HL Deb 23 February 1977 vol 380 cc179-355

3.2 p.m.

Lord CARR of HADLEY rose to draw attention to the Report of the Committee of Inquiry on Industrial Democracy (Cmnd. 6706); and to move for Papers. The noble Lord said: My Lords, I hope your Lordships will think it right to have taken this early opportunity to debate the extremely important Bullock Committee Report. I am encouraged in thinking that your Lordships think it is right by the large number of speakers who have put down their names to address your Lordships, including many with exceptional knowledge and experience of industrial life.

I am, and I am sure all your Lordships are, particularly looking forward to the first contributions to our debates from the noble Viscount, Lord Trenchard, and from the noble Lord, Lord Elibank, who I know have great direct personal experience to bring to bear, as is perhaps shown by the fact that they could have made their maiden speeches a long time ago had they not been so fully occupied in gaining the experience on which they are going to draw when they address us later. Perhaps I can assure them from personal experience that they will not find it as fearful an occasion addressing your Lordships' House for the first time as no doubt at the moment they may be thinking.

I am sure that the House would also wish me to congratulate and thank the noble Lord, Lord Bullock, and the members of his Committee, for tackling this extremely important but extremely difficult task. We all greatly regret that the noble Lord, Lord Bullock, cannot be with us today. I understand that he has not been well for some time. I am particularly sorry because I am afraid that I feel bound to make some rather severe criticisms of the majority report of the Committee, which of course he himself signed. I would therefore particularly have wished to have been able to hear what I am sure would have been a powerful answer from his own lips.

Perhaps I may also make clear that I am going to concentrate on the majority report of the Bullock Committee, not because of any lack of sense of the value and indeed the great importance of the minority report, but because the Government announced at the beginning that it would be on the majority report that they would at least make the base from which they would conduct their consultations; although I welcome the fact that that attitude has, I think, become progressively less rigid as each day has gone by.

There really is little doubt that, if we could substantially increase the degree of creative participation, and therefore create a greater sense of involvement and common purpose among all those who work in industry and commerce, the whole country would become more prosperous and our society more united. I hope it is therefore common ground that it is essential that we should take a strong initiative towards what has come to be called industrial democracy. But I believe that it is also essential that we do not attempt to do this by putting into practice the proposals of the majority of the Bullock Committee.

The Bullock majority proposals are a wholly unacceptable starting point, because they are based on false principles which are both fundamentally undemocratic and contrary to the requirements for making British industry more productive. Instead of creating more unity and more common purpose the Bullock Report's proposals would create more division and more conflict. They would stimulate strife rather than co-operation between the two essential partners in any business enterprise; namely, those who provide their money and those who give their work and skill. This would lead to less investment in British industry.

Then, given the large number of unions represented in most British companies, the proposed method for nominating worker-directors would set one trade union against another in competition for board places. The proposals would increase the division and tension between the half of British employees who are not trade unionists and the other half who are. They would devalue both the status and the role of those employees who, by qualification and merit, have become managers and technical specialists, and they would gradually destroy the private enterprise system, and therefore the mixed economy to the support of which the present Labour Government are supposed to be committed.

The subject of the Bullock Report is described as industrial democracy, but the majority proposals really make a mockery of that title. If these proposals were to be extended throughout all British companies, almost half of all employees would be disfranchised. Even if they remained limited to companies with more than 2,000 employees, where the degree of unionisation is usually significantly higher, the proportion of employees with no democratic rights would still be substantial. Moreover, this denial of rights is selectively concentrated on all those employees who have reached the upper and middle ranks of managerial and technical employment. This is grossly unfair.

Trade unions should rightly have the major part in the development of industrial democracy, but they cannot, in any fairness, claim, and they must not be given, a watertight statutory monopoly. Moreover, the actual method proposed for selecting worker-directors is, I submit, particularly intolerable. Even if we were to accept that no one but a member of a recognised trade union could become a worker-director, the candidate should surely be subject to election by a secret ballot of all employees. It is unthinkable that we should pass a law as proposed which would permit a committee of shop stewards simply to nominate directors from among themselves. Even if we were to disregard the interests of all non-trade unionists, it really is not right to assume that trade union members, as a whole, would wish to choose the same person to be a shop steward as to be a director. They might well decide that different qualities are needed for two such different jobs. I fear the truth is that the Bullock Committee's majority report is not really about democracy, but about power, about putting British industry and commerce under trade union control; and this is a proposition, I submit, for which there is no sign of majority support in this country.

Trade unions may be democratic and they usually are, in the broad sense that usually, though perhaps not always, they represent the wishes of the majority of their members when they undertake collective bargaining on questions of pay and conditions of employment. But this is not true when they turn from their industrial to their political role. I submit that in political matters it is demonstrable that trade unions are often highly undemocratic: that in many cases a small minority tail wags the large majority dog; and there is no evidence to suggest that the majority of trade union members support the objective of trade union control and the destruction of the free enterprise system, which is nevertheless written into the rule books of many unions. But there is every reason to think and to fear that a substantial number of shop stewards who might be nominated as directors would be dedicated to this purpose, particularly if they did not have to seek election and re-election in a fully democratic way.

Turning to the industrial effects of these proposals, they would, I submit, reverse the strong and much-needed trend of recent decades towards more genuine and dynamic professionalism in the direction of British companies. Appointment to the unitary board as we know it now in the British system should be on the basis of individual merit and function, and this principle should apply equally to the choice of both executive and non-executive directors. For the success of British industry in international competition, the board of a company should be a genuine meritocracy. Whatever may have been the position in this respect in the distant past, this is increasingly true of more and more British companies, and this is a trend which everybody ought to welcome.

Yet the Bullock proposals would wantonly reverse this trend. They would cause the removal from boards of large numbers of experienced directors who are needed on their boards and who hold their positions there entirely on merit, and they would block these places for the future. Moreover, the problem is made worse by the insistence of the majority report that, unlike in Germany, there should be no special provision for management to fill any of the employee-directors places. The implication peeping through the surface of the majority report is that one ceases to be a worker and becomes a shareholder's man as soon as one rises a step or two above the shopfloor, and this is one of the majority report's most divisive aspects, and I believe an offensive one.

The majority of the Bullock Committee, presumably through lack of experience of how boards actually work, seem obsessed with the representational function of boards. This is totally unrealistic. Directors under the present system are of course aware of their ultimate responsibility to the shareholders; but their daily actions and attitudes are not dominated by a consciousness of being shareholder representatives. They are seldom nominated by shareholders. Except in rare cases—unless a company gets into trouble—new directors are nominated by the existing board as people judged to have the necessary qualification to fill particular gaps, and the role of the shareholders is normally simply to endorse or reject the board's judgment and choice. Thus, the dominant motivation of directors under the present system is to use their experience and professional skills to make the company successful, and this is surely in the best interest of shareholders and employees alike.

What may seem wrong under the present law, and what indeed may be wrong, is that the sole right of endorsement of nomination to every place on the board rests with the shareholders and not to any extent with the employees. But this is not the imbalance which the Bullock Report seeks to redress. What the Bullock majority proposes is something quite different. They do not propose that employees, like shareholders, should have a right to endorse or reject the board's views about whether a particular person has the qualifications best suited to fill a particular board vacancy. They propose a general right and practice quite different in kind from that normally exercised by shareholders; namely, for a block of places on the board to be filled by the trade unions on a wholly representational basis.

Within the context of the 2X+Y formula recommended by the Bullock Committee majority, the logical response of shareholders to this proposal would of course be to fill their quota of directors with nominees from the organised share-holders; that is, from the big institutions and pension funds. Does anyone think that this would be a sensible, even if it were a practicable way to set up the active leadership and direction of a company's affairs? Such a response from shareholders would, luckily, be unlikely to happen in practice; so the reality would be that we should get boards with an incompatible mixture of dominantly functional directors from one side and dominantly representative directors from the other with the balance made up by a further number of directors of unpredictable qualifications and experience.

Thus, the truth is that, quite apart from any other objections, the Bullock Report's majority proposals are wildly impracticable from the point of view of the smooth and efficient direction of British companies and they must, I submit, be rejected on this ground alone. But in addition to the points I have already mentioned, there are a number of other fundamental objections to the majority's proposals. For one thing, they contain a fundamental fallacy as to why there should be absolute parity in terms of power on the board between shareholder and employee-directors. This fallacy appears to be based on the proposition that the trade union which would be nominating some of the directors would be expected to accept the same responsibility as the body of shareholders who would be nominating the others.

But nobody is expecting that; least of all, as far as I know, are the trade unions prepared to offer to accept such equal responsibility. In the last resort, for example when a company breaks up, the shareholders must accept the greater responsibility; the shareholders must accept the possibility of losing all or part of their money. They come last in the queue while the employees, rightly, come near the top of it when a company's assets have to be disposed of and distributed. The unions would be mad and entirely wrong to allow the salvage of the interests of a company's employees to be put on an equally low level of priority as its shareholders. This is an unanswerable reason why, in the last resort, the share-holders must be able to have control.

In personal terms, each director, executive or non-executive and no matter by whom elected, must accept equal responsibilities and liabilities; but because of where the greater responsibility falls in a last resort situation, the shareholders collectively must, in justice, be able to exercise control, otherwise risk-bearing capital must in the end disappear—and who would benefit from that?

Another major cause for rejecting the Bullock Committee's majority proposals is their incompatibility with European practice. We are, after all, members of the European Community and, given this fact, it is in our own interests, as well as being our duty, to develop our own institutions in a way which harmonises with those of our European partners. Indeed, the Bullock Committee was charged to take European practice into account. The result of its doing so, however, has been to lead the majority, extraordinarily, to make proposals radically at variance with European practice—at variance in principle and not only in detail—and this point needs emphasising because on a superficial hearing it may not be apparent.

To bring home this point, just look at the position in West Germany, which is so often quoted as an example in being so far ahead of us in the development of industrial democracy. So they may be but, if they are, it is not because they have gone down the road recommended by the majority of the Bullock Committee. In West Germany, ultimate shareholder control is preserved, even where there is or will be parity in numbers between the share-holders and employee directors. There is normally only one union in each company representing shopfloor employees. The German unions also positively support the mixed economy with a strong private sector. They also accept that collective agreements are legally binding and that strikes are illegal unless certain clearly defined procedures have first been gone through and the decision to strike is supported in a secret ballot by 75 per cent, of the employees. Moreover, in West Germany all employees are enfranchised. These really are something much more than marginal differences, yet the Bullock Committee appears to have given little more than cursory consideration to their bearing on the chances of success of the sort of system which it recommends and which has a highly geared employee representation on the top boards.

This brings me to the last of the fundamental reasons that I want to mention for rejecting the Bullock Committee's majority findings. This is the manner in which the Committee conducted its inquiry and made its report. This was bound to create distrust rather than confidence and to stimulate fierce dissension rather than agreement. Let me hasten to say that the blame for this rests not on the noble Lord, Lord Bullock, and the members of his Committee but almost entirely with the Government, first, for having laid down terms of reference which were not just inadequate but grossly biased, and then for allowing the Committee a wholly inadequate amount of time for such a fundamental inquiry. These were severe and unfair handicaps to place on the noble Lord, Lord Bullock, and his Committee. I have no doubt that, but for those handicaps, the Committee would have taken more oral evidence, perhaps particularly in order to talk the matter through with those unions who put in written submissions which were not in full harmony with the formal TUC line. The official TUC line on worker-directors has changed rapidly in recent years, so that a full examination and discussion in the report of the reasons for this change and an assessment by the Committee of the stability within the TUC of the present view, and the extent to which that view is held throughout the whole union movement, would have added greatly to the report's value and authority to the country and to everybody concerned.

I believe that a most serious criticism of the Committee's inquiry is that, so far as can be seen from the Report, the Committee failed to put to the unions and consider in depth a number of basic questions about changes in union structures and attitudes in the context of the radical new environment proposed. The unions are asking for, and the majority of the Committee are recommending, most radical changes in our industrial institutions. These would require from share-holders and management most radical changes in their procedures and attitudes. But what changes in old established procedures and attitudes did the Committee ask the unions to consider in return? For example, in return for becoming the single channel of representation at all levels and for having parity of board membership, would the unions be prepared to give any undertaking that it would be their policy to use their board membership to support the mixed economy and the continued future of the companies on which they have directors, rather than to pursue the objective of destroying the private sector which is enshrined, either overtly or by implication, in the rules of a number of the most important unions?

Then, would the unions themselves make a strong new effort to solve the problems of multi-unionisation which in many British companies makes traditional collective bargaining and the development of new style participative representation so much more difficult and dispute-prone than is the case in other countries? Would the unions be ready to make sure that their own internal processes were properly democratic? That is far from the case in every union at the moment. Surely, questions of this sort ought to have been raised and discussed by any Committee proposing to make such radical recommendations because they really are essential to the problems that we are facing.

To say this is not to criticise the unions for having developed structures, procedures and attitudes which are deeply rooted in ancient industrial history and no doubt justified by that history. But, if we are to have a really new deal in industry, should not the unions, as much as the other parties in industry, be prepared to change and to throw away old habits and attitudes in return for the new deal that they are seeking? We shall never get a reconciliation of the divisions in our industrial society unless and until all parties are prepared to stop justifying their past and present records and to start being genuinely ready to give as well as to take.

This brings me to what needs to be done in a constructive way. The majority recommendations of the Bullock Committee must be rejected because they are impracticable, unfair and undemocratic, and would be the cause of endless and bitter strife. But that is no excuse to sink back and accept the status quo. The status quo is not good enough either to ensure reasonable standards of living for Britain in the future or to make British industry a better and happier place in which to work, and a place that is more attractive for a life's career, to a larger proportion of our best young men and women—something we were talking about only two weeks ago.

There must be a partnership between capital, management and labour and the only way to build a genuine partnership is to build it from the bottom upwards, starting with everyone having a right to full information; leading from there to genuine consultation; moving on from this to real participation in decision making on matters affecting everybody's daily working lives; and ending up in real accountability to each of the partners for a company's basic strategy and philsophy of action. This structure of partnership cannot be built in a day, a month, or a year. Different companies are at different stages and need to design their structures in different ways to fit in with differing needs and traditions. So there must be flexibility. There must also be the minimum of compulsion and the maximum of voluntary action. But exhortation and generalised expression of good intentions are not enough. The trade unions would not accept it, nor should they. Nor should the country as a whole, because our national need for progress is too urgent.

How, then, should we proceed? Above all, I believe that we must seek to identify the maximum degree of common interest between the different partners and the widest possible consensus. I am old-fashioned enough to believe that consensus is far more creative than tension. To this end, the Government should clear the stage and enter into genuinely open-ended discussions with the CBI, the TUC and, I suggest, with the financial institutions best able constructively to represent the genuine interests of shareholders, remembering that nowadays the majority of shareholders are no longer a small number of rich men but are the mass of ordinary people in their capacity as pensioners or prospective pensioners, as contributors to various types of savings schemes, or as the holders of all sorts of insurance policies all of which are basic to the security of their lives. So the shareholders' interest is the interest of everybody who walks down Whitehall and Oxford Street and who walks down the street in every other city and village in this country every day. It is not some specialised minority interest.

I suggest that, in timing, the objective should be to produce a Green Paper for public discussion well before the end of this year; a white Paper containing more or less firm proposals and including a first exposure draft of any legislation which may be necessary in the first half of next year; with the intention of initiating administrative and legislative action in the 1978–79 Session. I am sure that the key to success will be to proceed stage by stage, making a plan of action for only a few years at a time, so that we can learn as we go and gather mutual confidence and agreement in the light of experience. The need of the country, and the deep feeling of most people of all Parties and persuasions, is for reconciliation and for a genuine attempt to find common ground.

The trouble with the Bullock majority report—and its tragedy—is that it has highlighted and maximised the divisions while obscuring and minimising the potential area of agreement. So it has formalised the battlelines and sent the different parties back to man their barricades, when the need was to draw them out on to open ground. If only now we can remove from the stage those features of the Bullock Report which are the most contentious and divisive, the most unpracticable and the least tested by any experience, then a great deal of progress is possible when we make a new start.

For example, in their submission to the Bullock Committee, the CBI did not oppose all idea of legislation; on the contrary, they said that some kind of enabling and back-up legislation was necessary so long as its purpose was to support and speed up flexible voluntary action and not to replace it by an imposed formula. Equally, within this voluntary context, the CBI evidence specifically did not rule out employee representation developing at board level. Surely, my Lords, this offers a fruitful basis for reaching genuine agreement on a constructive programme of action for, say, the next four or five years.

Let us suppose that we had a new legal framework which formally recognised a duty, already accepted of course in practice by all good boards, to take into account the interests of employees as well as shareholders; which also laid on all companies above a certain size a duty to reach a participation agreement with its employees within a fixed time; which also laid on all companies a duty to disclose information to employees equivalent to the present duty of disclosure to all shareholders, and to include in their annual reports an account of the actions taken each year to promote participation; and which, in addition, set up some independent machinery to provide guidance on the kind of schemes which have been found to work well and to conciliate and, if necessary, in the absence of agreement within the time limit, to arbitrate on what schemes should be adopted. Let us suppose for a moment the coming into being of such a minimum new legal framework. Would we not then get a great deal of progress over the next five years—and get it through voluntary agreement? And would not the experience gained put us on much firmer ground in finding agreement about how best to go on to satisfy what is an undoubted need, at least in my view, to provide better accountability on major issues of strategy and principle, to shareholders and employees alike?

The hard fact is that almost by definition participation and industrial democracy can grow only on the basis of agreement and not through conflict. What then should industrial democracy mean? If it is allowed to develop so that well-qualified management is constantly interfered with and undermined in its capacity to initiate and carry through policy decisions, we shall all suffer both in our standard of living and through increased industrial strife. But if it can be steadily developed through agreement—so that looking downwards from the boardroom, a board of directors must make sure that all employees at all levels are fully briefed and are given genuine opportunities to participate in the decisions which directly affect their own lives; and so that looking upwards from the boardroom, a board of directors has to be more effectively accountable to representatives of both share-holders and employees for its major strategic decisions and for the general philosophy on which the company operates—then we shall all gain. Industry will become more efficient, Britain will become more prosperous, and British companies will be happier and more satisfying places in which to work. That, my Lords, I believe is the target and ambition which Government, trade unions, employers and everybody concerned should set themselves. I beg to move for Papers.

3.36 p.m.


My Lords, the House is indebted to the noble Lord, Lord Carr of Hadley, for initiating this debate at this time. In the course of my speech I will endorse a number of the arguments which he has submitted to your Lordships, and inevitably I think there will be repetition in the debate as those of us who have had wide experience in industry and commerce draw similar conclusions from that experience. The Bullock Committee has performed one useful service to the community. It has placed what they call "industrial democracy" firmly on the political agenda and started what I for one hope will prove to be a useful and a stimulating national debate over the next year or so.

Having said that, I must express my deep regret that one of my oldest friends, for whom I have the greatest respect, should have accepted the chairmanship of this Committee, hamstrung as it was bound to be by its loaded terms of reference, and that it should, I hope unwittingly, have produced proposals which cannot possibly fit into the real world of industry and commerce as it is practised daily in this country today.

The Liberal Party has a long and radical record on employee participation and worker involvement. In the Liberal Yellow Book of 1928 called Britain's Industrial Future, this whole question was examined by a very distinguished committee of the Party under the chairmanship of Walter Layton, who was late to become a Member of your Lordships' House. The Committee contained, among others, Lloyd George, Keynes, Seebohm Rown-tree, Sir Herbert Samuel and Sir John Simon. It was assisted by specialist committees, many members of which had first-hand knowledge of industry or commerce. In my view it did a much better job than Bullock will ever do.

It stated, nearly 50 years ago: One large element in successful management is the evoking of a team spirit. This can best be got by consultation. The manager who is unable or unwilling to see that co-operative working is more effective than autocracy, though more difficult to direct, confesses his incompetence as a manager. It went on: There have been many different plans for recognising the claim of the worker to an effective voice in those aspects of the business which concern him. The value of any plan must in the end be tested by its effect in increasing or impairing the efficiency of the business. That is one important test by which Bullock must be judged, as the noble Lord, Lord Carr, said.

My first objection to the majority Bullock Report is that it throws a spanner into all the work and thinking that is developing and has developed over the last few years in establishing a firm foundation for genuine worker involvement in industry. By its terms of reference, Bullock has had to take a short cut which in my view, if implemented, would end in disaster. It would be totally counter-productive and disruptive to impose worker directors on unitary boards by Statute without creating the participative and communications net-work at different levels of a company. This is the much more important and the much more urgent task, and one to which much thought is being given in many companies today.

The second objection is that a statutory duty to reorganise a unitary board of any kind on the lines suggested by majority Bullock could totally disorganise the proper function of the board itself, and those of us who have had responsibilities as executive directors can recognise that in the Bullock Report without any difficulty at all.

The condition that the unitary board must be composed on the 2X plus Y basis means inevitably that the board must be substantially increased in size or that it must lose some of its present directors, including some of those with specialist responsibility or knowledge. The idea that directors are elected by the share-holders is, as the noble Lord, Lord Carr, said, a total myth. What happens in practice is that a management team or directorate is built up over a number of years with some quite considerable skill. It is only when things go wrong that shareholders begin to get restive and to assert their rights. The Bullock proposals do nothing to guarantee improved efficiency: rather the reverse.

The third objection is that running right through this report is the concept of conflict and confrontation within the board as an inevitability. If the majority proposals are accepted, then confrontation and conflict are bound to arise from time to time. The Bullock proposals envisage these conflicts being settled by a vote in which the jointly appointed directors, the Y directors, will play a major part. My industrial experience has been that very few matters are and can be settled by a vote in a boardroom. In fact, a board which has to make decisions on the basis of a vote is an unhappy and usually an ineffective and short-lived one. Somebody has got to do something about it if they get to that situation.

The fourth objection is that the two-tier system, as in Germany, is totally rejected. In fact, if worker directors are to be elected their proper place, in my view, is on a supervisory board or, as the Liberal Yellow Book proposed, a supervisory council, as they called it, whose duty would be to meet at regular intervals to hear detailed reports, to cross-examine and criticise the board of directors and to be the ultimate authority over the higher appointments, including those of the directors themselves. That is a workable proposition, but it is quite different from putting 2X plus Y on a unitary board, as Bullock proposes. It was also proposed in the Liberal Yellow Book that the supervisory council could, if desired, consist of an equal number of shareholders and employees' representatives. That, I think, is the sort of thing which would be acceptable in many companies today; but not on a unitary board.

The fifth major objection to the Bullock proposals, in my view, is the monopoly of power they place in the hands of the recognised trade unions to appoint the worker directors. My Lords, let there be no mistake about it; we need strong and competent trade unions in this country, but the drive to place more and more power in the hands of the trade unions, as envisaged under the new pensions arrangements and again in the Bullock Report, can only distort our industrial system. It will antagonise managers and disfranchise half our industrial workforce. Those of us who have been pressing for rapid progress on worker involvement want to see systems developed which carry the confidence of the total workforce, both union and non-union. Anything less than this will be divisive and frustrating. For these reasons, I hope that the majority proposals will be soundly rejected. I know that the authors of majority Bullock feel that they have met these objections; but, my Lords, having read that report I feel that they are totally unconvincing in the arguments that they put forward, which stem, unfortunately, from the lack of day-to-day experience of having to serve as an executive director at board level. I do not blame them for that: I blame the Government, in the way they chose this particular Committee to report on this very important matter, where experience means a great deal.

I believe that in continuing the debate on Bullock we should give priority to two important considerations which are linked together. The first is to acknowledge that for the time being industry should really not be obliged to digest any more legislation. It has got far too much on its plate as it is; and, in any event, it ought to be concentrating on improving productivity, dealing with investment and getting our exports up. Just consider, my Lords, some of the measures with which industry is now grappling as a result of what has been done by both ourselves in this place and in another place. The Social Security Pensions Act, which comes into operation in April 1978, is a very important piece of legislation which is putting quite a burden on the companies concerned. Then there is the Employment Protection Act; the Remuneration Charges and Grants Act, the pay code; the Prices Act; the National Insurance Surcharge Act; the Equal Pay Act; the Sex Discrimination Act; the Race Relations Act; the Dockwork Regulation Act; the new Companies Act; the Restrictive Trade Practices Act; the Development Land Tax Act; the health and safety at work legislation, and any number of Finance Acts that have to be coped with. In my view, my Lords, it is time to call a halt and to give industry, and particularly the bigger firms, a breathing space so that they can get on with the real job of work.

My second contention, which fits in with this plea for a moratorium on legislation, is that we should proceed along the lines proposed by the Industrial Society in their excellent booklet Practical Policies for Participation, in which they recommend a period of consultation and experimentation. They list the many options open to companies to improve participation and, if necessary, to secure representatives of employee interests at board level. They say—and they are right: The plain fact is that there is no substantial experience in this country to point the way to success, and hence the need for a period of experimentation". They list a number of realistic suggestions from which employers and employees might select one for experimentation appropriate to their particular circumstances.

I think the Government's role is to keep the debate going and to devise fiscal incentives, methods for monitoring success and failure, and methods of exchanging experiences and information between those participating—and I do not see this worker involvement being necessarily confined to the very large companies. If, as we on these Benches believe, genuine worker involvement leads to greater efficiency, it should be applicable to all shapes and sizes of firms. But the worst thing the Government could do—and it would be a real disservice to society—would be to impose by legislation the majority proposals of Bullock or, in my view, any half-baked compromise. Let us spend the next two, three or four years profitably finding out, not a standard solution—I do not think one exists; there is no standard solution to these problems—but different schemes which are applicable to different organisations and different situations. In that way, given the right incentives, we could make a great deal of progress.

The Bullock Report, my Lords, proposes an Industrial Democracy Commission. This might well provide the basis for co-ordination, approval and monitoring of different schemes. In some ways it could act rather like the occupational Pensions Board, which, under recent pensions legislation, is charged with satisfying itself that companies wishing to contract out have fulfilled the necessary requirements before issuing a certificate for them to contract out. In the same way, an Industrial Democracy Commission, armed by the Chancellor with a financial or fiscal incentive, such as a reduction in corporation tax, or some other method, could approve schemes of worker involvement agreed by management and workforce which attained certain standards. Along these lines we really could make some progress, but to impose majority Bullock by Statute would, in my view, be a recipe for disaster.

