Outlook: Disastrous to demutualise John Lewis

THE BUILDING society movement has been transformed by it. Even the AA and RAC are motoring down this path. So what price the John Lewis Partnership as the next candidate in the Great Demutualisation debate?

The issue has been around before, of course, but this time it looks a little more serious. Many of the partnership's 39,000 staff who collectively own the department store and Waitrose supermarket group, are getting restless, prompted by the management's decision to re-write the partnership's constitution which was first drafted in 1929.

The letters pages in the staff newsletter have been full of the subject. "Give us our loot," is the thrust of many of the comments, though others do argue for the status quo.

It is not hard to see the motivation. City analysts put the value of John Lewis at around pounds 3.9bn. That equates to a pounds 100,000 windfall for each employee, a tidy sum for a shop girl in ladies hosiery.

But would it change anything? There is little doubt that John Lewis must adapt. The stores' unwillingness to take credit cards and their short opening hours (the department stores all close on Sundays and Mondays) conveys the impression that the outlets are there for the benefit of staff rather than customers. Several branches have started to look tired and run-down. The last set of results showed a 17 per cent profit fall and the next figures in September will be grim too. There are alarming parallels with Marks & Spencer, another once great name that failed to notice that the world had changed.

John Lewis is aware it must sharpen up its act but demutualising this retail institution is not the answer.

There is the obvious question as to whether it is right that the current crop of workers should plunder the heritage of their forebears and rob their successors of the privilege of ownership.

More seriously, a break-up would require an act of parliament to change the trust set up by the founder Spendan Lewis, who bequeathed the business to future workers. It would be the equivalent of changing a man's will.

Thirdly, demutualisation would surely strip away some of the many quirks that make John Lewis special. This is a company which owns farms and holiday centres where its staff can go on holiday. It operates a "Committee for Claims" which helps staff who hit financial trouble. And after five years employment, partners receive a letter stating that all, things being equal, they will have a job at John Lewis for the rest of their working life. Sell or float this company and all this would be asset stripped away without a second thought.

The final point is that John Lewis' key strength is the quality of its service which comes directly from the self-interest of collective ownership. Sell the company and the buyer might find the business immediately devalued.

Of course, the board may find that if a sizeable number of workers remain firmly fixed on paying off the mortgage in one go, it could become counter- productive for the directors to stand in the way. But it would be a terrible mistake.

u

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