Margareta Pagano: Why John Lewis's Andy is streets ahead

The best moment in the first part of BBC's new fly-on-the-wall series, Inside John Lewis, shown last week, was hearing the managing director, Andy Street, explain why he didn't mind not being paid the millions he could earn if he were working elsewhere on the high street.

When asked why he stayed at John Lewis earning only £500,000 a year, Street said he felt that what he was doing was "worthwhile". It was so uplifting to hear from a businessman at a time when there is so much mistrust about the way big business operates, and he clearly meant it, even if the hyper-active Street did come across as a little earnest. But fairness runs deep in the DNA at John Lewis, and is clearly the secret to the retailer's astonishing success. This was demonstrated again last Thursday when it reported record operating profits – up 20.5 per cent to £389.7m. Not bad in any market, but stunning in the worst recession for decades.

Record profits allowed the country's favourite retailer to pay out £151m in bonuses between its 70,000 staff, giving them a 15 per cent bonus each, equivalent to around eight weeks' pay and an average of around £2,000. While much of the media attention surrounding results always centres on the way staff share in the profit (what is left after the board decides on what goes on new investment) my own sense from the programme was that the low differentials between pay levels – and that the highest paid, Street, can only earn up to 75 times the lowest – is the real key to the obvious harmony between staff.

John Lewis's chairman, Charlie Mayfield, put it well when he said that while we live in a world where not everyone is equal, people do expect fairness. Some would say that 75 times is too high – that old bombast, Plato, for one, thought that no man should earn more than four times another, while some Quaker businesses are a little more relaxed, setting the pay difference between top and bottom at seven times.

In the UK generally, until the late 1980s, most pay differentials between the lowest and highest paid in big companies was about 60 to 80 times. Those levels have become distorted, mainly because of the way the American high-pay culture has infiltrated British companies. And now, in many FTSE 100 firms, that differential has soared to more than 300 times. It's interesting that in most European – and Japanese – companies it is still much lower than in Britain or the US, and that these countries don't seem to suffer the social divisiveness so chronic in Anglo-Saxon economies. I'm not suggesting firms should be forced to set arbitrary caps on pay, but they could do worse than study the John Lewis partnership. You only have to watch the TV series to see how this spirit of fairness is truly infectious, and you get the feeling that staff love working there, not something you can say about many workplaces.

What is surprising is that more businesses don't borrow these principles. For inspiration, they should listen to a 1957 BBC interview (on the company website) with the elderly John Spedan Lewis in which the founder of the partnership explains why he came up with his "experiment" to find a better way of managing business – a compromise between rampant capitalism and Bolshevism. He succeeded, and we haven't come up with anything much better in the past 80 years.

One reason for this is that equity investment is too highly taxed in this country. Both Labour and the Conservatives say they want to use the John Lewis model to improve the way the public sector works but in fact they should start with the priate. If either party were serious, it would promise to change the tax regime, which still favours debt over equity, to encourage share ownership.

If you want to know how devious a banker is – just count his wife's shoes

There seems to be a strong correlation between the number of shoes owned by bankers' wives and the duplicity to which their husbands will go to get enough money to fund them. In her new book 'The Devil's Casino: Friendship, Betrayal and the High Stakes Games Played Inside Lehman Brothers', Vicky Ward details the flashy ways of Lehman wives such as Niki Gregory, wife of president Joe, and Kathy Fuld, wife of chief executive Dick.

Ward's book reports that Niki Gregory had a shoe closet reputedly twice the size of the Jimmy Choo store in New York and used to give tours of it to other Lehman wives. On Friday we discovered that Joe and Dick had their own closet – the Repo market – into which they stuffed $50bn in loans and investments, but they didn't invite any of their friends – and certainly not their investors – to see it. According to Anton Valukas, the examiner appointed by a New York bankruptcy court to investigate Lehman's collapse, the bank used Repo 105 to hide from creditors, markets, rating agencies, its own board, and the regulators, just how much it had borrowed compared to its capital. While all banks use the repo market as a way of swapping assets for short-term loans, Lehman manipulated the transactions – something that could only be done in the UK – by moving assets representing 105 per cent or more of the cash it received in return.

Accounting rules allowed these transactions to be treated as sales, not financings, enabling Lehman to shift debt off its balance sheet so investors didn't see the full picture. This is devastating stuff, and, frankly, doesn't come as any surprise. Watch out for even more legal action. It's time investors wised up – before the event. All the signs were there – Gregory alone boasted of a personal annual budget of $15m, as well as owning a seaplane and a helicopter ready for his daily commute. Well, the Choo's on the other foot now.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?