3.49 p.m.


My Lords, it is now just one month since the Bullock Report was published, at which time my noble friend Lord Oram reported to your Lordships the Statement made in another place on behalf of the Government by my right honourable friend the Secretary of State for Trade. As the noble Lord, Lord Carr, mentioned in his opening remarks, Lord Bullock himself has been unwell in recent weeks, and as a consequence has been unable to take part in the public debate which has been taking place since, and even before, the report was published. I am sure we all regret that he is unable to be with us today.

My Lords, the Government set the noble Lord and his colleagues on the Committee a heavy task. We asked them to report within a year, which they did. They received and studied a great quantity of evidence and they took themselves to Sweden and to Western Germany to study at first hand the arrangements for worker participation on boards of companies already in operation there. And they have produced for us a closely argued set of proposals in both the majority and the minority reports which give us a valuable basis for discussion and consultation in the coming months. I feel sure your Lordships will wish to join with me in wishing the noble Lord, Lord Bullock, a rapid return to full health and, at the same time, in thanking him and his colleagues for the work they have done. As the noble Lord, Lord Byers, has just said, it is pleasing that the noble Lord, Lord Carr, has secured this debate today particularly as it is clear from the list of noble Lords who intend to speak that the House shares Lord Carr's view and my own of the importance of this subject and that we can expect an interesting and constructive debate; although I need hardly say that I would draw a different conclusion from the report from that which has been expressed by the two previous speakers this afternoon.

It may be helpful to your Lordships if I recall the main points of the Government Statement made on publication of the Bullock Report. First, we repeated the Government's commitment to a radical extension of industrial democracy through representation of the workforce on company boards and to the essential role of trade unions in this process; second, we said that we intended to undertake consultation with the CBI and the TUC, on the basis of the majority report, in order that as much common ground as possible might be identified; third, we made it clear that we intended to bring forward legislative proposals in this Session of Parliament; fourth, we expressed the hope that the consultations would take place in a positive and constructive atmosphere with recognition by both sides of industry of the need to seek a lasting settlement. I am glad to say that this process of consultation is now under way. There has also been a great deal of comment and discussion in the newspapers, on television and on the radio, and we have received letters from organisations and from the public, all of which I believe will be helpful to the Government in reaching conclusions for the framing of our legislative proposals.

The Government's commitment to worker participation at board level has stood for some time now and there is no change in that. This is why we asked the Bullock Committee to confine its consideration to the methods by which this might best be achieved. Although the signatories to the minority report felt it was unsatisfactory that the terms of reference excluded the question of "whether"—the question of "how" had formed part of the remit—the majority did not feel this was a limitation and, indeed, made it clear in their report that the terms of reference had not prevented them from examining the wider aspects of participation in decision making, including the relationship of board level representation to changes below that level.

My Lords, looking back over the 30 years since the war, there has not been a single period when our economic performance can be said to have been entirely satisfactory. There have been times when we have fared less badly than others, but the economic pundits here in Westminster and elsewhere have been consistent in underlining for us our poor performance in the international league tables on output, productive investment, propensity to spend and to import and failure to export and invest. We have deflated, reflated and inflated. More recently, staggering under the impact of the massive rise in oil prices and adverse international trading conditions, unemployment has risen to unacceptable levels, the cost of money has soared. There is no simple reason for all this, in my view, but there is a common theme running through the statements of successive Chancellors of both Parties since the Sir Stafford Cripps era, of the need to improve output, productivity and industrial relations.

In terms of strike records, we do ourselves less than justice. A national strike in France may rate a paragraph on the foreign pages of The Times and no mention at all in other papers; but industrial stoppages here are front page news, inevitably, and the outside world may be forgiven for assuming that we are a country torn by industrial strife. In practice, over the years the international league table of days lost through strikes is one in which we do quite well compared with other countries. Nevertheless, the record of industrial relations in some sectors of our industry is rightly a cause for concern. And here I am talking not simply about the ultimate breakdown, the strike, but the underlying atmosphere of suspicion and confrontation which all too often prevails, particularly in relation to the need to adapt to change, both in technology and in the market place. The pace of change is accelerating all the time and if we are to cope with this we must amend our institutions to recognise the common interests of employees, management and shareholders alike in the creation of wealth, improved efficiency and desire for expansion. Happily, there is a consensus in the country at large about the need to develop our institutions for participation at all levels in industry. The argument is about the form participation should be encouraged to take.

The Bullock majority report, of course, discussed at some length (in Chapter 6) the existing practices for collective bargaining and participation and the dissemination of information about company policy and performance; and they rejected the notion that there was in some way a choice between legislation and evolution. On the contrary, they saw employee participation at board level as a means of strengthening industrial democracy below board level and as a guarantee and catalyst for effective participation at all levels. But the Bullock majority concluded that extension of participation below board level was not an alternative to board level representation and that the two were necessary and, indeed, complementary. The Government share this view.

My Lords, worker participation at board level is not new to Western Europe. Indeed, most countries have formal arrangements of one sort or another. In West Germany, for example, workers have been represented on the supervisory boards for 25 years. Legislative arrangements exist in one form or another in Germany, Holland, France, Luxembourg, Austria, Norway, Denmark and Sweden.


My Lords, has the noble Lord inadvertently misled the House when he suggested that the Committee recommends that participation in the form it recommends is necessary? Surely their instructions were to take for granted the Government view that it is necessary. They were given a limited directive to say how it should be done. Is that not a fairer description of what happened than that which the noble Lord has given?


My Lords, I do not consider that I have in any way misled the House as to the interpretation of the Committee's instructions. If I may say so, I think that the noble Lord may have perhaps misheard what I said, or he may have misinterpreted what I have said. If he will read Hansard, then what I confirm to him now is something that he might agree with retrospectively. I was going to say that although Belgium has no formal provision for representation in the private sector, some corporations in the public sector have employee representation. Within the Community, only ourselves, Italy and Ireland have nothing at all.

Thus, there is in the Government's view a well-established movement in Western Europe where worker representation on boards is seen as a natural and genuine extension of democratic principles into industrial management and as a logical part of the evolution of the mixed economy. Some of the comment made in recent weeks seems to suggest that the Government were alone in pressing a novel and doctrinaire innovation on to a reluctant industry; whereas the fact of the matter is that a great many of the objections which are now being raised to worker participation at board level in this country have been raised just as vociferously—I assure your Lordships of this—in countries in Europe, and experience there has shown that a great many of the fears were ill founded and have not been borne out by experience.

Indeed, looking at the relative economic performance of the United Kingdom against countries in Europe which have introduced participation arrangements, it is hard to escape the conclusion that the introduction of industrial democracy here will not prove as dangerous or damaging as it has been held likely to be. On the contrary, in West Germany, for example, both management and the unions are firmly convinced that participation at board level has made a real contribution to their economic success.


My Lords, will the noble Lord make it clear that, in that context, he is talking of a supervisory board, and not a unitary board?


My Lords, I am at this point talking about some form of participation at board level. A good deal of concern——


My Lords, may I interrupt the noble Lord? I am sorry, but he is making a number of very positive statements. Has he read the report that was commissioned by the Bullock Committee, made by Mr. Batstone and Mr. Davies? This says nothing of the kind. It says that where worker-directors have had an effect it has been only marginal. Can the noble Lord tell us whether he has actually read this report?


My Lords, I have read the report but I have also, of course, as a Government Minister, been in receipt of other information. I have other contacts. I have made my own decision as between comments in the report and other information given to me, and I am expressing that before your Lordships' House this afternoon.

My Lords, a good deal of concern has been expressed in many quarters about the proposals in the Bullock majority report for the involvement of trades unions in the process of triggering the move to appointment of worker-directors and in the actual appointment of worker-directors. They proposed, it will be recalled, that it would be for recognised trades unions (with bargaining rights on behalf of at least 20 per cent, of all the employees in the company) to make a formal request for a secret ballot of all employees. If the majority comprising not less than one-third of all eligible employees was in favour of representation on the board, the process of reconstituting the board would begin.

The Bullock majority proposed that the arrangements for the selection of employee representatives would be made by a joint representation committee representing all the independent and recognised trades unions in the company, and that this committee would act as the nominating body for employee representatives. Thus, under the Bullock majority proposals it is for the unions to trigger off the procedure and to settle the arrangements for selecting the worker-directors. This has been widely criticised on the grounds that it adds greatly to the power of the unions, and that, moreover, it seems to exclude, other than in the initial ballot, employees who are not union members. This, it is argued, is a negation of democratic principles.

The Bullock majority argument is based largely on the proposition that the trade unions in industry already provide the natural channel for the expression of employees' views and aspirations, and that in the larger companies particularly the incidence of trade union membership is already very high. They point out, moreover, that the function of unions is already widening beyond the relatively limited area of collective bargaining, and indeed that the scope of collective bargaining itself is also widening. The majority conclude that the trades unions provide the natural vehicle for the expression of employees' views, and that it would be wise and sensible to use their machinery for decisions about industrial democracy and the appointment of worker-directors.

In his Statement on 26th January last, my right honourable friend the Secretary of State for Trade said that the Government were committed to the principle of worker participation and to the trades unions essential role in this. The Government, however, acknowledge that there is genuine and deeply-felt anxiety about the Bullock majority proposals in respect of the role of trades unions in industrial democracy and, while wishing to proceed on the basis of agreement and consensus and to adapt and to build on to existing practices and procedures wherever possible, recognise that this is an area which will need careful thought. It will undoubtedly figure largely in the consultations now going on with both sides of industry, and the Government will do their best to reach agreement on the basis of sensible arrangements which will command widespread support.

The underlying aim is to establish the right in law for employees to have representation at board level. That is not to say that we must or would seek to impose a rigid organisational framework on all major companies regardless of their circumstances or the particular field in which they operate. In many cases management and workers will negotiate sensible and practical arrangements without any need to have recourse to the legal provisions, and we shall certainly encourage this to happen wherever possible. We are, however, convinced that this will not happen either quickly enough or widely enough unless the right in law exists. We want to see provisions enacted based, if possible, on the broad agreement of both sides of industry.

It is undoubtedly true that there has been an unhappy record of confrontation in some sectors of our industry. All of us this afternoon are rightly concerned about this. Happily, there are signs of development at all levels of a much better feeling of search for consensus on all sides, and the achievements through the pay policy tend to be to this end. I conclude by emphasising that in the Government's view the development of industrial democracy in companies and worker participation at board level, and at all other levels in companies, is a logical development of the progress which has already been made, and we believe will make a real and lasting contribution to the standard and quality of life for those working in industry.

4.9 p.m.


My Lords, I have been given a much higher place in the list of speakers today than I would have expected or indeed would have wished for, because I intend to deal with only a single point, leaving the many other facets of this very disturbing report to the diverse talents and experiences of the other noble Lords who are going to speak and who have spoken. I feel that between them they will undoubtedly cover the ground, except possibly for a single point which I want to bring to your Lordships' notice.

There is one matter which has not so far been mentioned today, and I have not seen or heard it discussed in any other place, but in my view it is of importance for our consideration of how best we should improve our administrative system in industry. The impression one gets from the majority report is that we now have in the United Kingdom a single-tier system, and that, with major modifications, this is what should be retained. From the minority report we get the impression that we now have a single-tier system but that we should have a two-tier system. It is only fair, however, to add—and it has been said already this afternoon—that the minority reporters have made it clear that their proposals result only from what they regard as an unsatisfactory remit. But while we certainly have at present what the report calls a "unitary board system", in fact in my experience, which is now quite long and varied, we already operate in practice a two-tier system, and if the proposals of the minority report were accepted we should be operating a three-tier system.

In every company with which I have been concerned there has been, under the board, a management committee. The board is responsible for the policy of the company but the implementation of policy, the day-to-day management, are matters to be dealt with by a management committee, executive committee or managing director's committee—whatever it may be called. It has different names in different companies, but its most obvious characteristics are that it is composed solely of executives and is chaired by the managing director. If that is not a two-tier structure, my Lords, I do not know what is. In fairness I must add that the majority report shows some awareness of this structure, notably in Chapter 7; and gives examples, in cases of very large companies, of more elaborate sub-structures below board level. But I have not detected in the minority report an appreciation of the fact that it is indeed proposing a three-tier system.

Comparisons are widespread with what is done in West Germany of what we do here, and of course these comparisons are relevant. But I think we have to be very careful indeed how we make them. In my opinion, we both have two-tier systems but they are extremely different, and it is not always necessarily helpful to try to apply West German methods here. Their supervisory boards, which have no executive directors, meet infrequently and have little to do with the running of the company. The company is managed by the Vorstand, which is composed entirely of executives. That kind of two-tier system obviously suits West Germany, but I believe that our present two-tier system suits us.

The backgrounds to the two systems are very, very different. In West Germany—and this is very important—there is not the great shareholding public that there is in the United States and the United Kingdom. The proportion of capital contributed by the banks in West Germany is vastly greater than it is here. Also, as has been said already this afternoon, the number, position and attitudes of the unions are quite different. Altogether, I believe—and here I think I am saying the same thing as the noble Lord, Lord Carr, said in rather more detail—that we shall be wise to improve our system in evolutionary ways rather than by drastic change.

As I think Mr. Michael Shanks made clear in his article in The Times of 15th February, there is little in European experience to guide us and, in my view, little to enthuse us. Only four countries—and here I disagree with what was said by the noble Lord, Lord Kirkhill—West Germany, the Netherlands, Luxembourg and Denmark, have successfully introduced legislation for co-determination, which is the name given to worker representation on boards. In France it is a dead letter, and if they do anything at all it will be of a rather peripheral nature. In the countries I have mentioned, where they have successfully introduced a system of this kind, once again the backgrounds are entirely different from our own. Even the Bullock Report itself says at page 69: We must try to build upon the flexibility of the present system. Its attempt to do so, however, results in the incredibly rigid proposals set out on page 103. Those proposals are vastly more drastic than anything yet achieved in other EEC countries. As noble Lords have already made abundantly clear, they could have disastrous consequences and, in my view, the minority reporters have not provided an acceptable alternative. Indeed, I doubt whether they have done so in their own views either.

4.15 p.m.


My Lords, I should like, if I might, to add my con- gratulations and thanks to my noble friend for raising this very important matter. After all the controversy following the publication of the report, and perhaps preceding it as well, it really was time that we debated this in Parliament. My noble friend and the noble Lord, Lord Byers, have dealt in great detail and very effectively with the report, and I do not want to take up your Lordships' time in discussing its details. It seems to be widely agreed that its slanted terms of reference and the haste with which it had to come to its conclusions entirely precluded the proper study of what I think we would all agree is a very difficult and complex subject. If one needs further proof, then I think it is perhaps worth saying that the only members of the Bullock Committee who had wide practical experience of running large companies said, in the first paragraph of their minority report, that they regarded the terms of reference as, …a far cry from satisfactory or even wise remit. I listened very carefully to what the noble Lord, Lord Kirkhill, said and I hope that what he said was that the Government are going to keep a reasonably open mind. If I may, I will come later to what the Prime Minister was kind enough to say, but I must make it plain to him that so far as the attitude of the CBI is concerned, we did our best to warn the chairman that if he felt absolutely bound by the terms of reference—and certainly the report has been bound by them—then he should expect "unremitting hostility" from the CBI and all its members. That was said as long ago as last March. I would merely add that that statement, made nearly 12 months ago, has been borne out by subsequent events. I now happen to have had the opportunity of consultation with nearly all the firms who would be directly affected by the report and I have never seen such complete unanimity of opposition as exists to all its proposals.

So my personal view of the report is one of intense disappointment. A year has been wasted and the report has, quite simply, got it totally wrong in practical terms, as other noble Lords have already pointed out. That is why it provides no service to anyone for industry not to say to the Government that we cannot reasonably discuss, much less co-operate in, any matters such as the imposition by law of trade union nominated directors on to company boards or parity of representation between shareholders and trade union nominated directors, or a trade union monopoly of choosing the worker-directors through the so-called "Joint Representation Committee". Even the report itself concludes that those processes would lead to friction, difficulty and conflict within the board—and so they would, my Lords.

I think, if I might express a CBI opinion—and I do not think it is fair not to do so if I speak in this House, because I am committed—we feel that this report should now be set quietly on one side. Let us give the noble Lord, Lord Bullock—and here perhaps I might echo what other noble Lords have said: of course it is not his fault and of course we deeply regret the circumstances that mean he cannot be with us today for this very important discussion—and his colleagues, the credit for putting this important issue on the national agenda. I could go on and say that perhaps even that was not really necessary since it has been on the agenda of most leading companies and most associations—including the CBI and the Industrial Society—for a very long time.

I should like now to turn, because I think we have reached the stage in the debate when we should do so, to what constructive policies might be put forward to enable progress to be made towards a true industrial partnership—and it is partnership that I want to talk about.

Here, if I may, I declare a deep personal interest. It is in this concept of a working partnership between all those who are employed by a company to which I have given many years of my life. I remember this afternoon my first very amateur attempts to work towards such a partnership made, I regret to say, over 20 years ago when I was junior Minister in the old Ministry of Labour under a very great Minister of Labour, whom I will always remember, Lord Monckton. I believe that the word, "partnership" is much more descriptive of what we are trying to do than catchwords like "industrial democracy", which is largely a meaningless phrase, or "worker-directors", for who today on a worthwhile board is not a worker-director? So may I take a few minutes only to explain what we should like to persuade the Government to do?

First, it is quite unchallengeable, and one could adduce a great deal of in-controvertible evidence, to show that the vast majority of employees have as their main interest the immediate circumstances which surround their own particular job. One may say that this is so self-evident as not to need saying, but it was, strangely enough, given no priority in the Bullock Report. I have read Chapter 6 which the noble Lord, Lord Kirkhill, mentioned. It is totally unconvincing and, I think, deals very unfairly with much that has been done by both trade unionists and employers in getting along with this kind of proper participation at the work place. Industrialists believe that this is where it all begins. The concept of a practical working partnership must have its foundation on day-to-day contacts and a full flow of information between those who manage and those who are employed at the actual work place. That is why, in all our talks with Government, we have stressed the necessity to begin any worth while examination of the problem at the grass roots.

We do not believe that the 2X+Y proposal for board structure, which is the nub of Bullock, is viable, anyway. But the point is that any solution imposed from the top would never work. A proper structure of participation or partnership in industry has to start from the bottom. So that the first step we would wish any Government to take is to study the practical proposals for employee participation set out in Chapter 9 of our policy document The Road to Recovery. These proposals contain legal backing and they would enable companies, large and small, to set up whatever methods of working together meet their own particular circumstances, first at shopfloor level and then up through the company.

May I say that these proposals do not at all disagree with those of the Industrial Society put forward by the noble Lord, Lord Byers, or the proposals put forward by the British Institute of Management and many other bodies. All practical opinion has said that Bullock is totally wrong in trying to start from the top, and I listened with some alarm to the noble Lord, Lord Kirkhill, this afternoon appearing to say that this is still the Government's view, because if it is I fear that it is totally wrong.

The essential requirement is that the system should start from the bottom and should be flexible, to enable each company to take the path that it believes bests suits the needs of its employees and its managers. We do not shirk the possibility of legislation, as I told the Prime Minister last week when he was kind enough to see us, nor do we oppose the concept of employee-directors in any way. But I emphasise that the appointment of employee directors would spring from a successful infrastructure of partnership below board level based on participation agreements, which under our proposals every company employing more than 2,000 people would have to sign.

If I may, for the purposes of a practical illustration—because if this is ever going to work, then, for Heaven's sake! It has to be based on practice and not on political theory; and we have had much too much political theory in Bullock—I should like to describe a working model that has proved itself, which I myself helped to set up, together with my fellow directors and our shop stewards, when I was chairman of Cadbury-Schweppes. Every place of work in the company had its own joint consultative committee. These were formed of employees and management who were employed at that particular place of work. They were elected in secret ballot and the chairman alternated between the employees, who were normally shop stewards, and the managers, who were those managers running that particular plant.

In a large company, such as the one I am describing, which is widely diversified, there are many operational groups with considerable sovereignty; and I do not disagree with what the noble Lord said about two, three or even four tier boards. I do not think that this is a great issue at the moment. So that where there were operational groups, those groups had their own boards of directors. There had to be close contact with them, because, obviously, at group level a great many decisions bear directly on those employed in the group. So committees at the workplace elected, again by secret ballot within each groups, to a group council which had a direct relationship with the group board, had the right—and I mean the right—to meet and discuss with the group board any matters that the group council wished to put forward to the board.

Finally, these group councils elected upwards again to the main board level what, for convenience in my old company, was called a company conference. We called it a conference merely because we felt that we had too many committees and councils, and we wanted to make this top one specially important. This conference, like all the other bodies, was comprised of 50 per cent, management members and 50 per cent, employee members. Of course, there was a good deal of union membership on both sides and its chairman was, and is, a director of the main board of the company. So there you had a direct link of a director presiding over this company conference, who was already a member of the main board.

The company conference or council had the agreed right to discuss directly with the board matters such as finance, the performance of the company, development and plans for expansion or contraction, and social and environmental policies and human relations. Group councils, of course, discussed matters with their group board, and plant committees naturally looked to local problems such as safety, recruitment, immediate production problems and so on. At all levels, full information was provided to the councils about profit and loss, the sales position, raw materials, customer problems and capital investment. As your Lordships will see, the whole concept rested on the firm foundation of the efficient operation of joint consultation at the place of work, at the grass roots. Incidentally, these local bodies were also visited regularly by the chairman and the deputy chairman, again at their place of work, so people did not feel that although they had representation they did not also see the boss.

This whole concept was invented not by management but by our own senior trade union members, and that company was the only one that put in a memorandum to Bullock, which I regret was totally disregarded, signed jointly by the shop stewards and the management, recommending this much more practical way of proceeding. I very strongly hold this belief, that people who give much of their working life to the service of a company have as much right to have their views considered as those who have bought shares in a company, and the system I have described gives them that right and it works.

I just want to say that what I have described, a practical system, is entirely within the published proposals put forward by the CBI, entirely within the evidence which the CBI submitted to Bullock. I very much regret that we were refused a second hearing, as we were when we wanted to develop our case further and were not allowed to go and do it. I know that time was short and I am not at all blaming the noble chairman. However, I am able to say from my personal experience that these proposals work well, and I cannot understand why the Government are not willing to try to develop this kind of real industrial partnership, as opposed to the kind of disruptive confrontation that will inevitably arise from an endeavour to impose the 2X+Y system on a main board, and then force it down through the company as a whole.

In conclusion, if I may venture to say this, perhaps the Prime Minister does, in fact, understand the problem as it is in reality, because his view, as expressed in the other place and to us when he kindly saw us, is that any solution will work only if there is a broad measure of agreement on all sides—and that I am sure must be right, whatever else is right or wrong.

May I end by saying that there can be progress with industry and its members if we start from the bottom to build a partnership and do not merely tinker with it at the top. This is what we hope we can now discuss with Mr. Dell, and that is the remit which the CBI gave to our Director-General to discuss with Mr. Dell, with the agreement of the Prime Minister. However, I must make it totally plain that the Prime Minister is not in any way committed, and I am sure that his view was properly expressed just now by the noble Lord. But, equally, we must make our view plain, if we are to rest on the basis that we shall not make progress unless we are in reasonable agreement.

Therefore the view of most industrialists and certainly of all members of the CBI is that we are willing to work hard to develop a broader concept of industrial partnership because we believe that it has much to contribute not only to the efficiency of British industry but to the wider job satisfaction of all those who work in industry. We have wasted a year on Bullock. Let us now put this aside and try to find a practicable, workable solution, built up from the floor of the shop and fully involving both management and employees all the way. That would be a job, my Lords, worth doing.

4.31 p.m.


My Lords, we are indebted to the noble Lord, Lord Carr of Hadley, for initiating discussion on this very important topic. As the terms of reference to the committee of inquiry asked the committee to pay particular attention to the TUC Report on Industrial Democracy, I propose to comment on the broad approach of the TUC.

In the first paragraph of their report the TUC make three basic assertions which are fundamental to TUC thinking. First, they say that throughout their history trade unions have generated a substantial measure of industrial democracy in this country. Secondly, they say that all trade union activity has served to further this objective. Thirdly, they say that so far as they are concerned the term, "industrial democracy" cannot be considered outside this context. This goes far to explain their attitude, that any changes must be based on trade union machinery. In a word, the unions, more than anyone else, have created such industrial democracy as exists and in their view industrial democracy is a further evolutionary step forward. But the only practical way is in consultation with the unions. This view is supported by the recognition that collective bargaining is, and will continue to be, the central method of joint regulation in industry.

The TUC report then indicates that there are a number of specific questions of close concern to work people which are not being effectively subjected to joint regulation through the present processes of collective bargaining and that additional forms of joint regulation are therefore needed. They say that this extension of collective bargaining to new areas has become more urgent—I think this is true —as capital has become more concentrated, and that the central decisions of boards of directors seem increasingly remote from any impact by work people through their own organisations.

What kind of extension of collective bargaining is intended? The Donovan Report recommended the extension of collective bargaining at shop floor level—and this is what is advocated in the TUC report—to deal jointly with such matters as the recruitment of labour, training, redeployment, manning questions, speed of work, work sharing, discipline, redundancy dismissals and such fringe benefits as sick and injury pay and vocational pensions. These are all matters for grass roots joint consideration. The other new form of joint regulation is expressed in a claim for representation to obtain a degree of joint control at the point where strategic decisions are taken, namely at board-room level.

