal, he said.
“But how the company operates isn’t ‘natural’ or set in stone. We can design new rules and transform ownership to make business democratic and sustainable – and build a better post-crisis economy.”
The report calls for a radical shake-up in company rules to strengthen businesses for a post-crisis future.
Ministers should impose bans on dividends and share buy-backs, pay caps for top executives and guarantees that firms pay their taxes fairly, it says.
It also recommends redistributing power across firms by putting workers on company boards, giving staff voting rights and ending rules that prioritise shareholder interests.
