Margareta Pagano: John Lewis and Barclays - The contrasting faces of capitalism

Margareta Pagano
Sunday 10 March 2013 01:00
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Here's what John Spedan Lewis had to say in a BBC radio broadcast in the 1950s as he explained why he had given the family company to the staff: "The present state of affairs is really a perversion of the proper working of capitalism. It is all wrong to have millionaires before you have ceased to have slums.

"Capitalism has done enormous good, and suits human nature far too well to be given up as long as human nature remains the same."

Lewis, founder of the John Lewis Partnership, added that this perversion has given us an unstable society, and that while there must be differences of reward to induce people to do their best, the present inequalities are far too great.

Even more astutely, he observed that the function of providing capital had become more and more separate from the function of managing capital, no matter who owns it. What's more, he backed his own beliefs, and by so doing created one of the great business success stories of the 20th century: pre-tax profits were up again by 15 per cent last year to £409m.

So when John Lewis announced last week that a £210m bonus pot is be shared by its 84,700 staff, and that each of them will receive a bonus equal to nine weeks pay, there was universal applause. Contrast that with the mood after Barclays said on Friday that it is paying out a £2.2bn in bonus and incentive payments – even though pre-tax profit last year fell by 96 per cent to £246m after taking hits for Libor, mis-selling and other charges.

Out of the pot, 428 bankers will receive £1m or more each, and five of them will get £5m or more. Yet the dividends paid to investors are less than half of the bonuses at £733m. Another 40, 000 job losses are expected over the next few years.

Investors as well as Barclays top brass would do well to listen to all of Lewis's speech. He also warned that if we do not find some way of correcting capitalism's perversion, society will break down: "We shall find ourselves back in some form of government without the consent of the governed, some form of police state."

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