How does the Bullock majority report deal with the proposals of the TUC? Their reaction is well summarised at page 160 of their report. In paragraph 2 they say that during their inquiry they found a widespread conviction, which they share, that the problem of Britain as an industrialised nation is not a lack of native capacity in its working population so much as a failure to draw out their energies and skills to anything like their full potential. They express their conviction that the way to release those energies is to provide greater satisfaction in the workplace and that to assist in raising the level of productivity and efficiency in British industry and, with it, the living standards of the nation is not by recrimination or exhortation but by putting the relationships of capital and labour on to a new basis which will involve not just management but the workforce in sharing responsibility for the success and profitability of the enterprise.

This new relationship between capital and labour will come about, says the report, only as a result of giving the representatives of the employees a real and not a sham or token share in making the strategic decisions about the future of the enterprise. A crucial test of this is the right of representatives of employees, if they ask for it, to share in the strategic decisions taken by the board. This, in their view, requires membership of a reconstituted unitary board, not a supervisory board. Finally, they draw attention to the change in attitude of the TUC in being willing to accept a share in responsibility for the efficiency and prosperity of British companies. This change, they believe, offers an opportunity to create a new basis for relations in industry which should not be allowed to pass.

The minority report shows little enthusiasm for industrial democracy. This is my opinion. In paragraph 4 of their report they say that those who work in industry are not ready for radical change. This is often said, but what you have to consider, so far as you are able, are the collective desires of employees. It is the trade unions, as on other industrial relations questions, which express that desire. In paragraph 6 of the minority report it is said that the aim is to bring the boards of private industry under trade union control. That has been said here today. Trade union influence, yes; but to say control by the unions is absolutely unwarranted. Throughout the TUC document the TUC have consistently asserted that they want an extension of joint control—which, of course, is an extension of collective bargaining. In paragraph 12 of the minority report they accept the case for participation on supervisory boards. In paragraph 15 they also very properly draw attention to the many states of development in the many different structures of many different firms. Hence there must be, they say, due regard for the evolution of the changes required.

I said that the minority report lacked enthusiasm. A clear example of this is in its concept of the duties of the board. Paragraph 38 suggests that members of supervisory boards should not be involved in determining policy but should be primarily concerned with the quality of management. This, I suggest, is a very restrictive function. No doubt this kind of attitude is what the majority had in mind when they spoke about sham or token representation. Another considerable restriction is on qualification for board membership—that is to say, 10 years' service with the firm and three years as a member of their proposed employee council.

There are other views on Bullock—I suppose many views—but I should like to comment broadly on the evidence of my own union, the General and Municipal Workers, to the inquiry. They favour a more flexible approach, but they consider it necessary to have a legal obligation on company management and directors to consult and negotiate with trade unions on all major decisions involving investment, closures, mergers, organisational changes and the redeployment of labour. They consider that the precise machinery for extending industrial democracy should be left to negotiations between the company or enterprise concerned and the unions. They draw attention to the fact that this flexible approach would appear to cut across the terms of reference of the Bullock Committee, which refer to accepting the need for a radical extension of industrial democracy in the control of companies by means of representation on boards of directors. The terms of reference of the Bullock Committee in fact go beyond the TUC policy. In 1974 the Trades Union Congress endorsed the Industrial Democracy Report, but significantly modified the report by passing a composite Motion which contained the following passage: Congress rejects the mandatory imposition of supervisory boards with worker directors and calls for a more flexible approach giving statutory backing to the right to negotiate on these major issues, but relating the control more directly to collective bargaining machinery". This approach supports the need for change, mainly by collective bargaining, but with a legal obligation to negotiate on strategic policy matters having a direct effect on the security in employment of the employee.

In recent years attention has been drawn to, and opinion expressed on, the changing role of the trade unions in society. These changes are closely associated with the dramatic structural changes in industry. Changes in the attitudes of workpeople are perhaps the most profound. The Donovan Report 1965–70 drew attention to the shift of power in the unions from the centre to the grass roots and recommended that this trend should be encouraged. Aubrey Jones, writing on his impression as chairman of the Prices and Incomes Board for 1965–70, expressed the view which the Bullock Report refers to, that the tendency was for men possessing nominal equal political rights to claim equal economic rights.

I believe this is a sound analysis of the prime motivation of workpeople today and one of the main reasons for seeking change. The trade unions wish to deal with the consequences of change by traditional collective bargaining. In my view, Government policy should be as far as possible to have a minimum amount of legislation to deal mainly with company law and the obligation of employers to negotiate. I believe there is much common ground in industry, accepting the need in one form or another for the extension of industrial democracy. Believing this, I consider the form this should take should be left to the parties to negotiate the most suitable machinery to suit each individual undertaking.

My Lords, the economic future of this country depends very much on getting this development mutually agreed. The Government will have discussions with the TUC and the CBI on this report. I express the hope that this debate will contribute to the Government's consideration of the report and particularly to the need for maximum flexibility.

4.44 p.m.


My Lords, I rise to make this, my maiden contribution, with perhaps more than the usual trepidation. While this subject is clearly of burning interest to an industrialist, it is also possibly a subject where maiden angels would fear to tread. I gather it is your Lordships' practice to declare an interest, and the first interest I wish to declare is that I believe I have been for the past ten years a worker-director on a full-time basis in a large multinational firm, and it took me 20 years of full-time management experience to be elected to that position. I note that the majority of the Bullock Committee recommend that six months should be the period for eligibility for election to boards. It is true that nearly 30 years ago, after six months' experience, I had some very strong opinions on how the firm should be run, but it is fortunate for both the business and for employees and the shareholders that nobody took the slightest notice of me! An industrialist can be positive in this area of the debate only of how to improve co-operation and involvement of all the people working in large organisations.

Perhaps indeed this is the problem of our age, but the description that emerges from the majority report of the Bullock Committee is one that I find very hard to reconcile with my experience of the fulltime executive boards of either a multi-national company or—as has not yet been mentioned in the debate—subsidiary boards in charge of large United Kingdom operations.

The emphasis on collective bargaining as a main and important function of those meetings and of the duties of the directors, I find hard to reconcile with the struggle to get through the essential management affairs with all the executives contributing from their knowledge and experience with a view to arriving at solutions in the best interests of the business as a whole. I have never known a vote to be taken. Employee questions and industrial relations are of course among the most important subjects, but they are a minority of the work of the boards of which I have experience.

This is perhaps the moment to discuss the European situation, which has been ably described by my noble friend. In my experience—and I have some experience of them—the systems really are in practice very different from anything in the recommendations of the majority report. The phrase we use in English is "supervisory boards", but it is often translated, perhaps more accurately, as "supervisory councils", and it is a specially designed forum—a centre of communications, a meeting place for shareholders, employees and management, specially structured to discuss the general long-term situation, some general policies, and the functions are defined in many Northern European countries. The bases of this system have already been mentioned: a very different trade union situation, with much more regulation and with the enforceability of collective agreements, but above all it is based on the works councils with secret ballot elections in which every employee takes part. In all the systems which so far operate parity has not been reached.

I am aware that British industry is criticised for being behindhand in this area, and the criticism is often made that the management of British industry is poor and that too few efforts have been made in the past to initiate works councils and floor level participation. There is indeed some truth in the suggestion that we are behind, but there are reasons for it. My own experience is that there are good, bad and indifferent managements in all countries, and that if the last war was an objective test of leadership, which must be the first cousin of good management, then I do not think on average we should denigrate ourselves.

So far as works councils are concerned, when I joined industry joint consultative councils were the fashion and the rage, and at that moment many British ideas were being exported to the Continent. It has to be said that since we gave those joint consultative councils no legal backing in this country, in a number—fortunately, not in every case—a very strong shop steward movement in our trade union position has brought about the cessation of what was essentially a British initiative. There are many modern systems—and the noble Viscount. Lord Watkinson, has described one of the most notorious—and these, in my view, are working every bit as well as systems in practice in Europe.

While still on Europe, I think we must be careful not to put too much emphasis on the trappings of co-operation. The devastation of Germany and Holland by the war and the enormous lowering of their standards of living faced every citizen of those countries with the stark necessity to rebuild and to co-operate in order to do so. This was perhaps, in my view, a deeper motivation responsible for the progress, and the earlier progress, that was made in those countries. In more static situations it seems that human nature becomes a bit obsessed with bargaining about distribution and pays too little attention to the maintenance and creation of wealth. Thinking people in Europe today do not believe that they have got the final answer to this major problem. They are worried. Systems—the trappings, as I have called them—can be used, of course, to aid co-operation, and they can also be used to aid confrontation.

My Lords, are there limits to the application of democracy that we can learn from studying history? As a system for law-making, and for long-term questions of the same nature, it is proved, and undoubtedly is the best. As a system for the executive functions, whether in Government or in industry or in any other human endeavour, are there severe limitations? Does history suggest that efficiency is correlated with firm and strong management, fast management and decision taking; even—dare I say it?—in the executive area, with a little bit of discipline?

The boards of which I have experience find that it is necessary that not every decision of the board can be taken by democratic processes, despite the fact that those decisions are most important. There is simply not the time, or the time to get the knowledge, for one to be able to make a contribution and have a say on every subject. Security is a problem that has been mentioned outside this House, and it is a human fact that on some questions there will continue to be different opinions for as long as you wish to consult different people. Again, for forward movement of a large organisation and for its cohesion, there are limits to the practical application of democratic processes in the executive function. It is for this reason that I support those who have already recommended that special forums—whether they be supervisory councils as on the Continent, or whether they be systems such as Lord Watkinson has described—are more appropriate to the problems we face.

My Lords, I am sure we would all agree that there have to be rules and safeguards for Parliamentary democracy. I believe industrial democracy to be no less important; I believe that rules and safeguards must be made, and secret ballot election by every employee seems to me to be absolutely essential. I say this not just to enfranchise the non-union members, but to ensure that every union member votes specifically for whoever he considers will be the best participator in the job of helping his company forward in a competitive market situation, of helping it to economise and become more efficient, to make profit and to progress, and essentially in the long-term. I do not believe that it will always be found, and particularly perhaps in the British situation, that employees will choose the person who at the moment is the strongest collective bargainer, whether he has been elected, chosen, or nominated by other means. Is this the moment to dare to ask the leaders of our great trade union movement whether they should overhaul their election procedures, to see whether this conflict which has been mentioned several times this afternoon could not be narrowed? If they ensured not only that their systems are democratic but that their systems are seen to be democratic, would this not help?

Is it also fair to ask that before seeking participation in the private enterprise sector of a mixed economy there should be a commitment to the maintenance and prosperity of that sector? Finally, my Lords, I believe, with some research and experience and not just opinion, that the average employee in business wants participation, and this is what he wants to get out of it: he wants to be kept in the picture as to what his company is doing; he wants an opportunity to make points and suggestions; he expects management to manage, decide, and get on with the job; he wants consultation on the carrying out of the decisions as they affect him. The last point to remember is that any major reorganisation in this area is going to tax directors and managers of industry to a very high degree. An enormous amount of time will be required from them. I would merely say that in this area, therefore, I believe it impossible to proceed without the backing of the majority of directors and senior managers.

4.58 p.m.


My Lords, the noble Viscount, Lord Trenchard, began by telling us that he felt more like a maiden angel at this moment, and, if he will not misunderstand what I mean, he passed through the Pearly Gates to great acclaim, not only by celestial choirs but by we humbler inhabitants of Westminster. I was very pleased that he widened the subject-matter by pointing out the psychological effects in Holland and other parts of the Continent which had been over-run during the war, where industry had been decimated and so on; because I believe that in this country also we have certain barriers which have been established because of our own history. Indeed, I believe that a great deal of the negative thinking we have had in British industry— indeed, one reads it in the financial columns today—has been caused perhaps by the loss of an Empire and the dominant role we once had in industrial matters throughout the world.

I believe that the reactions to our change of fortune in that respect have much to do with our relative failures to control, and indeed to expand, our industrial and economic life during the last 50 or 25 years. Indeed, when a nation such as ours also pioneered the first Industrial Revolution the world ever saw, and created the very structures by which our manufacturing industries were organised—and organised so successfully during that period—it is extremely difficult for those who are still taking part in industry to adapt themselves to the fast pace of change which we have seen in the last 20 years or so. Basically, that is the cause of a great many of our problems. It was Macaulay who said: Change if you would preserve". It is a thought that I commend to the nation in general and to this House in particular.

I believe that the Bullock Report is a pretty dry and not very well argued document about an extremely difficult subject, a subject which none of us dares now neglect. If any of us feels elated at our economic and industrial performance over the past half century, let alone the immediate post-war period, he will doubtless oppose such far-reaching suggestions as the creation of worker-directors. Those who see the report as the dawn of an industrial millennium will give it a quite unrestrained welcome. I believe that given a great deal of very careful preparation, it can make a useful contribution to industrial progress. However, I also believe that both employers and trade union organisations have a great deal to do during the preparatory stage, if we are to reach that position. I believe that it can be a helpful development providing that we make the right arrangements. I put it no higher than that.

I have mentioned some of the problems we all face. Within the trade union movement there are two basic schools of thought on the attitude that the movement should take towards this kind of development. One school of thought continues to see the role of the trade unions as being to demand, and indeed to fight for, the best possible living standards for their members and to have nothing whatever to do with the problems of management. That is a perfectly defensible role for it to take. The other school of thought argues for far greater participation in management in every phase. Indeed, this is what those trade unionists who have signed the majority report represent. There is much to be said for that point of view. The problem is that we cannot marry the two.

Before the movement can engage in a full implementation of the majority report, it must come down as a whole firmly on one side or the other. To be split on a fundamental issue of this type means tragedy, if it embarks upon it at all. Therefore, it has to do a great deal of hard thinking and decision making before it can come down on one side or the other. Indeed, in the evidence given by the electricians, which is outlined in the Bullock Report, we see the school of thought that I mentioned. They say that they want nothing to do with our problems and that they want the best for their members. I do not ridicule that in the very least.

The institutions and firms where a great deal of forward thinking and action has already taken place—the internal machinery which the noble Viscount, Lord Watkinson, described—have gone a great deal of the way to prepare for worker-directors on boards. Indeed, I am a product of the internal machinery of one of the great firms of this country. Therefore, directors or trade unionists cannot be proud of the fact that in a particular firm there has not been that kind of preparation. They are living in the age of the dinosaur if they have not advanced to the point where the actions which the noble Viscount outlined have not been taking place for a great many years.

Some of the letters which have been sent to the Prime Minister by leading figures in the City and about which we have read today are way behind the speech made by the President of the Confederation of British Industry today. I was very pleased at what the noble Lord said. I did not, for instance, appreciate—it is probably my fault, but I did not—that the noble Viscount said: We do not oppose worker directors. Those are his words, which I took down. Therefore, the argument is not one of principle between the two sides; it is a question of when we implement the report. I wholeheartedly agree that this kind of reform cannot be imposed from the top. Anyone with any knowledge of industry knows that that is simply not "on"—it is quite silly.

Nor is it the case, as I shall try to show, that one can rely implicitly on what the noble Viscount called "grass roots organisation". I agree that without constructive grass roots organisation we cannot have worker directors. However, the present boorish anarchy in the British car industry comes from workshop organisation—from grass roots organisation of the wrong type. I can remember the time when my own union, the engineering union, the Transport and General Workers' Union and, I think, the General and Municipal Workers' Union had to go into a number of car firms and force those trade unionists, who were masquerading in the name of these great national unions, to recognise the rules of those unions. At present my own union executive is instructing the workers at British Leyland to go back to work—and a lot of notice they are taking!

We must not run away with the idea that merely because we have grass roots organisation, we have reached the stage where we can implement the Bullock Report. That does not follow. However, there are exceptions. For years in the vast majority of our great engineering industry there has been constructive partnership participation in all the phases which the noble Viscount, Lord Watkinson, described. I should have thought that where they have achieved that level we cannot ask that they should wait until the laggards catch up with them. This is one of the great problems which the Government, the Trades Union Congress and the Confederation of British Industry will now have to face as they decide where the next stage will take us.

The expression "trade union monopoly" has been used. The advancement in the partnership between employers and workers has been possible only because of trade unionism, because of the constructive attitude of the trade unionists. I have said what I have said about the Bullock Report, that it is woolly in its thinking in many of these things. But I would not accept that because they say that the most convenient way of organising whether workers accept the need for worker-directors is through trade union machinery, that means a monopoly. As a matter of fact, when the poll is taken on this issue it will be taken by everybody and not merely by trade unionists, according to the Bullock Report.

Therefore, do not let us run away with emotive expressions. I repeat that, despite all the differences I have outlined, the two schools of thought, this nation would be in a very sad state indeed were it not for the fact that we are now in the second year of a wage restraint policy organised and implemented by the trade union movement. No non-unionist can organise that kind of thing. As we are agreed on all sides, unless we had that policy we would have no chance of coming through this difficult period we are now engaged in.


My Lords, is the noble Lord saying that he reads the report to say that a non-trade unionist could be elected as a director?


My Lords, I said that they talk about triggering off the whole thing, and to do it they would use the trade union machine, but in the decision taking as to whether or not you ask for worker-directors, every employee in the firm, as I read it, is eligible to vote. That does not mean to me a trade union monopoly.

I talked about the wages policy. We are hearing about pamphlets that are to be distributed by The Stock Exchange describing the need to get rid of dividend restraint in any way, shape, or form. In the mind of the workman, this of course is allied to what they deem to be a refusal to accept the principle of worker-directors. When I read about the rather fast one that Sir Arnold Weinstock has been pulling—I see that the noble Lord, Lord Nelson, is in the Chamber and he knows a bit more about this than I do—I was thinking the other day that had I remained in the purity of my employment in what is now GEC, it is possible that I could have been a worker-director, and I may have objected to Sir Arnold working a fast one to the extent of £170 million for his shareholders while I was accepting wage restraint on behalf of my colleagues. We must be careful—and this is why I attach such great importance to Lord Watkinson's speech—to make it quite clear that the refusal to accept Bullock is not based on fear that worker-directors would stop the kind of thing we have seen at GEC from being developed throughout the whole of British industry, for if it is then we would give up any idea of a Phase 3 of the incomes policy. I think that that would be a great tragedy indeed.

I shall not delay your Lordships much longer. I believe that it is now utterly essential that without any further delay the Government should invite the TUC and the CBI to meet them in a series of meetings at which they would hammer out together how we can begin, if necessary, to enforce workshop organisation through works councils and a far more comprehensive approach to what working people require and need in industry in these days, rather than leaving it that while the dinosaurs do not move the more progressive ones are held back. That is the problem that we now face, and I hope that the Prime Minister will, as soon as may be, call together and begin that type of meeting. They can do nothing but good.

5.15 p.m.


My Lords, first of all may I associate myself with the congratulations tendered to the noble Viscount on his maiden speech. As one whose last speech in this House seems so long ago, I feel that I am making mine for the second time. I assure the noble Viscount that that is even worse. It was a well-informed and particularly striking speech, and I think that we were all very impressed. I personally, as one who has completed in a way the whole spectrum from worker, trade union official, Minister, and now member, like the noble Viscount, of boards of multinational and United Kingdom companies, found that much of what he had to say fitted with my own impressions.

The noble Lord, Lord Lee, thought of one important function in drawing our attention to the two schools of thought in the trade union movement. It is tremendously important to get clear whether we want to be consulted and taken into account, or whether we want to participate in the decision-making process, and therefore in the acceptance of responsibility for the carrying out of those decisions. I unhesitatingly declare that I belong to the second school of thought. I equally unhesitatingly declare that it is of paramount importance to the nation that our people should be encouraged to accept the responsibility.

Consultation, as I well know, and as the noble Viscount, Lord Watkinson, described it at Schweppes, is a first-class arrangement for ensuring that people know what is going on and feel that they are being told what is going on, and are being given an opportunity to express their point of view. But we shall not get the productivity which is our vital need at this moment, we shall not get the acceptance by the car industry workers or anybody else the noble Lord, Lord Lee, referred to, until they become responsible for the decisions that are taken, and are not merely told about them or consulted about them.

In that sense we have been very slow indeed. Managements in this country have been as slow as the unions, and managements have failed. Let us face it, the CBI, or the old FBI, the various management organisations, have failed over the years to pull people into doing something that maybe they did not feel they wanted to do, but in fact if one was leading the Army one knew they ought to do. This House must give a lead to the Government in the discussions which are about to take place, as I understand it, on that matter.

I hope I am right in believing that when the noble Lord, Lord Kirkhill, was speaking—using the phrase which has been used by other Ministers before—of legislative proposals coming before us from the Government in the summer, that did not necessarily mean legislation, and that there is in fact a difference in their minds. The words are different. "Legislative proposals" can mean a Green Paper, a White Paper, or all sorts of things; "legislation" means dashing in with a Bill, and that can land us in the same trouble as the Government unnecessarily got themselves into last night. Indeed, I hope that it is proposals, and that the noble Lord, Lord Oram, an old pal of mine, will say to the noble Lord, Lord Kirkhill, and through him to the Government, that I hope that the Government thinking goes a good deal further than the speech which the noble Lord, Lord Kirkhill, was allowed to make today before they even get down to legislative proposals, because I feel they were still stuck in a trench which I rather hoped they would have left.

One of our problems is that we still misuse the language very badly; I have talked about management confusing consultation alone with participation, the acceptance of responsibility. But the trade unions and certainly Bullock confuse industrial democracy with the entrenchment of trade union power. This is perhaps not the place and maybe I am not the person to argue whether the second part is right or wrong, but it is not the same thing as the first part.

Industrial democracy is something quite different, and it means everybody. The one group who have not been mentioned today is comprised of what I would call front-line management, the chaps who are really where the buck stops; foremen and junior managers in offices and shops as well as workshop workers. These are the fellows who all have to be involved, whether or not they choose to join a union and whether or not it is traditional in the places where they work. If we are to extend industrial democracy to any sensible meaning of the word, they must all be brought in.

On this, as on pretty well everything else, Bullock is totally inadequate. Like the noble Lord, Lord Carr of Hadley, I deeply regret the absence of the noble Lord, Lord Bullock; not only the reason for his absence, but because it is so much more satisfactory to say these things in front of a chap when he is able to come back at one. However, it is not our fault that he is not here, any more than it is his, and one must say them. In a long and sinful life in the other place—


Hear, hear!


—and I shared most of those sins with my noble friend, a former Speaker there—it was my business to read and sometimes try to act on all sorts of reports, commissions and bodies of inquiry. With great respect to Lord Bullock, I do not think I have ever read a shoddier production than the one we have before us, and it gives me no pleasure to say that. It is, however, my view. It is inadequate all through. We have a list of the places where they went when they visited the Continent, but we are not told much—indeed, we are told nothing—of what they saw or what they thought of what they saw. We are given a list of the people who submitted written evidence to them of their own free will and volition, but the Bullock Committee seem cavalierly to have dismissed pretty well all of it. I have not had a chance to read it, so I do not know how much I would agree with the evidence given by Sir Eric Faulkner and his colleagues, but it is rather ridiculous when people as distinguished as that in such an important sector of our commercial and business life do not have their views taken into account.

At one period of my life—I fear that it was about 35 years ago—I worked in a commercial enterprise in which one or two other noble Lords—the noble Lord, Lord Shackleton, certainly—also worked. I refer to the John Lewis Partnership. I note that among the written evidence supplied was a joint submission by a group of people who included the former chairman of the partnership, Sir Bernard Miller, who was there in the days when Lord Shackleton and I were there. In that partnership there has been a system not only of consultation but of the sharing of responsibility for decision-making; it had been established long before I got there in 1931. In the department in which I worked I served on its main council and I took part even as a very young man in the decision-making process for which its constitution provided. Although people like that, who have had experience of working with such a system, submitted representations, they were never seen or asked to explain them. There has therefore been a degree of cavalier treatment of people with practical experience which, in my view, is of an almost unique kind in the production of public commission reports to the Government or to the Houses of Parliament.

I suppose one can blame that on the terms of reference, which, let us face it, were virtually dictated to the Government by certain leaders of the TUC, and they did not consult very closely with their colleagues, as came out clearly in the speech of the noble Lord, Lord Cooper of Stockton Heath. It was, as I say, dictated to the Government by certain leaders and the Government in turn wrote it as the remit to the Bullock Committee, so in effect it was dictated to them, and the report has been produced, as it were, to get the verdict that everybody asked for from the beginning rather than finding out what the verdict should be.

Before I look at Continental experience, I must point out that we have many examples in this country of where we have tried to experiment in this matter. I mentioned the partnership where I worked, but there are others. I remember that as a Minister in 1964 we embarked on what was then known as the Fairfields experiment in the Govan shipyard in which several unions—the engineers, electricians and others—took a share of the equity and where the workpeople were represented on what was referred to by the noble Lord, Lord Kings Norton, as the management or executive committee. They were part of that and the unions had directors on the main board.

That disappeared because the present Secretary of State for Energy, wearing his previous hat, decided to create a much bigger organisation on the Clyde into which Fairfields got pitchforked against all reason and simply got lost. Was that examined? I happen to know that Sir Iain Stewart, who was the chairman of Fairfields—whom I appointed to that job and who did a first-class job while he was allowed to—submitted a memorandum on that experiment, but he was never asked to come along and explain how it worked in the shipyard and to say what sort of results were obtained from it. I checked with him this morning about that. That experiment worked, so we have examples here which enable us to demonstrate that we can make it work in this country.

Then we have the Swedish and German examples to take into consideration. I should have liked to know what the members of the Committee actually thought of the places they visited. When I had the good fortune to be a consultant for five years to one of the larger textile corporations in this country—that is, when I came out of Government—one of the things I did was to look at the Swedish textile industry which was having the same problem as we were; namely, having to decide on the closing down of parts of the textile industry, though it was a much more difficult problem for them because of their need to ensure that their self-sufficiency fitted in with their foreign and defence policy.

I was taken to Gothenburg to see a weaving organisation that was to be shut down. The decision to shut it down had been taken by a policy board on which the workers were represented. The management committee, which I attended, which was discussing the consequences of the policy decision and on which sat the chairman of the main board and other directors, was not chaired by him or by any shareholders' director, but by a weavers' representative. They were discussing, as workers in the plant, the implementation of a policy decision to which they had been party. They were now accepting the responsibility for carrying it out and were making sure that it was done in a humane, sensible and rational way.

