Democratisation odyssey continues

Bryn Jones gives two cheers for McDonnell’s democracy plans, warns of Brexit implications but finds fudges on Labour internal democracy at Conference

Labour’s new commitment to sweeping democratisation cropped up in several parts of the September Conference. Echoing Nye Bevan’s 1952 call, John McDonnell said that ‘Democracy is at the heart of our socialism – and extending it should always be our goal.’ McDonnell went on to outline Labour’s aims for democratic institutions in business and the economy. Another form of democratisation was alluded to later, in the much-publicised motion on Labour’s approach to a Brexit agreement. The Party will now, apparently, consider a People’s Vote (aka a referendum) if it cannot force a general election on the present government. These different dimensions of democratic participation were thrown into sharper relief by the failure or withdrawal of various constituency-generated motions for greater internal Party democracy. A review of this year’s conference provides an opportunity to assess the direction and progress of democratisation, which has become a hallmark of the Corbyn project.

McDonnell’s speech was much publicised for its proposal to set up Inclusive Ownership Funds. In these a company’s shares will be owned and ‘managed collectively’ to give workers shareholders’ rights in the direction of their company. McDonnell estimated dividend payments from the funds could give workers ‘up to £500 a year’ and 11 million workers would each have ‘a greater say, and a greater stake, in the rewards of their labour.’ However, some commentators have observed that in the event of a successful takeover the workers’ shareholdings would either have to be sold for potentially huge buy-out gains for each worker, or be ring-fenced from the deal so the workers’ holding could carry over to the newly merged firm. How would workers’ and the public’s best interests be decided in these cases?

However, the main problem with this formula is that in many big firms shareholdings don’t convey much actual power over the executive directors. As the scandal of executives’ multi-million bonuses has shown, these top managers regularly and persistently evade or manipulate shareholder concerns. The previously announced plans to appoint workers’ representatives to a third of the seats on company boards could reduce some of this managerial arrogance. But research has shown that ‘external’ directors can often be outmanoeuvred by inner circles of executives operating through operational committees, informal decisions and opaque and restricted communication of vital information. Moreover, the experience of worker representation in other countries, such as Germany, shows that a narrow perception of what they perceive to be in workers’ interests can lead union/worker directors to back other directors’ policies without taking into account the wider public interest of the environment, communities or consumers.

Labour should also remember the watering down and stalling of the 1970s Bullock Commission proposals. This episode showed that huge vested interests could neuter any real say for workers’ representatives. So much could depend on the detail of any legislation. The powers of shareholder ownership are often a legal fiction. So Labour might well need to bring in further reforms to corporate governance. Variations on the Swedish system of legal rights of directors to appoint executive managers (as outlined in my book Corporate Power and Responsible Capitalism?) could usefully reinforce the proposed powers of ‘worker directors’ and include wider civil-society interests.

Of course Brexit could complicate these ambitious, but commendable, plans in several ways. The European Works Councils scheme, to which the UK finally signed up in 1997, requires managers to inform and consult with representatives on significant decisions at European level affecting employment or working conditions. For pan-EU countries such Councils could provide a valuable and reciprocal channel between worker directors and union representatives on the EWCs. Needless to say this mutual support would probably be lost if Brexit agreements didn’t cover such social regulations. Contrary to some ‘Lexit’ and neoliberal claims about ‘taking back control’, Brexit might diminish the prospects for corporate governance reform in other ways. Disruption of trading and logistical links between and within companies could distract both cooperating businesses and Labour ministers. Emergency measures to keep the economy afloat to pay for the rest of Labour’s programme could be seen as legitimate grounds for delaying any risk-inducing programmes of reforms ‘at the top’. All of these factors will depend on the nature of the post-Brexit relationship which will, in turn, depend on how the decision is made: in Parliament(?); in an election(?); or in the much-touted People’s Vote? Labour’s apparently ambivalent stance on a second referendum is actually quite astute.

Retaining a ‘public vote’ as just one ‘option’ makes sense when the different political dimensions are taken into account. For one thing, if the Government did submit to pressure for another referendum the Opposition are unlikely to have much say in the actual wording. Mrs May would be more likely to bend to the pressure of Tory Brexiteers. In which case the wording would be loaded in favour of the Cabinet’s preferred option. At best this would be a Brexit-lite. At worst it could be closer to the Hard Brexit criteria of Rees Mogg et al. In the best of all Remainer worlds, a ‘no’ vote against a hard deal might leave some form of continuing membership back in play, but it would probably be won by another narrow margin. Labour could then be punished by electoral defections from embittered Leave supporters in elections. As has become abundantly clear, referenda are blunt instruments for obtaining a democratic mandate. Referendum results are open to conflicting interpretations by both voters and political leaders. Would Labour really be furthering its new found commitment to democracy by backing a referendum that could be stage-managed and manipulated? This would be even more true if the result further exacerbated the political-cultural rift across British society: losing Labour voters to hard-Brexit Tories; or even to a revived UKIP or worse.

Of course, as many in the Party have argued for years, democratisation should begin at home. Labour remains saddled with procedures and rules that are only loosely democratic. Conference motions on leadership elections and the selection of candidates to stand as MPs represent attempts to remedy this state of affairs. These constituted a little progress. Conference preferred the NEC proposal for Party leadership candidates to need 10% of MPs and MEPs plus either 5% of CLPs, or 5% of members in three affiliates (trade unions). But, as a consequence, a CLP motion to make nominations depend on 15% of MPs/MEPs and CLPs therefore fell. Similarly, motions to abolish trigger ballots for re-selection of MPs as candidates (that is ‘open selection’) also fell.

These Byzantine manoeuvres apart, many delegates seemed to think the Party’s biggest democratic deficit is the disproportionate strength of trade union delegations, as ‘affiliates’, when ballots took place. When the results of the ballots for ‘priority motions’ was announced the union favourites gained more overall votes than those prioritised by the more diverse CLP vote. Voting as a bloc, the union delegations secured all four of their most favoured topics (Brexit, Economy, Government Contracts and In-work Poverty) giving negligible or zero votes to highly regarded CLP motions on Climate Change and Local Government Funding. When the results of the ballot for the Conference Arrangements Committee were announced there was audible booing. All five of those elected were union nominations. None of the CLP and other affiliates’ candidates were elected. The prospects for social democratisation are promising. Party democracy remains a work in progress.

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