APPENDIX 4
Supplementary memorandum by the Communication
Workers Union
BACKGROUND
1. On Tuesday 18 July 2006 the Communication
Workers Union gave oral evidence to the Trade and Industry Select
Committee's inquiry into Royal Mail. In the course of our evidence
the Committee asked the CWU to:
— provide additional information
on the CWU's consultative ballot of members and the response to
Royal Mail's letter to staff asking them to register an interest
in share ownership; and
— respond to the research evidence
provided by Royal Mail and the DTI purporting to show the benefits
of employee ownership on company performance.
CWU CONSULTATIVE
BALLOT
2. In May 2006 the CWU held a national consultative
ballot of our members working in Royal Mail Letters. The ballot
was an attempt to gauge members' support for the CWU's vision
for the future of the industry for higher basic pay, job security,
pensions and fairer workloads.
3. We sent our branches ballot papers to
distribute to all members working in Royal Mail Letters—around
136,000 in total. The ballot commenced on Monday 8 May and closed
on Friday 19 May. Out of the 91,478 ballot papers returned, a
massive 98.5% (90,103 members) voted yes in support of the CWU's
vision to raise the status and value of a postal worker's job.
This high rate of return was in spite of management's attempts
to undermine the consultative ballot.
4. To reinforce the consultative ballot,
the CWU also engaged an independent company to carry out a professional
telephone poll. Out of 1,000 members contacted, 949 supported
the CWU's workplace agenda.
5. Royal Mail's decision to write to all
employees on the question of shares was taken as a direct response
to the CWU's own consultative ballot. At a press conference on
18 May 2006, Royal Mail chair Allan Leighton announced that 80,000
employees had registered an interest in share ownership.
6. A return of 80,000 out of a total Royal
Mail workforce of 212,000 (based on 2005 staffing figures) represents
a return rate of just 37%. (Using more recent 2006 staffing figures
in RM's latest Annual Report produces a revised figure of 38%).
Clearly this return rate was not the ringing endorsement the chairman
was hoping for. It is also important to realise that:
— in an attempt to pressure staff
and boost the return, Royal Mail's letter was misleading in that
it asked employees to register an interest in order to "receive
your free shares". This implied staff would miss out on a
huge amount of money if they didn't return the form, when the
reality is that only the Government can sanction a change of ownership;
— in order to boost the return,
the shares letter was also sent to around 13,000 sub-postmasters
(who are not even direct employees of Royal Mail) and to thousands
of managers across the company;
— in an act of desperation, the
original deadline imposed by Royal Mail was extended when only
30,000 responses were received. At this point the goalposts were
shifted and managers were instructed that they could register
employees themselves directly by email; and
— Royal Mail's letter presented
shares as a free gift for all employees without telling our members
that their privatisation plans are directly linked to up to 40,000
job losses.
7. As chair of a public corporation we simply
don't feel it's right and proper for Allan Leighton to be pushing
the case for a change of ownership. We are aware of no part of
Royal Mail's Memorandum and Articles of Association that permit
it to survey staff on changing the ownership structure of Royal
Mail, and have seen no information on the costs Royal Mail have
incurred developing their share plan, consulting with staff and
seeking any expert independent financial advice.
EMPLOYEE OWNERSHIP
8. The Committee asked the CWU to respond
to any research evidence on the success of employee ownership
and, in particular, its success relative to other profit share
arrangements. Royal Mail's written evidence to the Committee offers
no specific examples or information to support its claims for
employee ownership. While we would be happy to comment on any
such evidence as and when it's provided, we are unable at this
stage to respond directly to any written evidence provided to
us.
9. However, we do wish to respond to the
general question about the success or otherwise of forms of employee
ownership, and deal directly with the specific example referred
to by Royal Mail in their oral evidence on 18 July, namely the
experience at Eirecom the Irish Telecommuniations company (the
actual transcripts of the hearing on 18 July refer to Viacom but
we are assuming this was an error in the transcription).
10. In general terms, assessing the impact
of any particular pay and reward strategy on business performance
is notoriously difficult. There is very little evidence to show
a direct causal relationship between any particular pay input
on the one hand and improved productivity and performance on the
other. The effectiveness or otherwise of any reward strategy is
dependent on a whole range of factors beyond simply the pay element.
Work environment and culture, the degree of employee involvement
and participation, the approach an organisation takes to managing
performance, communications and staff development all influence
the effectiveness of any pay plan.
11. In determining the success or otherwise
of employee ownership, one first needs to understand that the
term can cover a wide variety of arrangements from full employee
ownership (the John Lewis Partnership) to various part-ownership
arrangements. But whatever the particular model all the evidence
on the experience of employee ownership shows that real improvements
to company performance are bound up not simply with financial
incentives but with a whole raft of other measures designed to
give employees greater involvement and participation in business
decision-making. As the recent report by the Job Ownership Limited
(the association of employee-owned and trust-owned businesses)
noted: "International research consistently shows that a
combination of extensive employee stakeholding with real workforce
involvement produces superior productivity and profitability compared
with other companies." [24]
12. All the evidence suggests that the success
of employee ownership is contingent on the active engagement and
support of employees. "Employee ownership can't be successfully
imposed without the assent of key stakeholders". According
to the JOL, the research evidence shows that "harmonious,
productive industrial relations and employee engagement"
can only be achieved "when a meaningful equity share is coupled
with far-reaching employee involvement and participation."
Moreover the JOL argue that successful partial or extensive employee
ownership is "inconceivable without the active participation
of unions and their members in the process."
13. Allan Leighton's share plan is not based
on proper consultation or partnership with the recognised trade
unions. To date, the CWU have seen no formal proposal on any share
plan and are aware of no measures or proposals from Royal Mail
designed to increase employee involvement or participation in
the business. Without any discussion or agreement with the CWU,
Leighton is hoping to get approval from Government for his share
plan and then impose it on the workforce. The key point is that
any new pay or productivity scheme should be a matter for full
consultation and negotiation with the CWU. Our earlier oral and
written evidence (paras 14 to 23) reaffirmed the basis of our
opposition to Royal Mail's share plan.
14. Royal Mail's approach represents the
very antithesis to real employee ownership where the workforce
are consulted properly on any plans from the outset, the union
is closely involved in developing new forms of participation and
involvement (that give employees a greater say in future business
planning and decision making) and there is a meaningful process
of negotiation and agreement with the recognised trade unions.
15. At the oral hearings on 18 July 2006,
the DTI Minister, Jim Fitzpatrick, made reference to the experience
of employee ownership at Irish telecom company Eircom. But in
this case, the plans for employee ownership came from the trade
unions themselves which proposed a whole package of other measures
designed to increase employee involvement and participation. Any
financial benefits of share ownership have been inextricably tied
to a wider series of measures which give employees a real and
meaningful say in the running of the business.
16. In terms of the success of employee
ownership relative to other profit share schemes no specific research
is available since it's very difficult to compare "like-with-like"
and separate out and quantify the impact of any specific pay incentive
relative to other key determinants of company performance (automation,
skills and training, management communications and performance
management, workplace environment and culture, etc).
22 August 2006
24 "A Stake in the Post: Making employees stakeholders
in Royal Mail", Maoiliosa O'Culachain and David Farfar, Job
Ownership Ltd, Sept 2005. Back
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