Did the Committee see that? There, we have the two-tier system and representation on the policy committee, representation also at the lower level. It was, in fact, exceedingly successful and it is clearly inadequate to say, as the Bullock Committee says, that our trade union organisation and our industrial practices have grown up in a different way from those on the Continent, as though that was the answer to all progress from now on. There is no reason why we should not change. Probably, our trouble—if we have one trouble more than another in industry in this country—is that all of us, including workers, directors, management, the whole lot of us, are so wedded to our traditions. When I go round our own plants, I am often reminded of "Fiddler on the Roof" and the wonderful song in which the chap explains why they wear their caps at certain periods in their services. "It's tradition", he says. I am afraid that the Bullock Committee has accepted that very much too easily.

I, like others before me—and one cannot help repetition here—find myself very much in agreement with a large part of what the noble Lord, Lord Carr of Hadley, had to say. Of course, I believe that we must not make the inadequacies of Bullock an excuse for not pushing ahead. Perhaps it is unnecessary to say this but, on the other hand, it is worth putting on the record. We do not want to spend the next four years merely discussing it with each other. We must go forward, as I said earlier. One must get the workforce and the lower front-line management involved in accepting responsibility if we are to get out of this frightful log jam that we have at the moment. So we must push ahead. Companies that have got as far as Cadbury Schweppes must consider making the next jump. I have discussed this before with my noble friend. So must other companies. Maybe they will not catch him up, but at least they must get on with the job. I agree that we must have, in any legislative proposals that come forward, provision for the greatest degree of flexibility. It must enable the varying forms of participation and responsibility to be included. The Co-operative Movement must have something to contribute here. I do not even know that Bullock bothered to see them either. I do not believe that the noble Viscount, Lord Watkinson, was here when the noble Lord. Lord Lee, was paying him a flowery tribute. I got the general impression that Lord Lee thought that Lord Watkinson speaks better in this House than he sometimes does on the television box.


My Lords, can I hear what I was supposed to believe?


Anyway, my Lords, the CBI has a great responsibility to push its members who are in a position to go ahead. We must drop the foolishness of playing the numbers game. I do not see the relevance of 2,000 employees to a company. Companies which have that number of employees may well have them spread over all kinds of much smaller units. They do not all work in one vast shed. One would get a silly situation if, because the totality of a company's employees was 2,000, the company was required to go ahead to direct board representation whereas other units alongside them which could be bigger were not required to do so because the total number of employees was fewer than 2,000. I do not think that there is any point in playing the numbers game as Bullock did.

So I end—and I apologise for having taken a little more time than I intended— by appealing to the TUC not to confuse the entrenchment of its power with the extension of democratic involvement by all of those in industry. I appeal to the CBI to push hard those companies which can make the next step so that more people can see the results in front of their very eyes. Finally, I appeal to the Government to give the matter a good deal more thought than the speech of the noble Lord, Lord Kirkhill, suggested they had yet had time to do. There is no reason why the Government should have to produce their proposals before the summer. The autumn would be as good. If they would stop producing quite so much legislation in the other House, Ministers would have more time to think about things. I often get involved in the argument about abolishing this House but, the more I see of the other place, the more I come to the conclusion that that is the one to abolish. This is the one which wants keeping, but then of course that has only been true since I left the other place. Anyway, let us have a little more thought on the part of the Government, then we can have a Green Paper or a White Paper or whatever is felt to be appropriate so that we can have further debate on the subject. I hope that, by next year, we shall really have made some progress and shall feel we can risk this.

5.38 p.m.


My Lords, I know that it would be your Lordships' wish that I should first say to the noble Lord, Lord George-Brown, how very much we welcome him back to his seat and should tell him that we think that the new "slim line" look suits him well. I found his intervention very helpful because he gave chapter and verse for the main point that I want to make. I believe that so far in this debate your Lordships' House has made a mistake in treating this document as though it were a truly impartial and helpful attempt to examine the industrial and economic conditions surrounding the country. I do not believe that it is anything like that. I believe that it is a political document. I believe that it is a Party political ploy.

The reason I said that the noble Lord, Lord George-Brown, had given a basis for me to make that statement was that he, with his vast administrative experience in high office, has pointed out what an inadequate document the Bullock Report is. He pointed out that it did not contain the written evidence upon which the Committee said it had formed its views. It referred to the fact that the Committee had had evidence given to it, but nowhere in the document is the evidence that was submitted set down for people to make up their minds. It is the experience of all of us who have been in Parliament and in politics for any length of time that if it is a political document one is wanting to put out, one does not put too much detail into it. One does not give the evidence for people to criticise. But, if one is having a really impartial objective examination of something which one wants properly examined, one does put that evidence in. I believe that your Lordships in debating this report—for the first time in either House—will be making a mistake if it is treated seriously as being intended as an effective document which will help the general economic and industrial development of this country.

One of the problems is that one wants to make points which one thought about before getting up to speak, but one is then dragged away from these a little by what is said in other speeches. But if one wants to debate these matters it is necessary to pause in order to deal with them. I was rather impressed by the noble Lord, Lord Kirkhill, in regard to the way that he presented matters.

For example, in making the point that he supported worker-directors coming compulsorily from the trade union movement, he said that since the war we have had poor productivity and that has been our great problem. That is true. But he spoke about having had poor productivity since the war in the context of giving an impression that that was because we have not had worker-directors compulsorily appointed. But that is not the reason why we have had poor productivity. We have had poor productivity because of high taxes, charges, inflation and all kinds of threats and Governmental interference; and the people who know the job have not been left to get on with it. If we give an impression that we have had poor productivity only because we did not have worker-directors, then we shall be led up an alleyway that has nothing whatever to do with the problems of this country. Therefore, I hope that whoever replies to the debate from the Government Front Bench will make it clear that they are not saying that the poor productivity to which the noble Lord, Lord Kirkhill, referred arose just because we have not had worker-directors.

In furthering his argument the noble Lord, Lord Kirkhill, also said that since the Bullock proposals had been in print he had received many letters and much contact had been made with the Department. I should like the noble Lord to have told me whether the letters he received had said whether the Bullock proposals were good, bad, or indifferent, and whether the messages which they had had by the hundred—or whatever was the quantity he tried to imply—were for or against bringing in worker-directors compulsorily, which is what the Bullock proposals would do. To make those half-statements and to leave them unfinished, which gives an impression which could be quite the opposite to what is intended, is not the right way to go about this matter.

I have great admiration for the noble Lord, Lord Lee of Newton. I have served with him for many years in the other place and he is an experienced politician as well as being a Member of your Lordships' House. What did he say in his speech? He said that the noble Viscount, Lord Watkinson, agrees with worker-directors. Who does not? The principle of worker-directors is commendable; it has been accepted for years. The disagreement is not on the principle of worker-directors. The disagreement upon principle, as I see it, is whether or not the worker-directors shall be compulsorily appointed only from the ranks of trade unions, or whether the normal voluntary development which has gone on over the years will be allowed to go on producing the same kind of excellent results. That is where the difference is——


My Lords, is the noble Lord saying that he knew some time ago that the CBI had accepted the principle of having worker-directors on the boards?


My Lords, perhaps the noble Lord was referring to the noble Viscount in his personal capacity as president of the CBI, but I thought that he was referring to him as a noble Member of this House, and that he was saying that the noble Viscount, Lord Watkinson, had suddenly been brought to believe in worker-directors. But, if the noble Lord did not mean that, then my comments do not have the same relevance. My own businesses are very small, but on each of the boards of the two main companies, of which in terms of share control I (or my family) seem to have a majority, half of the board consists of people who were employees until the last few years, and how helpful, useful and constructive they are. But there is all the difference in the world between someone becoming a director because those who have worked with them for years think that they have merited the extra responsibility that goes with being a director, and someone who may not be known to one's company coming in and setting up the machinery to provide for a director to be forced upon one's board.

Another problem arose from the final words of the noble Lord, Lord Lee of Newton. He urged the CBI to get together with the Government and with the TUC and hammer out this matter. I am not prepared to leave this to the CBI. This is not an industrial matter. This is a matter to do with the way of life of this country. I know that the CBI, like all the others, is likely to strike bargains with the TUC which may suit it for the minute, but may not necessarily be in the interests of the nation in the long term. One of the weaknesses of the new managerial society, which has taken over from the older owner-employer society, is that they do not look as far ahead as the old owner-employer organisation did. They were looking ahead in terms of the inheritance of their families and all kinds of things. The new managerial society is very well represented by the CBI and if they can get out of their difficulties of the minute by coming to an arrangement they will do it. I am not saying that they are wrong from their own point of view. I am saying that when issues of this kind are being decided, in terms of what shall be the law of the land in which we live, then we in both Houses of Parliament—who represent the people in their widest sense, not in their narrow employment sense—ought to decide what is to happen.

I was a little disappointed with the last few phrases of the speech of my noble friend Lord Carr of Hadley. I thought that 90 per cent. of his speech was absolutely acceptable to anyone who is following the problems that are facing this country and the world. But in his final remarks he showed signs of giving way to a little of the pressure that has been embodied in the Bullock majority report. My noble friend seemed to be saying that he did foresee that we might have to have extra compulsory declaration and disclosure, that we have to have some kind of legislation which ensured that certain extra returns were made for unions benefit. He knows, because like me he is in business, that everything one does in business today has to be disclosed. Half of one's time is taken up not in making useful productive things which will lead to something in the future, but in completing records so that somebody can go to Somerset House, pay a shilling and get all the particulars he wants, including trade unions.

If any more permanent restrictions are to be placed on the way in which one runs one's businesses, I do not think it will be in the interests of the country or of the people who work in the industries concerned. I may have misheard my noble friend Lord Carr and I shall read with care tomorrow morning what he said. But the reason why I take him to task is that it is vital that he, speaking from the Opposition Front Bench, re-presenting a Party that may well be the Government in, who knows, a few months time, should not be giving the impression that there is not a great deal of difference on the two sides as to how this matter should be tackled. I do not know whether your Lordships' noticed a report which came out the other day, based upon "motivation of management". There was chapter and verse evidence to show that in their tens of thousands members of managements in this country are wanting to leave to go to work in other countries because of the restrictions and tax difficulties they are facing. I believe that the impression that the Bullock Report has given may well encourage more people to want to do that.

I would rather that my noble friend Lord Carr, speaking for the Party which I join with him in serving, would give to those people the impression that while we truly believe in worker-directors, we believe that worker-directors should be chosen because of their merit and because they are known, and not because of their loyalty to some outside concern, such as trade unions. Another point which should be made is that it is not the fault of the noble Lord, Lord Bullock and his Committee. As the noble Lord, Lord George-Brown, said, the document that has been produced was not of particular excellence in terms of the way it was presented, but I do not think that the way in which this whole matter has been started passes the test of objectivity and impartiality that a subject of this kind ought to have had. What is the position? We have a majority report which is supported by six members of the Committee. Three of them are trade union representatives, and that is understandable. They carried out the view that the noble Lord, Lord Cooper of Stockton Heath, said, was the view of the TUC. They did their duty; that was understood: they did not cheat anybody. Those are the three trade union representatives. On the other side we have the three representatives of industrialists, and they represented a point of view which again was well understood. They stood firm by their views, as did the trade union representatives. Then there are three academics on the committee, and they joined with the majority report.

On the face of it, if one views that as being absolutely beyond question in terms of somebody giving thought as to how they weigh these matters, one would say if there are the three trade union representatives, with the support of the three academics, then that is fair enough, and the supposed academic objective ones have come down on their side. But it is not the fault of the members of the Committee. Their views, and the ways in which they looked at things, were well known before they were appointed. I am criticising (if there is criticism in what I am saying) the people who appointed them, because I am saying that careful thought was given to their views and their outlook before they were in fact appointed.

The noble Lord, Lord Bullock, himself had previously labelled himself—and what is wrong with it?—as sympathetic to the Labour Party. That was well-known—and the best of luck! The second member is a prominent Labour supporter and an adviser to the Trades Union Congress. There is nothing wrong with that; he does the job very well. The third is a professor from a rather "Leftish" university. He is entitled to be that; and I am not criticising these people as individuals. What I am saying is that if it is that you wanted an objective and impartial report that would carry the weight that such a report ought to carry, then when you were appointing the academics, the balancing ones, to act, if you like, as the umpires, I should have liked to see a Committee which was a little less slanted than this one appeared to be. It is because that is the position that I believe we have got to take that into account when we consider the words which come from them.

I noted with interest what was said by the Director-General of the CBI, who was a member of the Bullock Committee to begin with and who therefore heard much of the evidence, which was not disclosed in the report. What he said was: The implementation of this majority report will stop dead in its tracks the voluntary form of participation which has been developing for years". That is the point I want to make. It is vital that we should have worker-directors. It is vital that we should have represented on the boards, not only of the big companies but of the small companies in this country, people who understand and represent the point of view of the people on the shopfloor. But the people fulfilling that role have got to be, as has been the case up till now, people who have been appointed to the boards because they as persons are recognised as being worthy and as having an outlook which will help the board, and not people who have been forced upon the board because they are members of a trade union, however excellent the record of that trade union may have been over the last half-century. The real issue, if this thing was being discussed impartially and properly, was whether it was thought that, bearing in mind the general standing of our industry in the world, the energy which has to flow from our industries would flow better if we had these enforced members on the board rather than the voluntary ones which we have had so far.


My Lords, would the noble Lord forgive me and give way? He is asking for the right people, the managers, to take over, and not all the other people he has mentioned. Where is he going to get them from if they are leaving the country in thousands?


My Lords, I am glad the noble Baroness has asked me that, because I truly am disturbed that the ones who ought to be staying here and getting on the boards are contemplating leaving the country in thousands. I believe that is one of the great problems we have to face up to, and a battle we have to win. I am saying that if the ones who want to get on the boards because they are interested and have the ability to do it can see that they are going to get there because of their personal merit and not just because they have been loyal to a trade union, they are more likely to be the ones who will make the sort of contribution that this country wants.

So I beg your Lordships to treat this document for what I believe it truly to be. It is a political document. There is nothing wrong with that provided it is recognised as a political document. But if it is looked upon, as some of the speakers appear to have looked at it, as evincing an objective, impartial, fair-minded desire to examine the industrial and economic needs of this country, neither this sort of report, as the noble Lord, Lord George-Brown, said, nor the evidence in it, will justify that. If it is treated on those grounds, we are more likely to come to that sort of conclusion. That is why, even at this late stage, I should like another Commission to be set up, not merely to carry out the instruction to say how you bring in industrial democracy, but to say whether industrial democracy in this form is, in the view of an impartial Commission, the right way to set about it.

My Lords, the very term "industrial democracy" is a clever gimmick phrase of politicians. We on our side did it. We made great play some years ago of the phrase "the property-owning democracy", to give the impression that our side of the political spectrum were the only ones really interested in people owning property. It was an attractive phrase which, we hope, attracted votes. This phrase "industrial democracy" is only put in because, again, it is an attractive phrase and it is hoped that it will attract votes to a certain point of view. I believe we have got to recognise that, because that is exactly how the thing was started. In terms of its being democracy, it is not. True democracy is a decision made by all, not by a section. If we can recognise it as a political problem and settle it as such, and can then get down to talking about the detailed alterations that ought to be made in order to get more effective management in industry as a separate thing, after we have a fuller report from a more impartial Commission than the Bullock Committee turned out to be, then I believe we shall be doing our duty in terms of helping the country much more than talking about words and, as the noble Lord, Lord George-Brown, said, merely quoting numbers, thinking we are talking about something which was seriously intended when clearly it was a political ploy.


My Lords, before the noble Lord resumes his seat, I wonder whether he would clear up a little matter for me. He has repeatedly stated that he is in favour of worker-directors, but I assume from his comments that he favours worker-directors only if those worker-directors are appointed by the employers, and not by any organisation representing the workers.


Yes; the noble Lord is quite right. I believe that the biggest influence in appointing the worker-directors ought to be what the noble Lord calls the employers, ought to be the management, because the management is in a position to look down and see those who have the qualities and can make a contribution, much better than the others can look up and see what sort of contribution they are expected to make. But of course management will heed the feelings of other workers. I come from the industrial Midlands. I have lived always in Staffordshire, never anywhere else; and that place is full of small industries where, up until 40 years ago, people used to leave the workbench and start their own factories. The Guest, Keen and Nettlefold organisation was made up of John Cotterill Limited and people like them. There is the great Rubery Owen organisation, where the old Mr. Owen was a workman and started his factory. There are the Wileys, where Mr. George Wiley started his factory. You had worker control in that sense, but those who wanted to get on stopped being workmen in those days and started their factories and became employers. Now we have got to where we have limited companies, and then they merge and become bigger companies. The sort of people with the outlook of those who founded the old firms are the ones who are becoming the working directors. Sitting in this House are noble Lords who I remember as under-managers at the Garringtons Limited works as part of the great Guest Keen and Nettlefold organisation. That is what is going on. I believe that the encouragement from the top to get the right people is what is most likely to succeed, rather than merely making it because you are a good trade unionist—although I believe in trade unionism; but merely being a trade unionist is not sufficient to give you the qualifications for a seat on any board.

5.58 p.m.


My Lords, it is fairly conventional to thank the initiator of debates in this House, but on this occasion I really feel that we owe a debt of gratitude of a very sincere kind to the noble Lord, Lord Carr of Hadley, because he has initiated this debate, I feel, at the right time; that is, at a time before, I hope, the Government have fully made up their mind on a White Paper or Green Paper, or whatever it is that is forthcoming. The Bullock Committee has come in for a lot of "stick" today, and I, I am afraid, am going to add to it. I agree with a great deal of the criticism which has been made, particularly by the noble Lord, Lord Carr, and others, but I want to try to set the debate in a slightly different frame of reference, perhaps, from that in which other speakers have set it so far.

I happen to believe that we are dealing with an issue which is even more important than the importance attached to it by others in this debate today; and, in order to illustrate what I am getting at, I comment in this way. In 1832 this House passed the great Reform Act which extended the franchise to the middle classes. In 1876 it passed, along with the other place, another Reform Act, extending the franchise largely to the working classes. Those Acts were regarded as great political milestones. At the time they were of deep concern to Peel, Wellington, Russell, Bright, Derby, Gladstone and Disraeli who really got the 1876 Reform Bill through the House—surprisingly so, because his Party was not all that behind him at the time. These debates rocked the nation because they were great constitutional reforms. Yet they were a prerequisite of the development of British society since then. If we had not had them, we should have had chaos instead—chaos of the sort that developed elsewhere.

We are facing a parallel situation today in this country; and of the same magnitude. In debating the issue of industrial democracy, we are debating the changes which will be required eventually to give 23 million people the constitutional right to take an equal right with others in establishing the policy governing the enterprises which employ them. I am trying to elevate the whole discussion to a level of importance which, with respect, I do not think it has yet been given. That is why I agree with the noble Lord, Lord Harmar-Nicholls, in saying that this is not a matter for a compact between the TUC and the CBI but a matter for very serious debate in Parliament. The British people accept Acts of Parliament, however distasteful at times, because they have been produced by a constitutional process which involves everybody, however indirectly. They are governed by due process and not by imposition. The absence of a similar constitutional right to involvement in the internal legislative processes of enterprises by employees is a living, daily contradiction of their political freedom as citizens. Bitterness and alienation from work which are characterising to a growing extent the attitude of the employees in industry today are particularly acute in Britain partly because a greater percentage of the population is in employment—higher than in any other country—partly because a greater percentage of employees are organised in trade unions and partly because we started the industrialisation process before other nations.

Other countries, I think, are already facing the sort of problems we are facing, but with perhaps less intensity. I am sure that in the years to come they are going to face problems of the same intensity as we face today. Britain was the first country to extend the franchise to all its citizens. If we can hold the grisly fantasies at bay and stick to cold rational thinking about constitutional matters, we could be the first to extend the franchise to all citizens in their employment roles. That is what participation is about. This has become the most important issue for the survival of Britain as an efficient, prosperous and a humanitarian community. Every other channel of improvement for efficiency, productivity, exports, investment and so on is increasingly thwarted by our failure to solve this sociological problem. Every manager in industry knows this today.

The question is this. Do the Bullock proposals provide for employees the minimum essential constitutional rights? The answer must be, emphatically, no; because they have assumed that these rights can be achieved by direct representation on the boards of companies. This assumption, which superficially may seem reasonable, in fact seriously confuses two major issues. The first issue is to reform the process of negotiation between employees and management. Unless this reform takes place, then no matter how the boards are reconstructed, fighting and alienation from work and feelings of imposition will continue, coupled with withdrawal from the national discussion and eventual withdrawal from work itself. The second issue is that of strengthening the boards by broadening their membership to include those with experience of national trade union thinking, not as representatives of employees but as ordinary board members.

By confusing these two issues, the Bullock Report turns the boardroom into a totally inadequate negotiation forum—and that is what it would do—thus putting at risk its real function and at the same time frustrating the active involvement of employees in policy-making through their representatives. Imagine the situation of a company employing 10,000 people. It is going to have perhaps six employee directors on the board; and they are to represent 10,000 people in the daily negotiations of all the problems. The whole idea is fatuous. With worker directors, very few employees will get a look in. Those who do will disappear into the board leaving the rest to get on with all the difficult negotiations on differential wages, job security, work transfer, inevestment priorities and so on. Meanwhile, the major policy changes will be agreed on the board over the heads of the real representatives.

Significantly, the three index pages at the commencement of the Bullock Report contain 74 sub-headings. Among all these 74 sub-headings, the term "works council" does not appear at all. That is very significant. These institutions are summarily dismissed from discussion in paragraph 3 of Chapter 10 on the grounds that, owing to the lack of decision-making powers possessed by works councils, they are not an ideal means of handling employer/employee relations. It does not seem to have occurred to the Committee to consider what would happen if they had real decision-making powers jointly. Nor has it occurred to them to visit some of the several establishments in this country that have used real decision-making works councils. Why on earth should they have spent all that time in Sweden and Germany without looking at forward examples of British companies, I do not know.

My last comment on the report before turning to more constructive comment is on the subject of subsidiary companies. If the writers of the main report had faced from the outset, first, that the majority of industrial employees are employed in subsidiary companies of large groups and, secondly, that the boards of subsidiary companies are not boards in the commonly accepted sense of the term—because they cannot buck the decisions of the group board; and there is a fault in the Companies Acts in this respect—they should never have treated the board of a subsidiary company as the same institution as an ordinary board. It has to contain its discussions within the terms of reference of the main board. If they had taken account of those things, they might have hesitated to attempt the achievement of industrial democracy simply through the restructuring of boards.

Chapter 11 displays the enormous problems which their proposals have invoked. Having in earlier chapters carefully created parity of representation for employees and shareholders on boards, they are then forced by consideration of the existence of hierarchies of subsidiary and sub-subsidiary companies (which are very common) to throw away this parity that they have taken so long to establish in the earlier part of the report by giving the group board the right to appoint the "Y" in the "2X+Y" formula. I am reminded of a report which I once received from one of my subordinates in a company I used to manage. It was a long report and it described what we were manufacturing and a very much better method of manufacturing it. I was excited about it and I got the report; but judge my disappointment when I came to a postscript at the end of the report saying: "Sorry. A serious mistake in calculations has meant that this method will not work after all." This report strikes me in the same way. You turn to Chapter 11 and all that has been done before goes up in smoke.

My Lords, the basic need to work out new institutions for constitutional participation arises from changes in the distribution of power which have taken place since 1945. Up to 1939, power had been migrating from employers to trade unions. Since 1945, this migration has accelerated until the potentiality of employers to resist demands from individual trade unions has become almost non-existent. Alongside this shift of power another shift has been taking place. This is the migration of power from the central organisations of individual trade unions down through their hierarchies of officials to the shop stewards. This growing power of employees can readily be seen not only in industry but in the Civil Service, social services, education—in fact, everywhere where one has employment. The question I pose is this: have we to relearn the lessons of the 19th century? That is, where you have power groups without a constitutional means of expressing that power, then you have growing chaos. Participation is not something to which we can say, "Yes, we ought to have it" or "Perhaps should not have it", it is something forced upon us by the fact that there are groups of employees all over the country now who have power as a result of associating together. They will use that power in a chaotic, damaging way unless they are given a constitutional position from which they can exercise it. That constitutional right, I suggest, must now be given by the statutory establishment of unanimous voting works councils in which all the negotiations between employee representatives, trades unions and management take place.

Let it be clear that I am not talking about joint consultation between a manager and his subordinate, for I believe that the discussion between a manager and his subordinate simply to be a sine qua non of good management practice and therefore essential. But that leaves the manager free to make his own decisions after consulting. I am talking about something quite different; a joint decision-making in the formation of the policies within which managers operate the company, in the same way in which the Civil Service operate the laws made in Parliament. I suggest that there must be statutory provision for a council of this type on each geographical site on which there are more than 350 people employed. Large enterprises would then have many councils. A council is a negotiating body determining all policies for the site it covers within the constraints of such external policies as the law, national agreements between employers and trade unions, and agreements arrived at for the enterprise as a whole. These councils would comprise the most senior executive on the site (the management member of the council) meeting with representatives of all grades and types of employee, including elected representatives of managers.

The role of the management member of the council is to express his view and that of the board, and to seek agreement to change and to provide full information of the plans of the whole enterprise. The role of the representatives is to pursue the views of those who elected them and the policies of the trade unions of which they are members. No subjects would be excluded from council agendas, except where disclosure of information might clearly damage the enterprise. The unanimous decisions of the councils, made within the constraints that I have mentioned, and including of course the assent of the management member, who, like others, would have the right of veto, would be binding on all members of the council and on the board of the enterprise.

There is nothing new in this, except for the absolutely vital constitutional right of all council members to veto change and stick to the status quo until alterations have made changes acceptable to all. It is the situation now. The veto is exercised through threat of strike. If you give a constitutional veto, you obviate the need to use power in that way. Withdrawal from rational discussion or from work itself is rendered unnecessary if abstention from a positive vote forces further negotiation. Where there was more than one council in an enterprise it would be necessary to have periodic conferences in which members of all councils could meet together and with the main board. Proposals for change arising at such conferences would be referred back to the individual councils for decision.

The process described will be seen to be precisely the opposite of the common pattern of fragmented negotiation in which each power group negotiates separately and confidentially with top management. I believe that there are a lot of trade unions in this country who want to hang on to fragmented negotiation. There is a great deal of resistance to the setting up of councils such as I have described because one union says that they are going to negotiate for their members and are not going to sit down with other trade unions or representatives and negotiate collectively. The result of fragmented negotiation is leapfrogging with avoidance of face-to-face debate among negotiating groups. This is precisely what is wrecking British Leyland at this moment: leapfrogging and failure of representatives of different unions to meet with each other. All-round consensus is not achievable except by using this principle of unanimous voting.

The basic concept is that no significant power group or management shall be coercively overridden by imposition of a change to which it is determinedly opposed. If that all sounds idealistic and unrealisable, let me reassure your Lordships by saying that the 5,000-strong public company which I used to manage has operated on just those lines since 1948 and is no longer alone as a company in doing so. Paradoxically, far from slowing down the process of decision-making and preventing change, it has had the opposite effect. Decisions are faster, more carefully thought out and less patched up to reach desperate last minute compromises.

The foregoing participative process is not realisable by electing employees on to the board of directors. But boards of directors will not endure as they now exist simply as instruments of the shareholders alone, because the power relationships I have described have shifted irreversibly so as to bring the power of employees into balance with that of shareholders. I propose therefore enabling legislation to allow national trade unions to appoint one third of board members as of right; not as elected representatives of the workforce, but as trade union members like any other board members. If trade unions took advantage of this right, the boards would be composed of one-third directors elected by shareholders, one-third trade union official members and one-third executive directors appointed by the other two-thirds. One of the biggest nonsenses of Bullock is to leave out of boards the production director, the marketing director and the technical director. How is a board to get on with the job without having those people present?

Such a coming together of representatives of capital, labour and management face-to-face with the real problems of a company would surely be a contribution to the regeneration of the British industry. This is what we must have. Within a couple of years we should have a cadre of trade union officials within each trade union who, each having served on several boards, would really know about management problems, together with shareholder directors who really knew about trade unions and industrial relations, and did not regard them all as "Reds under the bed".

Finally, I must re-emphasise that under this proposal the board acts as a board and does not usurp the function of employee representation. The employees have their own representative system built up from deep inside the enterprise. The emergence of support for managerial action and the hope for creative functioning lies precisely in the establishment of consensus as between the real representatives of employees, the board and its immediate executive appointees. This conjunction of interest must be found if more large enterprises are to be inhibited from becoming the conflict ridden chaos which some have already become. Let us not look at industry and say that only those which have strikes are conflict ridden, because there is a retreat from work in many companies where there is no palpable conflict. What I have proposed is simply a constitutional mechanism allowing for this conjunction of interest to be formulated and made manifest to everybody.


My Lords, if I may intervene very briefly, would not the noble Lord predict some slight measure of conflict in an organisation in which there were one-third trade union directors, while at the same time the organisation itself had works councils drawn from non-union ranks?


My Lords, I can see no problem there. The negotiation takes place in the works councils. The board acts as a board: it is not a negotiating body at all—as under Bullock.

6.20 p.m.


My Lords, in a matter as complex as industrial democracy it seems to me very difficult to express views which are manifestly and obviously wrong; and this is a source of great comfort and consolation to me as I rise to address your Lordships' House for the first time.

In the mass of conflicting opinions which surround the issue of industrial democracy, it seems to me it would be very helpful if we could fix on some main objective that could guide us along the right path. It seems to me that, before going further forward, we should ask ourselves: Why more industrial democracy? Why more participation? This sort of objective-setting would, I think, help to guide Her Majesty's Government in any legislation they might contemplate, and would also set the way for industrial practices and policies over the next few decades.

Objectives could be of various kinds, and indeed many of them have been mentioned already today. One is, of course, that we are under some pressure to fall into line with our partners in the EEC. Some mention has already been made of the experience of the Dutch and the Germans—and one might also mention, outside the EEC, the Swedes—mostly along the lines that it is relevant only to those particular countries and much less relevant to our own. All one can say is that Germany and Holland in particular have a very successful track record of economic and industrial performance, and I think we should perhaps look with some humility at methods and techniques in industrial democracy which they have found successful.

There is also the secondary point that we shall be under some pressure, moral and possibly legal, to fall into line with the practices on the Continent. The EEC Commission has already produced draft legislation, Green Papers and so forth; and it is only to be expected that we shall be asked at some time in the future to adhere to that legislation. Another quite legitimate objective which might guide us forward is a belief in pure democracy as such. We have been guided through our Island's history on the democratic path, both at national and local level, and also of course in the workings of sundry bodies, official and unofficial. It is fair to say that as a race we regard democracy, per se, as good, and feel therefore that any extension of it to the workplace must also be good.

A third concept—and, indeed, I think it is fair to say it is the main theme of the Bullock Report—is that an objective could or should be to increase trade union power, on the basis that to do so would improve our industrial relations in this country and so improve our economic prosperity. Lastly—and it is a point I should particularly like to commend to your Lordships—there is the obtaining of improved industrial performance by increasing in some measure the motivation of our workforce.

The last is the least glamorous and the least emotive but, to my mind, it is quite critical to the future economic performance of this country. As I see it, one of the great problems facing the West today and particularly Britain, is the low quality of jobs which have to be performed both on the factory floor and in the office. I think it is fair to say that most of our workers regard the work they do as boring, meaningless and devoid of any real purpose: it is something to fill in the time between 9 a.m. and 5 p.m., and for the most part they live for the evenings and week-ends. How many of our workers, when they set out from home on Monday morning, look forward with keen anticipation to an interesting and stimulating week lying ahead of them?

For many years, perhaps since the beginning of the Industrial Revolution, there has been a strong motive force to pursue their labours: and that has been purely hunger. That motive force, which has been very powerful and effective, is being increasingly challenged today for a variety of reasons. The phenomenon we know as "dropping out" has become all too common. Of course it takes various forms, but one of them is undoubtedly an alienation, as the noble Lord, Lord Brown, said, of the workers from their work; and, of course, where unemployment pay in most countries of the Western World has risen to a reasonably high level, the temptation to drop out is all the greater.


My Lords——

Several noble Lords: Order, Order! Maiden speech!


My Lords, there is, I think, no sovereign remedy for this phenomenon; but one remedy which is frequently offered, and one that has received a wide measure of support, is influence in the decision-making process at work. That seems to have a more stimulating effect on workers than possibly any other single factor, including pay. It seems to be a possible route whereby we can secure a greater measure of dedication to the work in the factory and in the office.

I think this is a critical issue because, without that greater dedication, I can see only a greater falling off in the material prosperity which so far we have enjoyed in this country. What has been up to now simply a nuisance, shown in absenteeism and poor-quality products, might quite easily become catastrophic in the sense that work at the factory bench or in the office virtually ceases. Perhaps that is putting it rather over-dramatically, but it is a trend which I can foresee over the next few decades unless this issue of participation and involvement in decision-making is actively pursued.

To say that is not to say that changes at board level are necessarily going to produce the desired result. I suspect that to most workers on the factory floor and in the office the board is a fairly remote body, and whether it is constituted of the conventional type of manager or is made up of trade unionists or academics is a matter which impinges very little on them in their day-to-day work. None the less, I believe that the board and its constitution can create the right sort of atmosphere to effect the necessary changes down the line.

We have been told, and I think rightly, that changes of this sort should begin on the factory floor, and that they should begin in what one might term, as a form of "shorthand", works councils. With this view I entirely agree. The only doubt I have—and it was expressed by the noble Lord, Lord Kirkhill—is whether we have the time at our disposal to let this gradual growth of the democratic process begin at the bottom and rise up to board level over what might be quite a few decades. We are under very considerable pressure to improve our economic performance, and I just wonder whether, in some measure, we need the spur of legislation to effect the changes we need in the time available.

I should like to touch briefly on the position of the middle managers, who have not so far been mentioned in the debate today. They, too, are suffering something of a crisis, particularly in the erosion of differentials, in the loss of authority and power and in a general uncertainty as to where they stand, and they present in the industrial scene a particular problem. I have no easy solution for this. In fact, as I try to look ahead, it seems to me that their position can only get more difficult. I think that they are going to lose the power and authority which up to now they have exercised as of right, and I suspect that their role in the future will be much more that of adviser and consultant. This is a change in outlook which the older managers will find extremely difficult to accept, and one's only hope is that the younger ones will be trained along these lines and will accept this new role as industrial democracy and greater participation gain ground, as I hope they will, in this country.

In conclusion, I should like just to reiterate the point I made at the beginning. I think that we should try to fix in our minds the prime objective of going ahead—why we are going to do it. I would suggest to your Lordships that the reason is a belief that we must increase and improve the motivation of our working people as a matter of urgent and critical need. I believe that if we do this we can take a notable step forward, both to improve the quality of life of our workers and citizens generally, and also to begin to close the industrial gap between ourselves and our principal competitors in the West.

6.32 p.m.

Baroness SEEAR

My Lords, I should like to add the thanks of those of us on these Benches to those already expressed by other Members of your Lordships' House to the noble Lord, Lord Carr, for initiating this debate today. Ever since the Bullock Report came out, there have been discussions up and down the country, and it is very useful that we have been able to debate it here this afternoon. Also, I am delighted to be able to congratulate the noble Viscount, Lord Trenchard, on the informed and mature speech which we heard earlier this after-noon; and it is a particular pleasure to congratulate the noble Lord, Lord Elibank, on the thoughtful and fluent speech that he has given us this afternoon—so fluent, indeed, that it was very understandable that the noble Lord, Lord Brown, forgot that he was listening to a maiden speech.

Thirty-five years ago, I was management secretary of a works council formed on the old style Whitley pattern, consisting entirely of trade unionists but elected by a 100 per cent, vote of all employees, union or non-union, inside the works. It was a child of its time but it was, for that time, a flourishing and useful works council and from that day to this, quite apart from my Liberal Party affiliation—and, as your Lordships have already heard this evening, and I am sure knew before, the Liberal Party's record of support for employee participation goes back 50 years and more—I have been a convinced supporter of employee participation at all levels.

I believe in it, because I think that it can add meaning to jobs which are otherwise of very limited scope and very limited interest, though not all jobs performed on the factory floor bore people in the way that the noble Lord, Lord Elibank, seems to believe. I believe that it recognises the status of employees today in their companies. I believe, also, as the noble Lord, Lord Brown, has explained, that it recognises power and puts authority where power is, which is vital in any organisation. I believe, too, that it forces people to look facts in the face when they have to be responsible for decisions—and this is of the first importance. Nothing turns the boys into men faster than having to be party to a decision, preferably a rather unpalatable decision, and then having to live with the results.

Unless we have real decision-making powers for employee representatives that vital element is left out, as it used to be left out on the consultative committees. It is all too easy to stand on the side, to give advice and to criticise, but not have to come down and be committed in terms of the decision that is made. Perhaps that is why so much of the comment that we get from the media is of such a frivolous kind, because they never have to be party to the decisions or live with the consequences of the advice that they give.

I have quite deliberately been talking about employee participation and not industrial democracy. This is not just a matter of semantics, and I have been doing that because I believe that the analogy of industrial democracy with political democracy is a mistake and has led to a good deal of confused thinking. After all, if you start an argument on a false analogy, you can argue with perfect logic to a ridiculous conclusion. It is a false anology, because if you consider the relationship between Government and citizen, and compare that with the relation-ship between a company and its employee, it is a relationship of an entirely different order, and the role of Government and the role of free enterprise are of a quite different order. After all, Government exists entirely for the wellbeing of the citizens of the nation State. The enterprise can never exist entirely, and it is not its primary task to look after the well-being of the people who work in it.

The wellbeing of the people who work in it is a very important responsibility, and their rights are very real rights and should be recognised far more than they are at the present time. But that is not the raison d'être of the enterprise, whereas the raison d'être of Government is the wellbeing of the citizens. The raison d'être of the enterprise must always be the provision of goods and services to meet society's needs and Government has no external function, no external raison d'être of that order. Then, again, the individual citizen is born into a particular nation State and can leave it only with the greatest difficulty, which is entirely different from the position of the employee who makes a limited contract with the enterprise, and can leave it and go somewhere else. These are not analogous situations.

This does not make a great deal of difference in terms of what I would like to see done about employee participation, but I think it clears our minds if—and I know that it is a forlorn hope because the term "industrial democracy" has now been, taken on and is accepted as the term for what we are discussing—we talk about employee participation. But if we are to think in terms of democracy, then we really must mean democracy.

The Bullock Report itself states at the beginning that democracy means that all the people affected by a decision should have a say in the making of that decision. From that there are two consequences. One is that you cannot disenfranchise certain employees, because they do not happen to belong to trade unions. Here I do not accept the argument of my old friend, in the non-political sense, Lord Cooper, when he suggests that people should belong to trade unions—as I agree they should normally—and that the triggering vote which the Bullock Committee suggests is adequate to represent the interests of the rank and file. The triggering vote is only to decide whether an organisation should go ahead with having employee representatives on the board. It does not give the rank and file non-trade unionist his democratic right to vote for the people who then sit on the board, and that is the point which any democratic interpretation must require.

Not only is the democratic interpretation inadequate, as put forward by Bullock. If you say that everybody affected by a decision should have the opportunity to express a view and to have an influence on that decision, then there are other interests, besides those of shareholders and employees, which should be taken into account. There is the consumer interest and there is the interest of the community as a whole. Where the market is operating, the consumer interest is adequately dealt with by the consumer's right to vote with his feet. But we in this country, particularly in the public sector, have many industries in which the consumer is captive; there is nowhere for him to go. We run the very real risk, and Bullock does not begin to look at this, that by enfranchising employees who do nothing for consumers in a monopoly situation we shall get a ganging up of shareholder-producer interests and employee-producer interests against consumer interests. Where there is a monopoly, therefore, I believe, particularly in the case of nationalised industries, that boards which claim to be democratic—that is the claim which is being made—should make some room for the representation of consumers. In those key organisations where decisions made at board level affect the community as a whole, we should look again to see in what way we are going to protect the wider community interest.

It is not only the inadequacy of what Lord Bullock has presented us with that I wish to criticise. It is not only what he says; it is what he does not say and what he does not include that I criticise. Nowhere in the Bullock Report is there any suggestion of sharing in the economic side of the business—sharing in ownership. There is not any one pattern for sharing in ownership. To speak about extending employee participation and the rights of employees but not to take on board at all the question of sharing in ownership is to leave a very wide gap in the discussion that Bullock was supposed to undertake. Once again this was not included in the terms of reference; but those were not the terms of reference that many of us, who have believed for many years in employee participation, would have wished to see. Again there is not one formula, but surely it is something that in the discussion of the extension of employee participation should be taken on board and be part of the discussion.

Do not let us forget—other speakers today have reminded us of this point—that we must think about our pattern of employee participation in the light of EEC Directives and European experience, because in Europe the extension of ownership rights has become a very important aspect of the argument. Again —here I am referring to what other noble Lords have said, but I want to say it with the greatest possible force—the Bullock Committee seems totally to fail to appreciate the role of management, the expertise of management and the rights of management, particularly middle management.

I believe that on the Bullock Committee there should have been representatives of working managers, not at the very highest level. I have the greatest respect for Sir Jack Callard, but it is a long time since he was a working manager at the level I am speaking about. These are the people, many of whom have worked their way up and who have sweated it out acquiring qualifications and experience, upon whom the development of industry and our prosperity to a very large extent depends. They have as much right to a say in what is going to happen to their companies as any other group. This is not just a matter of numbers. It is a matter of the very greatest possible importance. As has been said before, not only this afternoon but in other debates in your Lordships' House, they form a group which has been very seriously squeezed.

I do not believe that the Bullock Committee understands what management is about. I do not believe that it under-stands the growing professionalisation of management and how badly we need that professionalisation. It has led to the advances which have taken place in many of our greatest companies, because they have recognised the need for professional management. Nowhere do we see this reflected in Bullock, either in its personnel or in its proposals. Indeed, there is one paragraph in Bullock which makes my blood run cold. It seems to suggest that the future role of management is to be rather like the Civil Service—which God forbid! Not only have the Bullock Committee left out of account all share in ownership; not only have they ignored the role of managers and misunderstood their role—if, indeed, they really cared to think about it at all—they have also failed to take any account of the volume of research and experiment which has gone on in this country.

Here let me declare an interest. I speak as vice-chairman of the Tavistock Institute of Human Relations which has worked for years in this field and contributed greatly to that experiment—to that work, for it is far more than experiment which the noble Lord, Lord Brown, has so clearly and valuably described for us this evening. There are people in the Institute who have been doing nothing but research in this area for the last six or seven years. They, I know, sent evidence to the Bullock Committee, but there is no sign that that evidence was taken on board. I will give to the Bullock Committee the credit of believing that their evidence was read: but you would not think so if you looked at the report because the essence of that work, the essence of research and experiment up and down the country, tells us two things which come out in different ways from all the different researches which have been undertaken.

First, you have to have participation at all levels. I agree that you cannot leave it at grass roots level. How right was the noble Lord, Lord Lee of Newton, to say that you must not hold the sentimental belief that everything that is done at grass roots level is good for that reason. But you have to have development at grass roots level. You have to have development, as the noble Lord, Lord Brown, has explained, built up by experiment and by a great deal of blood, sweat and tears—as the noble Lord knows, and as any of us who know about his work know—until you have worked out a pattern of participation which penetrates the whole organisation and takes place at all levels.

It is also of the essence of what the researchers and experimenters have found out that you have to have horses for courses. You cannot say that because it worked in this way in the Glacier Metal Company—I know that the noble Lord, Lord Brown, will agree with me—you must take that pattern and impose it on every other organisation up and down the country. We know enough from research to know that this is not true. We know enough from research to know that you have to work out what is appropriate in every circumstance for the organisation with which you are dealing. There is no evidence that Bullock understands this at all, and if it does not understand it then it does not know what it is talking about.

Let us say that we are committed to the idea of employee participation. We accept that we need legislation. We accept that we need something like—although I should never call it this—an Industrial Democracy Commission to help us to get on with it. We want people to start working to find out what suits them in their circumstances. We all agree that something must be done, but we must not make the fatal mistake of saying that there is this one pattern, which Bullock has presented us with, and that the law says everybody is to behave like that. The law is often an ass, but I hope that it is not such an ass as that. I can only believe—and I am sorry to have to say this—that the majority of the Bullock Committee knew where they wanted to arrive before ever they set out on their journey and that they selected from the evidence presented to them only those items which fitted that predestined pattern.

6.50 p.m.


My Lords, I want to begin by making a few comments on the political situation relating to the whole question of the Bullock Report and the furtherance of the cause of industrial democracy. The Government have made a commitment and now they are in search of a consensus; and I think one can ask the question: what if they do not get the consensus? What are they going to do about the commitment? We have been told this afternoon that the Government are committed to introducing legislative proposals in this Session of Parliament, and the noble Lord, Lord George-Brown, said that in his view those words did not necessarily commit the Government to the introduction of legislation. I think it would be valuable for us to know what the Government really mean by the phrase which has been repeated time and again by Ministers, that they are committed to the introduction of legislative proposals in this Session. How do they propose to do it? Are we to be given a Green Paper, a White Paper, a draft Bill? What precisely have the Government in mind? Perhaps the Minister who is later to reply to this debate will try to enlarge on that.

The two important speeches made this afternoon were, first, the opening speech made by the noble Lord, Lord Carr of Hadley, and, secondly, the speech of the noble Viscount, Lord Watkinson. Lord Carr represents political power; Viscount Watkinson represents industrial power. Between them they have a very important contribution to make to this debate. Opinion is sharply divided: the Bullock Committee was more narrowly split than is fully realised. Had Mr. Methven remained on the Bullock Committee, he would presumably have joined the minority, judging by the speeches that he has made since; and, bearing in mind that Mr. Wilson, a member of the Committee who signed the majority report, had an important reservation to make to it, really the majority report of the Bullock Committee is by the casting vote of the chairman. That is really the truth of the Bullock Committee, and it is perhaps unfortunate that the weight of the word "majority" rests upon that slender margin of opinion on the Bullock Committee. Therefore I think we have to approach this matter realising that opinion is sharply divided and that the two sides of industry appear to be equally sharply divided.

In those circumstances, I think the Government, Parliament and the public must approach this matter with a full sense of responsibility and with an attitude of caution. I agree entirely with my noble friend Lord Brown that we are on the threshold of a revolutionary change in the expansion of our system of democracy as important as the extension of the franchise itself in years gone by. If I recall his words correctly, I think he omitted to mention the equally important change in the franchise occasioned by giving votes to women; and when the noble Lord, Lord Carr, said—and I made a note of his words— democracy grows on the basis of agreement and not on controversy", I do not think history is with him on that. I believe that democracy grows out of controversy. It may be that it has to reach agreement before it can be fully accepted and applied, but controversy there is bound to be on the extension of democracy in whatever form.

The noble Lord, Lord Carr, refrained from uttering a caution which I thought would have come well from him. He should have uttered a warning to the Government against the dangers and consequences of coercion, even by Act of Parliament. Is it not strange how former Ministers on the Benches opposite, in discussing this great issue never refer to the Industrial Relations Act of 1971? Yet there are some lessons to be learned from that and I wish they would tell us so, because just as in 1971 the Government found that they could not impose upon the trade unions an Act of Parliament that they deeply resented, equally I think the present Government must beware not to try to impose on industry and management any legislation that they deeply resent.

I believe we have to come to a closer agreement on what we are going to do before we can move forward. I think the Government were rash in entering into this commitment before they could take the full measure of what was involved in the practicalities of what they were proposing to do and the sharp division of opinion that would accompany the consideration of this matter.

What has the noble Viscount, Lord Watkinson, to offer? I found this gravely disturbing. What he said was that the report of the Bullock Committee should be quietly put on one side. But, my Lords, it will not just go away like that. It has to be regarded as part of the debate that we shall have to conduct for some time to come. He then went on to say what he would like to persuade the Government to do. I took note of what he wished the Government to do, and they amounted to no more than proposals for the introduction into industry, of the Whitley Council system, which was introduced into the public services 50 years ago. Indeed what he said was nothing more than the recommendations for industry made by the report of J. H. Whitley in 1919, which was spurned by both sides of industry. They did not want the joint consultative councils, for reasons which I need not go into; and the public services, for whom that report was never intended, grasped the opportunity of getting that form of consultation in the Civil Service and in other branches of public service, and they have flourished ever since. But they are not the assumption by staff elements and unions of the responsibilities of management. They are consultative; there is a large measure of agreement reached between the two sides when they are discussing various matters of common concern, but the staff elements do not take the responsibility for the final decisions of administration for Government.

The noble Viscount, Lord Watkinson, was really suggesting that that is what he wants in industry. In my view it is very late in the day to begin to talk of setting up works councils on the Whitley model and giving them adequate trial before proceeding further, and in the notable maiden speech to which we listened a few moments ago from the noble Lord, Lord Elibank, he was absolutely right when he said that we have not the time. Fifty years have gone past on the Whitley Council concept and throughout industry, and certainly in the public sector, people are now ready to move forward beyond that. We cannot go back to the original concepts of joint consultative councils, which is what I think the noble Viscount, Lord Watkinson, proposed to do. He said that we had to work hard to form an industrial partnership. What does "industrial partnership" mean? "Industrial partnership" surely means equal shares and equal responsibilities. Partners are equally responsible, but he made no suggestion which in my opinon matched the full meaning of the word "partnership" in this connection.

So I am bound to say that if the stand made by the noble Viscount, Lord Watkinson, this afternoon represents the view of the CBI, it is a very disappointing beginning to the discussion which has to take place, not only between the Government and them but between them and the public. We are all in this. This is not just a matter that can be fixed between the TUC and the CBI, or between the Government and both of them. This is a very important extension of the whole concept of democracy. It is a constitutional change of the first magnitude. The whole structure of industry will be changed in consequence of any movement along these lines. It is a very important matter, may indeed be a grave matter, for the future economy and prosperity of the country.

The Government have to begin to think of some meeting point between the two points of view upon which agreement can be found, or, if agreement cannot be found proposals the Government could feel confident in putting to Parliament and to the country. Here I share the view of those who believe that a considerable amount of flexibility is desirable in the introduction of industrial democracy. I think that the so-called majority report of the Bullock Committee does not contain the only form of industrial democracy. The minority report also includes important suggestions for industrial democracy.

There is a good deal to be said, as the noble Lord, Lord Elibank, said a few moments ago, for looking to the European model as one which deserves our close consideration. The Bullock Committee scrambled through their period of sitting in a way which could not possibly have given them the adequate basis for their conclusions which a committee of that kind should require. They did not spend long enough in Europe in examining what is happening there. I went myself and spent a month there, and that was nothing like enough. We want to find out what is the secret of their industrial and economic success. They have a Parliamentary democracy, as we do. Why is it that their system works and ours appears not to work anything like so successfully? Is there a clue there that we could find and apply in this country? Do not let us be insular. Do not let us say: "We are not used to this idea of a main policy board and an executive board; therefore, it will not suit our industry". Why does it suit theirs and why would it not suit ours? These are questions which should be gone into much more deeply.

I would, therefore, suggest that the Government should consider an approach in a framework, first of all, of voluntary endeavour. I would prescribe the conditions of the Bullock Committee, giving the workers and the unions the right to negotiate with the enterprise for the introduction of a measure of industrial democracy. I would not in the first instance put any coercion behind it. I would allow a reasonable period during which voluntary negotiations, based upon the reasonable degree of support for the idea laid down by the Bullock Committee, could be carried out. The trade unions desire to have the voluntary effort in every other connection; they want voluntary wages policy, free voluntary collective bargaining, a voluntary Social Contract. Why not voluntary industrial democracy, at least to start with, and see how far we go before we begin to lay down compulsion for the introduction of this concept. I agree that without good will and without enthusiasm industrial democracy will go on the rocks. There are far too many pitfalls and difficulties, even for men of good will to overcome, unless the spirit of co-operation is present in what they do. I think that is more likely to be obtained by voluntary negotiation and agreement than by any form of statutory compulsion.

The second thing I would suggest is that the range of industrial democracy permissible should be rather wide. I would then set up the Industrial Democracy Commission and let it work on guide-lines, approve schemes and advise both sides of industry on what would satisfy the mini-mum criteria of industrial democracy. I think there is a fairly wide range of guide-lines within which the Industrial Democracy Commission could say: "This will satisfy the test. If this will work in your industry or in your firm, go ahead and make a success of it". What may suit one firm may not suit another. I think there are a wide variety of forms of industrial democracy, as long as they satisfy the minimum criteria. They have to do that to be democracy at all. Then in a few years' time one could take stock and see how far people have gone, what forms of industrial democracy have been introduced; then possibly carry the matter a stage further, if lack of co-operation or refusal to co-operate needed some statutory attention. I think those are the lines upon which the consensus might be found. I start, and I hope we all do, from the premise laid down in the earlier part of the speech of Lord Brown, and throughout the whole of the speech of the noble Lord, Lord Elibank. If we start from there, as I do, then I think we move along this path and begin to formulate ideas where the two sides can come together.

One final word: that is, do not be afraid of putting responsibility on workers. They will take more than you think. I have had experience. After all, I was in the Whitley Council system in the Civil Service for 38 years; I helped to build it up; I was Chairman of the Staff Side. I did everything there was to do in the Whitley Council in the Civil Service. In my experience you cannot teach responsibility; you cannot tell people that they ought to have it but cannot have it; you have to give it to them, and when you give it to them you will be surprised how they will respond.

I leave your Lordships with this thought. Far from resisting or resenting or even discouraging the attempt of workers to get this position of participation on equal terms of responsibility, industry ought to be welcoming it. I believe that this is the indispensable condition of the survival of capitalism in Britain, and that ought to inspire noble Lords opposite to look at it again. I do not believe that the mixed economy can continue unless there is greater inspiration in the workforce, greater enthusiasm to national prosperity.

As the noble Lord, Lord Elibank, said, we have to get this motivation in order to obtain the efficiency and the output and the capacity to regain our place in the world of manufacture and export of technological development and the rest of it. That is the thought I think we should have in mind all the time. Do not resist—accept. Bring people on; give them the responsibility. It does not really matter about it being union power. Any participation at board level is power; if it is not union power it is worker power, and in most cases there will not be any difference between the two. The real problem is in the area where there is no trade union organisation, where it would be impossible to force trade union organisation in some ranges, especially in middle management, in order to get the formalised basis for their participation in this scheme. That needs special attention. Therefore, there cannot be a completely doctrinaire approach to the question of whether it is trade union representation or worker representation. There may be a mix in order to achieve the common purpose.

7.8 p.m.


My Lords, I should like to take for my text this evening the one sensible remark out of the Bullock Report which your Lordships may have noticed on page 149: It may be argued that the involvement of Government in what are essentially business decisions is undesirable. I am going to come back to the same conclusions as the noble Lord, Lord Houghton, though by a different route. It it were not for the fact that the word "representative" throughout the report has become rather an emotive word, I think I would safely stand here as being the representative of 15,000 employees in my company, of whom 10,000 are in this country, 14,000 shareholders, mostly in this country, and thousands and thousands of customers. By the way, that point about customers which the noble Baroness, Lady Seear, emphasised, is a very real point. Unless you get that balance between the three elements, the employees, the shareholders and the customers, you will never have a successful business. One began to wonder, as one waded through the Bullock Report, whether the members of that majority had ever sat on boards before. There was this obsession with voting rights. Last night I thought of all the circumstances in which I had been the chairman of a company, of hospital boards, of a "Neddy" and of a cricket club, and I can never remember having had a vote. The reason for that is quite simple. The people who were on those boards, committees and councils all had a common purpose. There was certainly not this divisive element that is advocated in the report, of having employee representatives, shareholder representatives and co-opted directors.

I should like to share with noble Lords some of the problems of a group of 15,000 employees. When we have a board meeting, if we are sensible the first thing we do is to review our orders and sales, because if we do not look after them there will be nothing to follow in the rest of our business. Then we get into the difficult area of reviewing our major companies—we have to take a look at those companies—their conditions of employment, their differences in design and marketing. In my case, many of those companies are overseas and how blessed it is that most of my directors have been overseas. Shall we gain much from employee representatives who have never seen any of these companies overseas? The same argument would, of course, apply to the budgets of those companies.

To be slightly controversial, there comes a time in any group of companies when, for practical reasons which I shall not try to enumerate now, one has to consider the problem of selling off one of those companies. Be sure of this: in doing that we must watch the interests of employees, shareholders and customers. I can imagine the excitement there might be among the employee representatives until they become appreciative of the full considerations that take place behind such an action. Conversely, if one wished to acquire a company, the same sort of arguments might go through one's mind, although one would not, perhaps, want to acquire a company if there was a Bullock Report in the offing.

I wish to make one point which has not been emphasised enough tonight. Throughout all these considerations there is the cash element. If we disregard that cash element we know what happens to companies. I shall not enumerate them, but the many instances of recent times are well within the knowledge of noble Lords. Unless we look after the interests of these shareholders—and they have not been mentioned very much this evening—there will be no continuity in businesses which need further cash elements.

I turn to subsidiary companies overseas. Here I must be tactful. A friend of mine has just returned from visiting Australia and New Zealand where he mentioned the Bullock Report to top level people. They were astounded. They should have heard about it—perhaps our High Commissioners are at fault here. This is where I have to be tactful because I cannot use here the language which the Australians used to express their reactions to the fact that there could be circumstances where a subsidiary company in Australia or New Zealand could be at the mercy—they put it somewhat more impolitely—of trade union elements in this country. We shall have at least four subsidiary companies under the 2,000 rule. We have many problems on which we may mave to take decisions without going back to consultation with the trade unions.

I quoted what I thought was the most sensible sentence from this report, but now I want to quite the silliest one. It is to be found on page 84. It reads: It is for consideration whether the directors of a subsidiary company should be able to have regard to the interests of the shareholders and employees of the holding company and of its other subsidiaries. That statement must have appeared silly to them because they repeated it. The same sentence appears on page 130. The implication is that no one trusts anyone else, and that the directors of the subsidiary company not only do not trust the board of their holding company but also all the other subsidiary companies.

Good business administration depends on clear lines of responsibilities, and decisions have to be reached without too much emphasis being placed on this consultative element. There is another curiosity on page 87 to which reference has not been made this evening. It refers to the reporting back of these employee representatives on the board. It reads: They must make it their regular job to report on what the board is doing or proposing to do and why. It continues: They must be able to take soundings before a matter comes up to the board so that they can accurately reflect the views and feelings of the employees to their fellow directors. How on earth will that happen in any company which has to make quick decisions on vital matters? Presumably this consultation back will take place monthly, weekly, daily?—we do not know. However, one thing is sure; it will be in company time.

The noble Baroness, Lady Seear, mentioned consumers. There is another good sentence in the report which reads: Consumer interests must continue to be protected but the way to do this is through legislation and through existing consumer organisations rather than by involving consumers in the running of companies. I could not help reflecting that if one turned that sentence round in one small particular one could equally logically say: Trade union interests must continue to be protected, but the way to do this is through legislation and through existing trade union organisations rather than by involving trade unions in the running of companies. In other words, the idea that each of these elements has to be represented at board level in this divisive manner is, to my mind, a great mistake. However, I must not stand here as a diehard reactionary. I am not. In my company we believe that we do not represent simply the shareholders; we believe that we represent the employees and the customers. We are not anti unions in any sense of the word. The unions have a vital role to play, and it does not help them to extend it to the complex and difficult boardroom matters until and unless they have earned recognition as directors of the company.

At one time I thought that I should be quarrelling with the noble Lord, Lord Houghton of Sowerby, because I was very impressed by the remarks made by the noble Viscount, Lord Watkinson. The noble Lord referred to what he called his "workers conferences", and in that respect I felt that perhaps my company had fallen a little behind him. However, we have set these up and I agree with the noble Lord that this is the way in which to pursue this democratic element in a large company.

Despite my text at the beginning of my remarks about the Government, I like the tripartite approach. As chairman of a "Neddy" I know that one can do very fruitful work if one has the three elements of the Government, the employers and the unions working together with their separate training, philosophy and expertise. How- ever, that needs patience and time. This afternoon the noble Lord, Lord Byers, almost converted me to becoming a Liberal. I was very impressed with his speech. I would advocate the philosophy that he advanced; I would advocate the methods advanced by the noble Viscount, Lord Watkinson, and I would also advocate the patience and urgency put forward by the noble Lord, Lord Carr of Hadley, to whom we are very much obliged for initiating this debate.

7.19 p.m.


My Lords, I am very grateful indeed to the noble Lord, Lord Carr of Hadley, for initiating this debate for two reasons: first, for the rather obvious one that it has given us the opportunity to have some very tough and hard-hitting discussion about the Bullock Report, and in particular the majority report. The second reason is perhaps slightly less obvious because there has been an almost complete unanimity of view from all sides of the House that participative or partnership schemes, call them what you will, must develop with an increasing momentum from now on.

I believe that there is a tendency in industry today which is far too wide for people to say, "Bullock is so dreadful that it is going to go away ", and at the back of their minds they have the idea that that will be the end of it. I therefore welcomed it when the noble Lord, Lord Houghton, said that Lord Bullock is not going to go away. I believe that it is important that a message should go out from this House that we have all come to the view that we must press ahead with partnership as fast as we can. I hope that the maximum publicity will be given to this message. I believe if for nothing else a debate at this time has made the whole thing worth while.

We live in an age of increasing education and still growing specialisation. The result of this is bound to be greater boredom, greater frustration and a feeling of being nothing but a tiny cog in a vast complex of wheels. Fundamental to this is the increase in education that has come about over the years. It is of course absolutely essential that this frustration be removed and replaced with a feeling of involvement. It is essential that the greater degree of education must be harnessed and put to the good of the company and, just as important, in order to increase the happiness of the individual at work.

The noble Lord, Lord Byers, used a very nice, simple, old-fashioned phrase, when he summed this up by describing it as teamwork, because that is really what the whole thing is all about. It is the end as well as the means. A good team has happy people in it, and because it has happy people in it then the team is that much more efficient. At the risk of being simplistic I believe that this sums up what we are about in our desire to move ahead in industry in this country with schemes of partnership.

Formal partnership agreements in the United Kingdom are not yet very common. There are a number of companies which are well advanced with their consultative machinery, but I have to say that there are many more who have scarcely begun, and perhaps as many more again who have not really given it a thought. Therefore, I welcome the initiative of the CBI and the work it has done on participation over the last three or four years. I urge the CBI to go on with its campaign and, if need be—and I think there probably is a need—to give it a bit more muscle than it has had in the past. But let me make one plea: please do not let us have any legislation yet.

The noble Lord, Lord Byers, rattled off with remarkable speed and accuracy the number of Acts of Parliament to which industry has been recently subjected, perhaps over only the last three or four years. Cannot we resolve at this time that at least for a year or two we will give industry a chance to do its own thing in its own way. By all means let us have a full-scale participation but do not let us hurry with legislation.

I move to the contents of majority Bullock, which I deplore as much as any other speaker today. I do not intend to go fully into the reasons why this is so, because the case against Bullock has been so cogently argued already. But it must be said by everyone who speaks on this that when you use the phrase, "industrial democracy" and actually mean the massive extension of trades union power then, to put it mildly, you may be said to be toying with the truth.

Half the workforce in this country are non-unionised and about 30 per cent, are non-unionised in the companies that will be affected; that is, those with over 2,000 employees. The report recommends the disfranchisement of this 30 per cent., and it means the disfranchisement of the managers below board level unless they happen to join some managerial union which would then put them in quite a different category. This is a point on which I feel very strongly indeed, because I know that in the company I run just what would be the effect on my younger executives if their ambitions to join the board were suddenly thwarted like that by an Act of Parliament.

I do not want to say anything more about 2X plus Y, that strange and rigid formula, but it seems to me that when the noble Lord, Lord Oram, replies he might give us a bit of help on the real nature of the Y-directors, because the report has said very little about what their responsibilities are to be and where they are to come from. Finally, on the 2X plus Y formula, which is at the centre of the whole matter, let me say that collective responsibility of the board—no matter to whom, whether it is to the shareholders or whatever—is to be abandoned, and with it the cohesion which should be such an important characteristic of every good board.

You may have read an article in 2nd February issue of the Financial Times which quotes Mr. Len Murray as saying the following: Shifts in ownership and control are the prerequisite of the Socialist society. We must aim to make cumulative progress in both areas, [...] dually extending the range of the public ownership and at the same time shifting control of capital to labour in both public and private enterprise. Parity of board representation will be a major and essential step in this direction. I want also to quote more briefly from the current issue of the New Statesman: What Bullock does is to focus the class struggle at a high level and thus facilitate the way for the working class not just to fight existing management but to replace it. Some of your Lordships may think, as I do, that these two quotations together serve to show what majority Bullock is really about.

The Bullock proposals, if implemented, will be disastrous in ways that have been described better than I could, and indeed I would not wish to take up too much of your time. To my mind, discussion of this report in any further detail is fruitless but, much more important, it is extremely dangerous because discussion might seem to imply some degree of acceptance, and in my opinion there is no part of the majority report that is acceptable as a basis for discussion. It may be that the Government will now initiate a totally new dialogue. If so, fresh discussions can be started, and that we would all very much welcome. I put it quite specifically that in those discussions there must be total exclusion of any reference to the Bullock majority report. But if it does not go that way—if the Government insist on keeping majority Bullock alive—I ask your Lordships to remember that there are occasions when a battle is to be preferred to compromise, and this is just such an occasion.

7.32 p.m.


My Lords, I do not often speak and, when I do, I try to find something to say which no previous speaker has mentioned. I am going to break that rule tonight because what I think is wanted now is repetition. My noble friend Lord Carr of Hadley said it all, or most of it, and the following speakers have largely been left with anecdote or reinforcement. If this debate can do one thing, it is to reinforce the unanimity of reasoned refutation which this report has aroused.

In any event, I thoroughly approve of this document, not because of its contents but because it forced three intelligent, empiric and deeply experienced men to make public their thoughts on the topic. But with that brief, that remit, contained in the terms of reference, there would have had to have been a minority report. Those three men, with something like 80 years' collective experience of running substantial enterprises, when faced, as they were, with begged questions and slanted rhetoric, were most unlikely to join in the wordy justification which emerged posing as an objective report. Those arguments which the majority wished to condemn were largely dismissed as "speculative and unconvincing", yet the authors of the majority were able to make conclusions on their own views. For example, Chapter 9, paragraph 9, states: …in our view such a structure"— In this case referring to minority representation— cannot lead to that full participation in decision-making on the board which full responsibility implies, nor to the consequent release of constructive energies which, we are convinced, full participation will do much to produce ". Not only is this speculative, but the proposals of the report are not what many will regard as "full participation". Chapter 10, paragraph 9, says: It follows from our support of the principle of a single channel of employee representation through trade union machinery that our proposals in this chapter do not provide any special rights for employees who are not members of a trade union. It is worth remarking how non-unionists are not to be given any special rights of representation; they are to receive no rights whatever and the use of the word "special" to imply "privileged" is a device with which we are not unfamiliar. The question proposed for the ballot, the only part of the procedure which is open to all employees, is double-barrelled: Do you wish to be represented on boards through trade union machinery? The answer must be Yes or No. There are other answers and even other questions, but I do not want to delay your Lordships because we have heard repetition. However, as I said at the beginning, I am sure that in this instance repetition is valuable. I wish to focus on one trifling example of the content, and I draw your Lordships' attention to inconsistency in the relation-ship between the development of statistics and the conclusions drawn from them.

In seeking to justify the sole use of trade union machinery for appointing employee-directors, Professor Bain has pursued a process whereby the overall density of unionisation, 50.4 per cent., is first reduced to 38.8 per cent, by exclusion of the public sector, since this lies outside the scope of the report. Quite reasonably, he also excludes, at the end of his process, small firms; these, too, would be outside the legislative scope at least of the report. He then excludes various sectors of industry whose density of unionisation is low, such as agriculture, distribution and construction. The final figure for union density adjusted in this way—that is, for larger firms in sectors other than those excluded—is 71.7 per cent. So far so good. But if, as seems to be implied, this is a justification for representation through trade union channels as the general case, is it not illogical to leave in scope those sectors, such as construction, which were used as building blocks in the process of erecting the 71.7 per cent, tower? He really cannot have it both ways. Either all private sectors of industry are in scope, at whatever lower percentage figure for union density then results, or the single channel of representation should not necessarily apply where the union density is low.

The minority report has its faults. They stem rather much from the frame of reference within which the drafters had to work, and I refer to "perceived legislative intention"—a rather sinister phrase—as well as to the terms of reference themselves. They believed that any legislation on employee representation on boards of directors was premature. But if the Government were in fact determined to legislate quickly, they wished that legislation to be as soundly based as possible. I would encourage the Government to try out these principles in the public sector so that they could demonstrate the success—or, conceivably, less than success—which might follow; a process possibly of putting their mouths where our money is.

Can there be any quarrel with the opinion that the efficiency of industry depends more on sound decision-making than on any other factor, something which has been mentioned many times in this debate? Radical amendment of the very nature and role of the boards responsible for such decision-making, by replacing existing members and introducing an element of rival power-blocs, would be highly damaging. Therefore, a more realistic way should be sought, and I think this is to be found in employee representation on supervisory boards—I repeat, once certain prerequisites have been met. These boards would appoint the members of the management board and monitor the operation of the company. Such a concept would, unlike those of the majority report, align closely with the proposals of the European Community, more closely than I consider the majority report indicated, even in their own justification to themselves.

Secondly, the minority signatories plainly hold firmly to a belief that democracy is an inclusive concept, not an exclusive one. It follows that all employees must have a common right to participation in all aspects of whatever procedures ultimately operate. No one should be excluded on the grounds that he or she is not a trade union member; least of all should middle management be excluded because these are the men who actually write the plans of enterprises and implement most of them in their day-to-day work. It is less than honest to say, as the TUC has done in its Guide to the Bullock Report, that, …there is no question of 'disenfranchising' anyone wishing to take advantage of this system of…trade union…collective representation. Of course the trade unions will play an important role, normally the major role, in whatever arrangements are finally concluded, but if they claim to believe in participation and democracy, they must be prepared to eat accordingly.

Finally, there is the question of timing and preparation. In his interesting note of dissent, subject to which he signed the majority report, Mr. Nick Wilson makes the point that recent experience has shown the importance of ensuring that legislation does not run ahead of public opinion in an attempt to engage in social engineering. In other countries where employee directors now sit, there has been a long apprenticeship of participation below the level of the board where the role has been one of co-operation, not of conflict.

I have said nothing this afternoon which others have not said. I commend the minority report as a basis for realistic proposals which will meet the genuine and justifiable aspirations of employees for involvement and accountability. But, for the majority report—written, as it is, on the basis of, "Have you stopped beating your wife?"—I spy intellectual acrobatics, I spy the class conflict and I spy power.

7.41 p.m.


My Lords, if one intervenes in a debate at this time of night when we have been discussing a subject for over four hours and when there have been something like 17 speakers and there are 15 more to go, one is very much aware of a dilemma. Much that one had wanted to say has been said, so that there is nothing left to say, whereas much of what has been said one has disagreed with, so that one does not know where to begin. I find myself in that dilemma today. I want to focus a few words on three aspects of this issue. First, I want to say something about what I take it the debate on industrial democracy is actually about. Here, I think I prefer the phrase used by the noble Baroness, Lady Seear, "worker participation", though I am sorry to say that the noble Baroness subsequently criticised some of the ideas in the Bullock Report on the assumption that it was really about industrial democracy. Here I think I agreed with a great deal of what she said and I think that I disagreed most clearly with the noble Lord, Lord Harmar-Nicholls.

Secondly, I should like to say something about the central position, as I see it, taken up by the majority of the Bullock Committee itself, because on this I do not think that I really agree with anyone so far, unless it is my noble friend Lord Kirkhill. I feel that Bullock has had a rather bad run tonight, largely because people have misunderstood the main thrust of the argument. Thirdly, I want to say something about what we and, in particular, the Government should do now. Here, I agree most with a very great deal of what my noble friend Lord Houghton said.

First, as regards the nature of the debate, it seems to me that a lot of people and even some people in this Chamber tonight have been talking about industrial democracy or worker participation as though it were in some sense a by-product of the Social Contract. It has been said that it is a political issue and that Bullock is a political report, as though these were some of the further consequences of the influence of the Godfather, James Larkin Jones. It is as though if we did not have this man and we did not have this Government we would not have this report and we would not have this problem, as though, in a way, if it were not for the Social Contract, with the commitments that the Government has made in respect of the Social Contract, the problem, if problem it is, would go away.

If there is a problem and one that will not go away, it is one that arises out of the fact that we are members of the European Economic Community. Only those who opposed membership of the European Economic Community can really oppose this, because membership of the European Economic Community has, almost ever since 1970 and certainly since 1972, committed members of the Community to find some way of putting employee representatives on the board of major companies. Although the Green Paper of the EEC—or rather it should be called the "Mauve Paper" because it is mauve—is a little more flexible than the old fifth Directive as to the form that this may take and allows for certain transitional arrangements, the basic thrust of the EEC position is that sooner or later we must make up our minds on the question of the influence of the representatives of employees—not working directors but worker-directors—on corporate management and in particular in respect of corporate management decisions taken at board level.

The problem, if problem there is, is that up to this moment in time the debate on this issue and the leadership on this issue have been taken by the Trades Union Congress. It is the Trades Union Congress which most quickly, fully and comprehensively developed a policy based, as it saw it, on the challenge of the fifth Directive. In comparison to the TUC, as the Mauve Paper says, the Conservative Party while in office never announced its attitude to employee directors but was reported while not opposed to experiments not in favour of general legislation prescribing employee directors preferably in general in the context of works councils. That was the position of the Government of the time, though we all know that, buried in the depths of No. 8 St. James's Square, they were working under successive Secretaries of State on a Consultative Document which never saw the light of day.

So the TUC took the lead. I do not say this in defence of my own Party. The Labour Party did not take the lead. I suppose that the justification for that was that most members of the Labour Party and certainly the majority of the National Executive of the Labour Party not only hoped that the fifth Directive would go away but hoped that the European Economic Community would go away. Therefore, they did not see the need to work out a policy. However, the Trades Union Congress did. The ball was kicked into the long grass and the Trades Union Congress picked it up. The TUC formulated the policy which is essentially that of the Bullock majority report and is the basis of the commitment of the present Government.


My Lords, am I right in drawing the inference that the TUC has taken the initiative in working towards industrial democracy, or is it merely that they have taken the initiative in producing a paper framework for it? Would the noble Lord not agree that many of the best big firms took a lot of initiative long before the TUC even got down to thinking about it, and that it is the action that matters rather than the writing on the paper?


My Lords, I want to go on to say something about what the majority of firms have done. I do not want to suggest that they have done nothing, but what they have not done is to place the representatives of employees on their boards. They may say that they have not done that because the present framework of company law makes it difficult, if not impossible. Nevertheless, they have not done it. It was left to the TUC to present a programme for doing that in the context of British industrial relations.

As I have said, to say that is not to say that the TUC needed to decide as it did. It is not to explain the decision that the TUC took. Indeed, as some noble Lords have already said, it represented in many ways a direct change from the previous position of the trade unions in this country because they had previously been against direct participation of employee directors on the boards of major companies. Therefore, it is also import-ant that we should understand the arguments which led the TUC and, in the end, the Bullock majority to take the view they did.

I think that the first argument—and this has been indirectly referred to by some noble Lords, by the noble Baroness, Lady Sear, and by my noble friend Lord Brown—is that the fifth Directive was very strongly in favour of an institution which the trade unions have always opposed; that is, the statutory works council. The fifth Directive appeared to commit us, if we were in the EEC, to a system of statutory works councils elected by universal suffrage, both unionists and non-unionists, which the trade union movement in this country has always regarded as at best a form of rival unionism and at worst the basis for company unionism. Whenever statutory works councils have been suggested, from the early 1940s onwards, the trade union movement in this country have reached for their revolver. At that point in time, not so much the mauve paper but the fifth Directive, looked as though it was centrally based on the introduction of statutory works councils. As I have said, quoting from the mauve paper, it looked as though the Government at that time were thinking in the same way, though we did not have their Consultative Document published. But a mere desire to reject the notion of statutory works councils, which they thought was a form of rival unionism, would not have been sufficient to produce the total change in TUC policy.

The second and most important and lasting reason was that the trade unions had become increasingly concerned about their inability to force large companies, and particularly multi-plant companies, and most especially multinational multi-plant companies, to the bargaining table. They were particularly concerned about the effect of corporate decisions in large multi-plant companies on industrial relations, on questions of investment location-on questions of closures, on questions of the manpower consequences of new processes and so on. They felt that the fifth Directive gave them an opportunity, it gave them a solution. By going not for statutory works councils, but for parity of representation for trade unions only on supervisory boards, they had a form in effect of corporate collective bargaining in the boardroom.

Here I want to move to my second point. I do not think that it has been sufficiently appreciated in the debate in this House tonight that what the majority report in Bullock is recommending, whatever they may say, is a form of corporate collective bargaining in the boardroom. That is really what it amounts to. It seems to me that the central role of Bullock is to spell this out, to overcome most of the practical objections, to put before us a serviceable model, if we want to adopt that model, for corporate collective bargaining in the boardroom.

Of course it is perfectly true that they make significant changes from the essential TUC position. Instead of parity they talk about 2X+ Y, but of course the Y really consists of a little of the first X and a little of the second X because the Y is in fact nominated by each one of the two Xs. There is no essential difference. In order to meet the charge that what they are suggesting is a monopoly for trade unions which are not in any way related to non-unionists and their position, the Bullock Committee majority recommend a system of universal elections. Again, I do not think that I am misrepresenting them, and I am not trying in any way to be unfair to them, in saying that they time that election very carefully so that it takes place at a time and in circum-stances in which the trade unions are most likely to win; at least, when the trade unions are ready for the election. So essentially this remains a system of corporate collective bargaining in the boardroom.

This also explains both the opposition to it inside the trade union movement and the opposition to it outside the trade union movement. Inside the trade union movement, for example, the majority report is very often opposed by craft unions. It is opposed by craft unions because they have enough power in collective bargaining anyway, and in any nomination of worker-directors they are likely to be outnumbered. So they are not very much in favour of this form of corporate collective bargaining. It is opposed—no, not opposed, I must be fair, but rather alternative suggestions are put forward by the General and Municipal Workers' Union, which were very eloquently put forward tonight on this side of the House, because the General and Municipal Workers' Union believe that it has discovered a more effective form of corporate collective bargaining which it put before the Bullock Committee itself.

But most important of all, if we are to understand, and most surprisingly if we are to listen and try to understand some of the speeches which have been made on the other side of the House, it is opposed by the Left of the trade union movement—by the extreme Left of the trade union movement. These proposals are opposed with even more force than in this House in most speeches, by the IMG, the WRP, the IS and the three or four versions of the Communist Party of Great Britain. The extreme Left of the trade union movement is most vociferously opposed to all forms of corporate bargaining by trade unions at board level. They are opposed to this because they are afraid that once the trade union representatives start to consider the wider issues that have to be considered in the board-room, they will start to be influenced by what one commentator has called the "pinnacle effect". They will start to stand at the pinnacle and look down into the abyss, and they will begin to appreciate some of the constrictions, some of the problems, some of the difficulties of management. "Once we start doing that", say the extreme Left of the trade union movement, "we shall be finished". They would much rather have the trade union movement debate an argument in terms of the claims of profits and the claims of wages, because that is the argument that they understand and that is the argument that they think they can win.

So this explains the degrees of opposition inside the trade union movement to Bullock. It also explains the opposition outside the trade union movement. Much has been made in the House tonight about those who gave evidence to Bullock. It is quite true, as has been said in one of the appendices to the minority report, that about two-thirds of those who gave evidence actually opposed any form of employee directors. This is quite true, especially, of course, in relation to trade union nominated employee directors.

By and large these people felt, from their point of view legitimately, that the power of trade unions, especially their influence through collective bargaining, had already gone much too far, and what we needed to do in this country was, if I may say so in the presence of the noble Lord, Lord Carr of Hadley, a kind of 1971 effect in reverse. If we could not restrict their power by legislation, by golly! we were not going to increase their power by legislation. Therefore they felt that be-cause this was a collective bargaining model, and because it would extend the influence of trade unions they wanted no more of it.

Most of the rest, including, I should say, what was said by the authors of the minority report, and to some extent most of what was said by the noble Lord, Lord Byers (I am sorry that he is not in the House), and some of what was said by the noble Baroness, Lady Seear, was actually an attempt to change the subject. It was an attempt to argue that many people sincerely believe that participation and worker involvement in management decisions must in no sense be sullied by being mixed up with the hard conflicting processes of collective bargaining. There is collective bargaining, which is concerned with conflict and with disagreement and which divides people, and which trade unions can do—the lower orders of things. And there are the upper reaches of consultation, of co-operation, of harmony; and that is what worker participation is about.

So we have to develop two different channels, not only at the board level, but at all levels: one channel for the nasty, conflicting, difficult, dividing issues of collective bargaining, which we assign to trade unions; and this other upland of co-operation, of harmony and prosperity which of course we do in a quite separate system with quite separate people. Of course they may be trade unionists if they like, but they will not be there as trade unionists; in other words, a parallel system, but a parallel system which is not necessarily there to undermine trade unionism (at least that is not what these people would say), a parallel system which has its own ideology and its reasons.

Now if this is the case—and I suggest to the House that it is—then at this time of night all one can do is give one's own point of view. I believe that we are beyond the point where most major companies can hope to have any form of effective participation, other than participation through trade unions. I believe that the trade union movement is over-anxious about this. I believe that even if we had systems of election, even if we had a recrudescence of joint consultative committees, in the overwhelming majority of the large British companies the trade unionists would dominate and their members would be the members who were elected. To me, this is an unreal battle.

Secondly, I think that even if participation and involvement up to the level of the board is bound to be a trade union dominated arrangement in this country at this time, there are advantages; not only advantages for the trade unions, but advantages for management. Many of these advantages have been put before us tonight, and I do not want to go into them at this late hour. I would prefer to pass on to say something about what I think the Government should do now, because I think that in some ways that is more important. I think the Government must recognise the number of weak-nesses in the Bullock Committee majority report, or (perhaps one should put it another way) the number of questions with which this report does not really deal. It does nothing, as has been said, for the two-thirds of employees in the private sector who work in companies with a workforce of below 2,000. It will take at least four years to make any impact on the problem. No direct stimulus, through Bullock, is being given to participation below board level. There are considerable problems of confidentiality with which Bullock fails to deal; and, as has been said, most notably by the noble Lord, Lord Houghton, I think, there is a very real problem of management consent. At this stage it is impossible to try to impose one single system on British management, and I do not think that the Government can do that.

Therefore in conclusion I would say that what the Government must do is to stand back; what the Government must do is to take up the challenge of the CBI; what the Government must do is to say to the CBI, "Let us talk", as the Prime Minister has said, "about the issue of participation, first of all below the level of the board". Because, my Lords, if the CBI, even at this late stage, were really to encourage multi-plant major companies in this country to establish effective corporate bargaining with trade unions, a great deal of the push for the implementation of the majority report of Bullock would die away in the course of a few years. Nevertheless, the Government must say that if progress cannot be achieved and advancement made along these lines, then the proposals of the majority of the Bullock Committee lie behind them.

Let me finish by quoting from Lord Bullock himself, who has been frequently mentioned in this debate, not in an altogether complementary sense. He said in his personal statement on the publication of the report: The first publication of such proposals has led to similar controversy and to forecasts of disaster from employers. In every other case legislation has been necessary to introduce the changes required, and in every other case, once the changes have been made, the opposition has died away, the fears have proved to be exaggerated, and both management and unions have found advantage in the new arrangements". He finished by saying: I do not know what action the Government will take on our report, but of one thing I am certain, that the question of employee representation has been placed on the agenda of British politics, and it will not be easily removed".


My Lords, before the noble Lord sits down, would he allow me, in the temporary absence of my noble friends Lord Byers and Lady Seear, to say that, as I understood what they were saying, there was nothing in their concept of employee participation which excluded the possibility of joint decision-making as well as consultation.


My Lords, I am afraid I am not quite following the noble Lord. The noble Lord is saying that, in the concept put forward by Lord Byers and Lady Seear, they were allowing for joint determination?


For joint decision-making, my Lords, as I understood it, as well as for consultation.


Yes, I will accept that, my Lords.

8.4 p.m.

The Lord Bishop of SOUTHWELL

My Lords, I welcome the opportunity to take part in this debate. Discussions about industrial democracy are part of a much wider, ongoing and creative debate about the future of industry as a whole and about industrial institutions in Britain today. The importance of this debate is such that it must be taken up by the whole community, and not merely by those who work in industry. In this sense, it is comparable to the great education debate initiated recently by the Minister of Education. In the context of admitted confusion about the future of our economy and how to deal with it, with a still unacceptable level of unemployment and with attitudes towards the next phase of the Government's pay policy appearing to harden day by day, an open and honest debate on the issues raised in this report is very urgent, and no one should be deemed to be an inappropriate participant in it.

My Lords, I have read the report carefully, and I am myself convinced that the need for the involvement of employees in decision-making at the highest level is both right and prudent if good relation-ships are to be maintained, work is not to be disrupted, implementation of board decisions delayed and shareholders' interests put in peril. As I understand it, this particular debate is focussed, not on various kinds of worker participation but on the question of whether there should be employee representatives on the board itself, and it is to this that I feel it right to speak. The implications of this report will affect the lives of all of us. To put it crudely, each man's bread and butter is at stake; and all of us, particularly those who are not immediately identified with one or other side of industry, has a right to be heard.

I have considerable sympathy with those who argue that we have had too much legislation in recent years and who are urging a breathing space in which industry can digest all the legislation of the past few years; and, as has been pointed out, the noble Lord, Lord Byers, listed a formidable number of pieces of legislation which have been passed. As one Nottinghamshire factory manager put it to me, We have had too much legislation—industrial relations Acts, health and safety Acts and women's pay legislation. There has been too much for industry to assimilate, and not enough time to get on with the real issues of production". Another complaint was that the very production of this report has in itself soured industrial relationships which, before, were developing fruitfully.

The person I talked to doubted whether personal relationships are capable of being established by Statute, and believed it to be wiser to legislate only after good relationships had already been built up, albeit slowly and painstakingly. I could subscribe to such a view if I did not believe that events will overtake us. Change will be forced upon us by the very age in which we live; and because change challenges long-held attitudes and threatens our way of living, we shrink from it. For this reason alone, legislation will be necessary. For instance, could industry, left to itself, have sorted out the problems that required the enactment of the Redundancy Payments Act, the equal pay legislation and much else? I fear that without legislation there will be insufficient spur to action, and that we may act too slowly and too late. In saying this, I am not implying that the recommendations in this report are the only right ones.

At a time when so much publicity is focussed on what is wrong in our industrial life, I think it is right that we should pay tribute to the great amount of good that there is in it. There is plenty of good, honest, harmonious working and bar-gaining going on all over the country. Management training has vastly improved. Many, indeed most, of our trade union leaders act with great responsibility, for which we should be properly thankful. The recently published figures relating to the number of days lost through strike action last year were extremely encouraging; and the fact that 98 per cent, of our firms had no stoppages is good news, but news which seldom hits the headlines. The Social Contract, despite strains and stresses, has made a big contribution to our present attempts to cope with the problems of inflation.

Having said this, it is hardly surprising if, with the Government's pay policies restricting collective bargaining on wages, the trades unions are looking for other areas in which to extend their influence. It could well be that we are approaching a time when collective wage bargaining, as we have traditionally known it, will never return. Such a prediction is probably anathema to many people, but I cannot see our present economic situation allowing a return to free-for-all bargaining, when inflation hits the weakest and the most vulnerable the hardest. Indeed, such a situation would be morally indefensible. The weak have the right to expect their Government to support them in times of economic confusion. If a free-for-all on wages is prevented then it may well be that the trades unions will find new and different ways of defending the interests of their members, and industrial democracy will certainly be one of them.

It has been said that we should forget issues like industrial democracy and concentrate on the creation of wealth, for only then will we be able to pay for the sort of society we desire. As one Nottinghamshire manager put it: It is nonsense bothering with things like this. Industry needs to become more profitable. Creation of wealth is the main problem, not tinkering with politics". With this I agree. The problems of production are primary, and this is always the danger of necessary decisions concerning production being delayed while other issues are taken up. But this does not preclude a debate on industrial democracy. These are not really alternatives. Both can and must proceed together.

My Lords, having read the submissions of the different groups to the Bullock Committee, it is not hard to detect how passionately differing views are held. Certainly, the debate in this House has revealed those passions. It is easy for passion to distort judgment and make it well-nigh impossible to decide issues on their merits and not according to a pre-packaged view of industry, of industrial relations or of industrial society.

I should like to raise three points that come to me in reading this report and in discussing it with others. First, the problem of apathy. This was mentioned in the speech of the noble Lord, Lord Elibank, whom, if I may be allowed to do so, I should like to congratulate on his first speech in your Lordships' House. The report states that many people in industry seem apathetic about industrial democracy. This is probably true. There is a vast amount of apathy relating to most major institutions. It is a well authenticated theory of human behaviour that people are content to let others "get on with it" so long as the status quo is not threatened. Attendance at church and the support of the church is a typical example. It is only when the institution is in danger that anxiety arises and involvement suddenly begins.

From such an argument it might seem that all was well with industry and that apathy is largely a question of contentment. But non-involvement is a dangerous thing, for whatever reason, as it opens the door to fanatics with an axe to grind. The fact that a man (or a woman) can spend 40 hours each week at his place of work and yet be apathetic about how the industry he serves is run, is little inclined to attend branch meetings of his union, or be much concerned with industrial democracy, is surely a worrying state of affairs. We need to recapture the imagination, the enthusiasm and the commitment of people to their employment. I believe that allowing people to share in decision-making (whether along the lines of this report or not) would be a major step in the right direction. Sharing in decision-making means sharing in responsibility and sharing in accountability. Apathy cannot coexist with responsibility.

Secondly, this discussion is ultimately about power, and its proper use and distribution. The noble Lord, Lord Carr, was certainly right in stressing this at the beginning of the debate. I am somewhat surprised that in this House there seems to be a reluctance to recognise that power is an essential element in this argument. This discussion is about power, its proper use and distribution. I do not believe that this report contains the last word about power sharing, but it has certainly spelled out some of the important areas of its operation: the power to be shared between the shareholder and worker; between capital and labour; between the unionised and the non-unionised, between the strong and the weak. I am not sure that the Committee has got the right answer, but I believe its attempt to introduce checks and balances is right. Any plan for industrial democracy will have its faults. There will have to be compromises and we must openly acknowledge this. After all, the problem of the distribution of power in society is wider than the problem of industrial democracy.

Thirdly, I must comment on the Committee's recommendation that the trades union movement should be the proper channel for worker representation. It is easy to disagree with such a bold re-commendation and to impute all manner of subversive intentions. There are a few-dangerous individuals who are out to damage industry, but I believe them to be as yet a small and controllable faction.

This is certainly the most controversial suggestion in the report, but I am persuaded that it is a right one and could mark for the trades unions the beginning of a new phase in responsible partnership in industry. There is evidence that over the past two years the shattering economic realities of our situation have created a new mood of responsibility in the trades union movement. The unions have been trying, over a period of time, to rationalise themselves and to seek a common identity and purpose—what in Church circles we call "unity amidst diversity". We might wish for a different trades union movement, but the fact remains that this is the one that we have got and this is the one that has evolved in our country and it already has great power. We can hardly change the system rapidly even if we wanted to. The issue ultimately is one of our capacity to exercise mutual trust. Are boards prepared to accept the trades unions as they are and seek to work closely with them, sharing power and responsibility and seeking all the time to find common ground, or will it be a battle in which we attempt to exploit each other's weaknesses to gain one-sided advantage?

I can see the advantages of a proper definition of roles between management and labour, and there are not a few, as we have heard, who feel that neither trades unions nor their representatives will be helped by being admitted to the boards of companies. If I may once more quote a Nottinghamshire opinion, that of a management consultant: Trades unions are trying to do the wrong thing. I much prefer the likes of Arthur Scargill who knows where he stands and who represents his men. The unions' job is to get the best possible deal for their members and they should leave managers to get on with managing". It will certainly also be true that there will be the danger that an employees' representative on the board will soon find that he is no longer wholly trusted by those he represents, and that by participating in unpopular decisions of the board, however much they may be in the best interests of the company, he will be regarded as having negated his brief as employees' representative.

These are the hazards of the game. It is difficult for any man to wear two hats and not confuse the role which he is at the time assuming. This is a skill we all have need to learn. Unfortunately, those who have not learned it misunderstand those who have. I believe that it is right for workers to be represented on the boards of companies and to be represented by properly elected trade unionists; and I cannot believe that employee representation can be set up by any method that bypasses the official trades union movement. I believe that when elected the workers will act responsibly and be increasingly trusted for the contribution that they make.

The suggestion to involve trades union representatives on the board is a matter of much disagreement, as is evidenced by the majority and minority reports, a disagreement which, as we have heard, is to be found within the trades union movement itself and certainly throughout the country at large. This suggests that it would be wrong for any hasty action to be taken on this matter. I am grateful for the opportunity which this report has afforded to allow the whole nation to share in this debate. Whatever the merits or demerits of the report, it is a significant contribution to the ongoing discussion about the nature of democracy, not only in industry, but in society at large, and we cannot allow this subject to be swept under the carpet and removed from the arena of public debate at this time.

8.22 p.m.


My Lords, I join in the congratulations to my noble friend Lord Carr of Hadley in initiating this debate. He must be well rewarded by the intense interest of the large number of speakers who have participated. Much has been said about the terms of reference of the Bullock Report. There is one aspect which I do not think has yet been aired. The terms of reference of the Bullock Committee did not, as is widely misstated, include that there must be employee-directors, but that there must be an extension of industrial democracy through representation on boards of directors. They did not confine the issue to trade union or employee-directors. I join forces with the noble Baroness, Lady Seear, that the terms of reference embraced all those associated, and the report should have embraced the shareholder who risks his money and the consumer who buys the goods, if democracy is to be fully interpreted.

It would appear from the report that the Committee's interpretation of democracy concentrates on the trade unions. The Press and the media have encouraged the myth that that was the sole mandate of the Committee. When one reads the report, it is difficult to get away from the idea that the Committee's main concern was to find out how trade union organisations could best be represented on the boards of directors; and the claims of others—middle-management, scientists, salesmen, managers, shareholders and con-sumers—received scant, if any, consideration in the report at all. Also in its terms of reference the Committee was required: to analyse the implications of such representation for the efficient management of companies and company law. It considered company law at some length; but, as pointed out in the minority report, it produced no evidence that the changes proposed would be beneficial and would improve efficiency, employment, sales, ex-ports or profitability in the interests of the company. Professor Wedderburn reported: It is unreasonable to expect employee representatives to accept equal responsibility unless through equal representation on the board they are able to have equal influence on the decision-making process". That might get a cheer at a TUC conference, but how in practice will it operate?

Some firms negotiate with 10 different unions for widely varying numbers of their employees. Does USDAW, in a large retail complex, representing 2,000 employees, equate with the Transport and General Workers' Union representing 20 truck drivers, and also a director and perhaps 10 typists who are in the Municipal and General Workers' Union in the same firm? This is where the claim of my noble friend Lord Watkinson, as also many others who have spoken today, is so important: there must be flexibility to make way for the enormous differences not only in union representation as between one union and another but in particular companies where there is a minority of union representation. It must be flexible, and also I believe it has much more hope of success if it is in a much wider sphere but allowing individual firms to work out the best for their own company.

According to the majority report, directors representing blue-collar workers bear the same responsibility as those representing white-collar workers, apparently regardless of whether the ratio of one to the other is 10 to 1 or 1 to 10. I believe that it is extremely important that the emphasis on individual union representatives should be far more clearly defined in terms of the importance and size not only of the unions but of other employed forces in the company, otherwise this can only lead to dissension as between the unions themselves. They would be in conflict with the Committee's statement that each director should have the same duties to the company as a whole, regardless of whether or not he is appointed by the shareholders, trade unions or co-opted. That principle transcends the multiple union employee and fairly places on him the responsibility, which already applies to a director of a company, that he is there to represent and serve the company as a whole and not a special entity in it.

On more than one occasion Ministers of the Crown—and I was rather shocked to see how glibly the Prime Minister went out of his way to do this—have depicted the Bullock proposals as justified in the light of the success of the German scheme. But they are not comparing like with like. The noble Lord, Lord George-Brown, was right in saying that the report would have been the better if it had given us the analysis of the various countries and institutions that were visited by this Committee, because there is a fundamental difference between the German set up and ours. It is illegal for a German trade union to be affiliated to any one political Party, and thus their consultative and board representatives are not committed to any Party political policy. To that extent they have not forced upon them divided loyalties; and far less are they bound by political resolutions to replace private enterprise with nationalisation.

The most recently published programme for Labour envisaged and pledged the nationalisation of banks, breweries, air-lines, pharmaceutical, oil, and food undertakings, to mention a few. What happens to the unfortunate trade union member elected by his fellow members to a board of directors, who has a good working knowledge of a great international company, and becomes convinced that it is more likely to thrive under private enterprise, yet he is burdened and bound by his union's vote that that industry should be nationalised?

I believe that it is a very simple and crucial question as to how free that trade union board member will be to vote for something he considers to be in the best interests of the company as a whole, if that were to conflict with a resolution of his union. In fairness, some trade union leaders—and I may say on television last Saturday I watched a most exciting programme involving four leaders of trade unions—have recognised the dilemma. Some unions are fearful, and rightly and honourably fearful, of that dilemma. They do not want the "poacher turned gamekeeper" exercise at all. They want to preserve the union's right to put the union first and not to put the company first. I think that is a very honourable challenge of conscience on which many union leaders have expressed their views.

I want to say just a word or two about the duties of a director. As I understand it, the duty of a director is to the company as a whole, to secure the fulfilment of the objects of that company and its continuance in business for so long as it is established to carry on the same, with a view to safeguarding the interests of all those who are, and to the extent that they are, interested therein, whether they are suppliers of capital, of work, of goods or of services, or whether they are customers—and subject thereto, to the provision of a stable and if possible rising income, to the extent that those interests of the suppliers of equity, capital and labour shall be reasonably rewarded, and re-warded also to the best of their capacity.

That has many moral and legal implications, not the least of which is that there must be no suggestion that employee board directors should be confined to matters of interest only to employees. Indeed, the most difficult problem which has been met in some of the European systems is the very fact that it has been difficult to get employee-directors interested in matters which are not of short-term interest to their own work-fellow constituents. Nevertheless, unless total commitment to the company interest, and to everyone associated with that company, is accepted, any chance that the institution of employee-directors will be beneficial to the company and to the community as a whole will be lost. The acceptance of board membership brings with it confidentiality. I wonder whether we are not creating a top-heavy elite without providing more democracy through the stages from the shopfloor, as has been outlined so brilliantly by a number of earlier speakers today; a system of specialist or departmentalised consultative committees would provide far more scope to train up competent people on the shop-floor who could be promoted to management.

I think it is a pity that greater recognition is not given to the many directors today who started way down in the company. Recently I tried to check up on friends and colleagues that I have known over many years, and a great number of them completed their full apprenticeships in engineering, in paper-making, in building and in a specialised form of the chemical process of their company, before they gathered wider experience in other aspects—possibly in marketing and sales—before finally going on to the board. We have far more working directors who have worked their way up from the bottom to the top than the TUC ever give industry credit for. The tragedy is that the moment a man puts on a white shirt and drives his own car, prejudice immediately designates him as "them" and not "us". But he has won his spurs by merit, in exactly the same way as Len Murray has won his way up from the bottom to the top of the TUC.

If there is to be direct liaison between trade union directors and their constituents on the shopfloor, what happens to the middle management? How seriously will their management decision-making be impaired? Nowhere in the report is there any provision for directors-from-employees who, for whatever reason, do not belong to a union. According to the Bullock Report, employee-directors will lead to the right to order the work of employees—so the specialist salesman who gets the orders, the chemists and scientists who evolve the product, and who have won their place by their expertise and personal effort, may come under the direction of those who are wedded to industrial-political policy.

In paragraph 10 on page 7, the report virtually anticipates a divided and not a cohesive board, in suggesting that board representation and collective bargaining machinery would be mutually supportive. I doubt whether it would be so, and I think that is the main contention of those trade unions who have grave doubts about the ability of the trade union member to back his union 100 per cent., if he had dual duties on the main board. It would be dangerously dividing the responsibility of directors from their duty as a whole if this precept of the Bullock Committee was accepted.

We support real industrial democracy, which is not merely limited to half the employees in the country. We want to see everyone within a company having an opportunity to graduate upwards through the consultative committees and to participate in the decision-making within their factory and within their department. We seek wider opportunities for all the workforce, of whatever grade or professional skill; and I believe members of the workforce should rise on merit and not exclusively on trade union patronage, because they all make a vital contribution to the success of the company. We support genuine full employee participation, but I am sure that the system must be flexible enough to meet the widely differing conditions among companies and that it should be elected from within the company and, in no circumstances, nominated from without.

8.38 p.m.


My Lords, I think it is very sad that the Bullock Committee missed an unequalled opportunity and duty to inject new life into the industrial life of our country. As a non-lawyer, I am most hesitant to speak on the law in your Lordships' House, which is a veritable eyrie of legal eagles. However, I believe that the law should reflect the undoubted truth that labour—and by "labour" I mean all labour, including management—is a partner with capital and not the servant of capital. By "capital" I mean capital contributed by shareholders and all classes of loan capital. It has now become a truism to hold, particularly with the larger organisations, that those who work for a modern company are more members of that company than the remote shareholder who is now more a lender of capital than a member of a company, participating in the life of that company or, in other words, a quasi-partner.

If we ignore this undoubted truth, we do so at our economic peril. Yet English company law persists in so doing. I regard this shortcoming as fundamental, for if there are shortcomings in the principle what hope is there for the practice? Company law recognises and attempts to define the relationship between the company and its shareholders and potential shareholders, the company and its creditors, the company and its directors, the company and its auditors, and the company and the Department of Trade. Yet in the Companies Act 1948, comprising as it does 462 sections, 18 Schedules and approximately 160,000 words, the word "employee" is used once, and once only, ironically in a proviso to Section 54, which enables a company to lend money to its employees for the purpose of acquiring its shares. I did not care to count the number of times that the word "employee" came into use in the Bullock Report. But one of them has got to be wrong.

Even then, Section 54 was not new to the 1948 Act. Section 54 was first written into the law as Section 45 of the 1929 Companies Act and, as your Lord-ships will appreciate, was very advanced thinking for its time. There is also in the 1948 Act the occasional prohibitive mention of "officers and servants of the company". Your Lordships will appreciate that there is a distinct nineteenth century ring about that phrase. Yet modern company law does not even concern itself with the relationship between the company and those who work for it. Their relationship with the company is reflected in the common law of master and servant. With respect, I deem this to be a serious lacuna in the law, yet, strangely enough, it is not surprising that this came to pass.

Much of our company law is designed bearing in mind a company yet formed, yet born, rather than a company as a going concern. When a company is but a twinkle in the promoter's eye, it can be seen as available and potential capital seeking labour, all labour, in order to fulfil its common, wealth-creating objectives. But the law fails to reflect the fact that when the company is born, when it becomes a going concern, the position is completely reversed. The company becomes labour seeking capital and creating capital, in order to further and continue its common, wealth-creating objectives. Labour, the total workforce of the company, has become one of the partners of capital and is not its servant. May I suggest, with respect, that this truth is missed, partly as a result of two fundamental flaws in the philosophy underlying the constitution of the company in English law. It is vital, in my view, to see how this flaw, this disease, crept into the body corporate, for then it may become clear how best to effect a cure.

The need for cheap and simple incorporation of companies was seen by Gladstone, when President of the Board of Trade. This resulted in his great Joint Stock Companies Act 1844. The principle of limited liability was made Statute in the same year and, together with other company law amending Statutes, was consolidated in the Act of 1856. Similarly, a consolidating Act was passed in 1862 and it was this Act that was the first to concern itself with the organisation, constitution and management of the company, and the relationship between its shareholders, directors and creditors. However, all these Acts reflected the underlying philosophy behind the constitution of the old deed of settlement companies, which was based on the law of equity and of partnership, which was similarly so based until it became Statute. One of the main underlying philosophies about these two types of companies was that it was held that the proprietors would be, and would wish to be, involved in the management of the company.

To illustrate this point, it took the Judiciary of the time, and many others besides, decades to realise that a company was, could be and was very likely to become, something very different from a type of elongated partnership, and the model that was taken for the constitution of the company was Westminster. This can be seen when one looks at the two organs of the company; the members in general meeting, analogous to Parliament, and the directors, analogous to the Government or the Executive. The shareholders, the members, the contributors of capital, were given the right inter alia to attend the parliament of the company, to speak, vote, question and ratify the appointment or dismissal of directors where necessary.

But what of the other contributors of the company's capital, the part-contributors to the internally generated capital of the company, represented, of course, by surplus and by good will? As we have seen, the law was not even concerned with their existence in the body corporate. But, far worse than that, for it is in the constitution, the structure of the company—again, the Westminster analogy—that the basic flaw lies. It is right and proper that in Parliament, as in a court of law, the various interested bodies be set in contentious or adversary positions, for in that way some semblance of the truth has a habit of floating to the surface. But in industrial and commercial enterprise, there is one truth and only one truth, and that truth is not in contention, or should not be. It is that the interests of all those involved in any industrial or commercial enterprise are mutual, not contentious; namely, the expansion, growth and increasing of the wealth of that enterprise for the good of those involved in the company, for the community as a whole and for the wealth of the nation as a result of that.

I heard some of your Lordships say that this development should come from the bottom. I do not believe that. For all labour to be seen to be a partner of capital, it must first be deemed to be a partner of capital in law. With the law as it stands, it should surprise no one that capital and labour should be seen to sniff at apprehensively, run circles around, fight one another and limp away bleeding, like two dogs in a park. The success of any union or partnership, be it marriage, be it industrial, commercial, artistic or philanthropic enterprise, be it allied effort in war, depends upon mutual trust born of open, efficient and respectful discourse and consequent achievement of common objectives.

It might be said that these principles should lie in the heart of good management and should not be the concern of the law. I have very great sympathy for that view. But, if your Lordships see what I mean by this somewhat clumsy paradox, there is far too much legislation and not enough law. As an illustration, modern company law, comprising in the main the Companies Act 1948 and the Companies Act 1967, are not law. There is no law therein at all. All they are is nothing other than sets of rules and regulations, designed to encourage good and to discourage bad management. But the law, the issue of Parliament and the courts, must reflect the current needs, aspirations, beliefs and will of the country. This it manifestly does not do. As a country self-sufficient only in great expertise and a potentially superlative labour force, the law must entrench the belief of all reason able men that labour is no longer the servant of capital, but a participating, contributing partner. It can readily be seen, then, that true industrial democracy should be the child of good law and good management.

Good law and good management can never be the child of spurious industrial democracy, and it is spurious industrial democracy that the Bullock Committee proposes. For it not only maintains the contentious or adversary stance; it positively encourages the dog fight, the brawling. It is a badly written Fabian tract, by a committee who could, to their eternal shame, see the trouble only as a power struggle. One needs to look no further than the language of the report. What does the language suggest? It suggests that we keep the great divide, that we maintain the divorce between labour and capital. For instance: … now is the time to provide scope for the growing power and unused capacities of organised labour". That is not the language of struggle, nor of joint venture. And again, … since trade unions are necessary to ensure that employees have an effective voice in decision-making both within the company and within the wider society"— what has that to do with the company in that context?— … we wish to ensure that board level representation is designed in such a way that it does not undermine the unions' representative capacity". That is the language of power politics, not of industrial democracy and good management. Again: The benefits in increasing confidence and understanding between trade unions and employees on the one side"— here we go again— and management on the other,… Again, … let us maintain the divide, the two sides of industry, with differing interests, not mutual". Again they refused to see the mutual interest of capital and labour and, as a consequence, the interests of the nation as a whole. We recommend that all directors should continue to be required to act in the best interests of the company, but that in doing so they should take into account the interests of the company's employees as well as its shareholders"— again as if they were different. I should like your Lordships to listen to this lovely passage of English prose from the Electrical, Electronic, Telecommunications and Plumbing Union. This, by the way, is the union of the noble Lord, Lord Lee of Newton.


No, my Lords. The noble Lord has mentioned the wrong union.


My Lords, the noble Lord said something about the electrical union, but it does not matter. The job of the trade unions is, through collective bargaining, to consider, contest and oppose, if necessary, the exercise of managerial prerogatives. It is not the responsibility of work people to manage the enterprise. It is essential that trade unions retain their independence". That piece of disruptive and destructive invective is not the language of partnership; it is not the language of union; it is not the language of mutual trust; it is not the language of union brotherhood; it is not the language of democracy, industrial or otherwise. It is the language of the boxing ring, of the gutter, of dog-fights and brawls.

If the Bullock Committee had considered the problem in the light in which it has been considered by so many of your Lordships with such heady erudition and sublime eloquence, instead of withering their hearts and addling their minds with wishy-washy, Socialist ideology, totally unaware of the economic and other realities of life, they might have produced something richer than this mealy, mealy porridge of misconceived, misunderstood and misrepresented ideas. It will be apparent to your Lordships why the politically motivated are so afraid of true industrial democracy; why they so fear true worker, management, shareholder, creditor partnership through participation; why they so fear the secret ballot; why they so wish to maintain the great divorce between differing skills, working for the common good through their industrial enterprise. For they see therein an erosion of their political power. Then they might have to return to their original duty; namely, to be guardians of the interests of their members, their working conditions, health, welfare, work rates, et cetera. Bullock's brain child is a monster and should be strangled at birth for encouraging the divisive elements in our industrial and corporate life.

The report is threatening the whole future wealth of our nation—every man, every woman, every child. It is incumbent on this Government—upon any Government—to start afresh. However, we have two things to be thankful for. One is that the Bullock Committee has moved many reasonable men to think long and hard—hence this most constructive debate. Secondly, they have given us a new word in the English language. It is a noun. The word is, "Bullock", and it can be most aptly used in such phrases as, "They made a Bullock of it".

8.55 p.m.


My Lords, only the noble Baroness and the noble Lord who has just spoken have introduced Party politics into the debate. If the noble Lord says that the language of the EETU is the language of the boxing ring, may I say that his language is that of the hustings and that he ought not to make remarks about a highly responsible union, especially when he tacks it on to a Member of this House who is not even a member of that union. Per-haps the noble Lord, Lord Morris, would stop talking. The noble Lord has made a very provocative speech and some very offensive remarks, the only ones which have been made in this debate and I think that all your Lordships will resent it.

The debate has been conducted at a very high level. I should like to congratulate both the noble Lord, Lord Elibank, and the noble Viscount, Lord Trenchard, for speeches which have been very properly praised. Their forebears were well known and were great men. Also, they were well liked. In particular, I should like to say this to the noble Viscount, Lord Trenchard. When I first got into the House of Commons, I was sent for by the noble Viscount's father. I was still in the Air Force then. The noble Viscount gave me three martinis and said, "Now, my boy, there is something serious that I must say to you. You must vote for the Labour Party on every occasion"—sometimes I find it a little difficult now—"except when the Royal Air Force is involved and then you will vote for the Royal Air Force". The noble Viscount was a very great man and we are very pleased to see his son, like the noble Lord, Lord Elibank, bringing such expert knowledge to our debate.

This is the hour when the select band who are prepared to stick it out are still here. First, may I say that of all the speeches I have heard there is none with which I agree more completely than that of the noble Lord, Lord Byers. This maddening quality of his to say a great deal in a short space of time is something which I have never been able to emulate, although this evening I will try to do my best. We can take it for granted that the great majority of the Members of your Lordships' House, like the great majority of responsible business today, recognise that their duties are very much wider than simply to the shareholders. Indeed, the poor share-holder has hardly been mentioned today. Not long ago, I attended a private meeting of the British Institute of Management which was attended by chief executives. It was a very high-powered meeting but we never mentioned the shareholder. I think that the Bullock Committee should be told about this.

I hope that we are all aware that the old authoritarian views of industry are gone. Like the noble Lord, Lord George-Brown, for many years I was with the John Lewis Partnership, the most complete example of participation. Nobody could therefore suggest that I am not in favour of the concept of industrial democracy, participation, and, indeed, worker-directors. I am bound to say that it took 50 years to develop. It is also worth noting that it has reached such a degree of responsibility, admittedly in a very largely non-union environment, that you find the unionised section electing their managers to the central council rather than their shop stewards. This is the sophisticated approach to which those who believe in worker-directors look forward.

I am bound to say that the Bullock Report does little service to the concept of industrial democracy other than in the role of an Andalusian terrorist who throws a bomb over the wall. It maims one or two people but it gets everyone else buzzing around. To some extent this is the achievement of Bullock. However, it was a rushed job. The people to be blamed for this are not just the members of the Bullock Committee but the present Government. I am sorry to have to say this, but when I think of the enormous amount of research which went into the report prepared by the noble Lord, Lord Robbins, and his Committee and when one looks for the background research for this document one notices the absence of evidence. I do not know whether it is proposed to publish the evidence—perhaps the noble Lord could tell us—but we should like it.

So much of the report consists of a series of statements about what is the right answer, without proper justification being given. No attempts to apply much of the theory to actual situations were made. There were no real case studies. There was a little in the way of evidence—at least, what actually happens at company boards. Many Members of your Lordships' House who will have served on company boards know of the extraordinary variety of things which happen when they meet in the board room, instead of the lavatory, when there is a controversial situation. They realise that in fact it is ridiculous, in our concept of a board, to think of it in the great majority of cases as a place where conflicting representative interests are fighting one another.

Of all the chapters in the Bullock Report that are unsatisfactory—I mean intellectually unsatisfactory—I regard the analogy with political democracy as a most unlikely analogy, but in Chapter 6 they set out a number of statements and then proceed to knock them down. For instance, on the subject of investment they say that it was made clear to them that a number of submissions expressed the view that loss of confidence among investors in the United Kingdom might be compounded among foreign investors in British industry. Too true! I have already seen examples of people who are hesitating about a further industrial development, but the Bullock Report dismisses this and says that other views counter this. The only view they quote—and then they say "implicitly"—is that of Mr. Helmut Schmidt and they then go on to reject the German solution anyway. The truth of the matter is that it is not what ought to be; it is what will be in regard to investment in British industry.

There are a number of other aspects. I saw the noble Lord, Lord McCarthy, in the Chamber for a short while and I was rather pleased, because I wanted to answer some of the aspects and, as I thought, his misinterpretation of what the Bullock Report said on the subject of collective bargaining. What the Bullock Report favoured was in fact the three answers—the third answer being to recognise that the 2X + Y formula enables the shareholder representatives to insist that the management negotiating position is not subject to detailed and practical consideration by the board, and the whole of the argument in regard to collective bargaining is one of the most crucial issues. I wonder how many of the Bullock Committee had in fact taken part in negotiations and collective bargaining? Undoubtedly, the trade union representatives had, but I wonder how many of either the academics or indeed some of the industrialists who speak so freely about collective bargaining have ever negotiated with a trade union? I cannot say that I have had a great deal of experience, but I have had more experience of direct negotiation than many people.

Here it is worth while looking at the one piece of evidence that we have got. It is the document to which I referred the noble Lord, Lord Kirkhill—Industrial Democracy—European Experience. That consists of two reports prepared for the industrial democracy committee by Eric Batstone and P. L. Davies. There is one reference at the beginning of the report which no doubt some of the members of the Bullock Committee hoped would be forgotten. Among other things they said: It would be most unwise to see the concept of worker directors as anything more than a marginal contribution to industrial democracy in industrial relations. Of far greater significance will be collective bargaining, and the trend in Europe appears to be an extension of level and the scope of negotiation. Collective bargaining is likely to be far more important. I think this question of collective bargaining is a key issue in industrial relations, as I am sure the noble Viscount, Lord Trenchard, knows.

On other aspects I find the Committee's dismissal of the evidence given by Michael Young of the National Consumer Council disappointing. Most noble Lords on this side of the House will have known and respected Michael Young and will know that the sort of evidence he gives is not to be dismissed lightly as the Bullock Committee in fact do.

I should like to refer again to the report of Batstone. What they said in the introduction is this: There were a number of problems in preparing this report"— and again I stress that it was a report which was carried through at the request of the industrial democracy committee— First, the time constraints upon its preparation have meant that the review is necessarily more partial than would ideally be the case. Second, the introduction of worker directors is so recent in many countries that no reliable data on their actual performance are available. Third, much of the debate on industrial democracy is remarkable for its failure to take into account actual experience. They said this in July of last year: Fourth, much of the research undertaken in the area is conceptually and methodologically weak, and difficulties of access to boards have resulted in a heavy reliance upon survey methods. Fifth, few empirical studies of a cross-national nature have been undertaken, and accordingly some account has to be taken of subtleties of word usage and the aspects of industrial relations and company operation which inform, or are taken for granted in, the various studies. In view of these problems any discussion of worker directors and industrial democracy in an international context, including this one, has to be treated with caution. Perhaps I may say to the noble Lord, Lord McCarthy, that the so-called Gunderlach Committee—the Green Paper, of which noble Lords will undoubtedly admire the colour—slips back quite a long way from the draft Directive, and some noble Lords will have seen the piece written by Michael Shanks on this subject, which I will not go into now. There are all sorts of historic reasons in connection with this and those who may have studied the Sudro Report and the practice in France and Denmark and other countries will understand the caution of Gunderlach in not settling on a single pattern of the specific kind we have been given in the Bullock Report.

Mr. Batstone goes on to say: It is scarcely surprising that the evidence, largely from Germany, indicates that worker-directors have had a minimal impact… I am sorry, it may be a "marginal" impact, but it is about the same— …worker-directors have had no important effect on the economy generally, It would be most unwise to see worker-directors as anything more than a marginal contribution. I do not fully agree with these statements, I am bound to say, because I know cases where it is in fact having effective use. But this was the evidence that was given to the Bullock Committee by their own people.

I do wonder why Bullock picks mainly on Sweden and Germany. It has come up with a plan which, unfortunately, has aroused the most violent opposition, not from shareholders—we have hardly heard from shareholders—but from managers as a body, not just directors. Furthermore, the Bullock Committee has ignored the sensible experience of certain countries like Denmark. There are two worker-directors on the board of any company in Denmark, elected by employees regardless of union membership, paid their directors' fees, and the rest of the board can be as large or small as they wish, instead of this extraordinarily rigid formula that has been produced. We know that many of the unions, and not just the craft unions, are opposed to Bullock.

I will not take up the time of the House much longer, but I am bound to say that this is a long and historic battle among Socialists and within the Labour Party. The historic criticism of the capitalist system and of private enterprise in the past has been, leaving aside the issue of the class struggle, that decisions by individual enterprises, by large companies, and particularly international companies, could operate solely in the interests of the owners of these companies, and that by some magical process of a free market everything would work out for the best. There are very few of us, either in the Labour Party or the Conservative Party, who accept this simpliste view today. We believe that the role of the big enterprise is a much more important role than that simply of providing dividends, important though those dividends are if the mixed economy system is to work. It is recognised that companies have a responsibility both to those who work in them and to the public, and not just to those who invest in them.

I am bound to say to my noble friend Lord Houghton that I think he was a little less than fair with the noble Viscount, Lord Watkinson, in comparing the functioning of those admirable institutions, the Whitley Councils, to the sort of council that, under the influence of the great Sir Eric Hooper, he has set up in the past. Of course there is a lot of splendid development going on. I do not disagree with those who say that we cannot afford to wait. There is a great deal of industry, especially those firms with less than 2,000 employees, where much improvement can be done. Some of the noble Viscount's predecessors must be turning in their graves at his radical views on these matters. There is a recognition that there will probably need to be some back-up legislation. The one thing we do know is that violent interventions, particularly in the field of industrial relations, have had a disastrous effect in the past. I was in the Cabinet at the time of In Place of Strife which tore the Labour Party apart. We remember those days and nights when we fought on the Conservative Industrial Relations Act. There was much that was progressive in that Act. It just was not going to be accepted, and the result was a big contribution to the destruction of the Conservative Party.

If we have learned a lesson it is that in many areas one wants to proceed carefully, slowly, not too slowly, with as much consent as possible, but ultimately being prepared to back up what is achieved; after a little rest, after the list of new legislation that the noble Lord has referred to—which I have to administer, and I have a lot of help; how small companies manage I do not know—there will need to be backing legislation. I do not dispute the possibility that in the right sort of concept there should be worker-directors on the board. But I personally reject in present circumstances both the majority and the minority reports.

It is worth reminding noble Lords that the history of the Labour movement and much of the trade union movement in England has been anti-syndicalist, and here we have a form of syndicalism in all its nakedness—what is referred to as company egoism in one of these reports. Therefore I object to the Bullock proposals not merely on managerial grounds but on socialist grounds. Those who remember their history must remember the struggles that occurred in the past.

I call in support of this the greatest public administrator that this country has ever known—Herbert Morrison. I was his Parliamentary Private Secretary. He fought the issue of syndicalism for many years, A great deal of the agony and conflict between him and Ernest Bevin was when Herbert Morrison refused to put representatives of the Transport and General Workers' Union on the board of London Transport. He said that he wanted businessmen on the board. I quote from his biography by Donoghue—now well placed with the Prime Minister: By 'businessmen' he meant men of a business turn of mind, which might include such people as trade union bodies as well as men of business experience in the ordinary sense of the word. He intended all along to appoint people associated with trade unions and local government. He called the proposals for guaranteed labour representation ' undignified and humiliating': as if trade unionists could not be appointed without an Act saying so. It presumed their inferiority. I share the views of noble Lords who believe that trade unionists are capable of keeping confidentiality. Indeed, there is evidence in overseas companies and from those who deal with them that it can be done. However, the way does not go the Bullock way. Neither the Labour Party nor the Conservative Party have taken the sustained initiatives which the Liberals have taken. I pay tribute to them for that. I shall still remain on these Benches, if the Government will have me, but I hope that this controversy will make the Government face this issue properly and allow discussions not simply with the CBI—although they could do a lot worse—but with many people, and thus to arrive at some sort of consensus, with ultimately some back-up legislation.

9.16 p.m.


My Lords, first, may I say how much I agree with the remarks made by the noble Lord, Lord Shackleton. I thank my noble friend Lord Carr of Hadley for introducing this very important debate and congratulate the noble Viscount, Lord Trenchard, and the noble Lord, Lord Elibank, on their maiden speeches.

There is such an immense amount of experience and knowledge in your Lordships' House on this matter that it almost seems impertinent sometimes to enter the ring. I feel very privileged to speak this evening. This is a very important debate and I hope that I shall not appear too dogmatic. For a great number of years I have worked on different boards. I regret to say that the first board on to which I worked my way as an executive director was over 40 years ago, but I have served on a number of other boards, first as non-executive director and later as chairman. I have also sat on a number of bodies, whether we call them councils, committees or boards, where I have had the privilege of working alongside a number of trade union members. I enjoyed their company, respected their point of view and, indeed, the wisdom and support that they gave.

During my last few years as chairman of Harland and Wolff, the Belfast ship-builders, the company was in the process of being turned by its single shareholders—the Government—into guinea-pigs, the idea being that we should be a "try-out" for worker-directors, participation and so on in advance of any legislation that the Westminster Government might introduce. It was the noble Baroness who mentioned that some companies have as many as 10 trade unions but we had to deal with almost double that number. My company was under mandate to negotiate with them with a view to arriving at a board structure which would include a substantial number of worker-directors. I shall refer to that again later.

A number of points have struck me very strongly as to what a board, as the apex of the management pyramid, requires for any degree of success. I emphasise the few words, "the apex of the management pyramid", because the board must be regarded as part of management. Yet I have met a number of people in the last year or so who seem to regard the board as something separate from management. I cannot understand that. Anyone who joins the board automatically becomes a part of management. This must be recognised, and it is not always appreciated. To begin with, I find it important to try to assess what we might reasonably hope to gain by the introduction of worker-directors. We must get that clear. If I repeat one or two points that I have made in your Lordships' House on a previous occasion when talking about this kind of matter, I apologise. I regard the board as an important and delicately balanced piece of human machinery. It is rather like the heart of a body. It should not be played about with, except for very good reason, and then only after the most careful consideration. Just as there is no standard heart among any of your Lordships or anyone at all, so there is no standard board. There is an infinite variety of boards, reflecting to a large extent the style and character of the chairman and his chief executives, and of course reflecting the personalities of other members of the board and the size, general circumstances and nature of the company itself.

Against that background, it seems to me that the motto for any board chairman must always be to try to achieve mutual trust and confidence among his members. That is absolutely the first thing that he must do. So that despite inevitably differing views, all strongly, sincerely and correctly held (and this may very well be healthy), there can be complete frankness and openness of discussion in the boardroom without, if possible, any rancour, to be followed in the end with loyal, collective responsibility for all decisions, however they may be made—although, like many other noble Lords who have spoken today, I do not think that I can remember over the years that I have been in a boardroom ever having taken a vote; the decision has always been by consensus.

Another important matter one has to bear in mind is that, if regrettably there is any serious and prolonged acrimony in a boardroom, it cannot possibly be kept within the four walls of the boardroom. It is bound to come out and do enormous damage throughout the whole of the company. This clearly presents the chairman with immensely difficult conditions, and it is largely the chairman's job to guard against this. It presents a great challenge. Therefore, if we are made to provide changes, such as the introduction of worker-directors, on a major scale, we must be very clear what we are out to achieve. We must be very satisfied that we really think we can achieve it so that the change does not prove, in the end, to be retrograde instead of taking us forward.

In my view, and to put it in a nutshell, there is only one objective to be sought, and that is greater effectiveness and greater efficiency in the whole under-taking, using those words in their widest sense. May I put it another way: the objective must be regarded not as an end in itself but as a means of creating an even more efficient and viable and—very important—happy company. If we can achieve that, it will be better for everyone concerned. It will be better for manual workers, all other workers whether technical or administrative, shareholders, customers, suppliers; and indeed it will be better for every other person who, in one way or another, is oncerned with, or dependent on, that company. It will give everyone in the company greater security and contentment, a greater sense of purpose, greater pride in achievement, improve morale and confidence, and generally enhance the company's reputation so that all can feel that the whole undertaking is pulling together as an involved, united team. That is what we want. That is what is going to improve efficiency.

I have no hesitation in saying that there are a great many boards—I was particularly interested in what my noble friend Lord Watkinson said about Schweppes-Cadbury—which are well on the way to achieving this sort of high standard, but one must also agree that there are many boards which have not reached anything like that standard, that some have not even left the starting point and that others have further to go. But none would deny, whether they are at the head or back of the race, that there is always room for considerable improvement, and if improvement can be gained by the introduction of worker-directors, then I say we should let that be where we set our sights.

During my last year at Harland and Wolff, as I have mentioned, we were under mandate to come to an agreement with the trade unions for including worker-directors on our board. I was a real protagonist for this move because I felt it was the right thing for our company in the circumstances. Obviously I saw many pitfalls, and my experience has led me to certain subsequent conclusions. By 1974 we were already working on greater participation at various levels below the board. I am bound to agree that up to then we as a company had been well below the best current practice; there were historical reasons for this, long before my time, but I will not mention them now.

Eventually we established a joint consultative council over which, to sound a personal note, I had the privilege and great satisfaction of presiding for the inaugural meeting and the next few meetings, until I was able to hand it over to the new managing director we had just appointed. We also established joint productivity committees in different shops right down the line to the floor level, and we had a very important committee consisting of the chairmen and secretaries of the various sections of different trade unions within the yard. This was immensely important, and all this activity was being developed with some success and all the other activities were being improved.

Even so, it was clear to me that there was still a wide gap between what we had been doing below board level and what would happen at board level with the reconstituted board. The reconstituted board was finally agreed with the trade unions and the Government; I admit that I should have preferred that we could have agreed it between the trade unions and ourselves without the Government, but that is another story. The type of board we finally agreed was a unitary one—one-third worker-directors, one-third executive directors and one-third external directors (we may call them non-executive directors) plus a chairman—and, after I left, a further joint implementation committee was established to bring it into being.

Before I can complete the story, I must say something about the operation of any board such as one with worker-directors. It seems to me that the question of there being two sides of industry represented on a board or some level of polarisation on that board must be done away with; that concept must have been lost on the way up the participation ladder—lower down throughout the company—so that all members, when they come to the board (be they worker-directors, executive directors or non-executive directors) must be able to meet as equal colleagues, have the same sense of interest and the same sense of responsibility, even though they are able to bring to bear very different and valuable experiences.


My Lords, I wonder whether my noble friend can say something about the remuneration of the worker-directors.


My Lords, that is a very difficult point. All I can say on remuneration is that I and my colleagues on the old board were of the opinion that the worker-directors should have the same remuneration as any other director. But that, apparently, was not the view of the then Government in Belfast. The point had not yet been decided by the time I left. There were various suggestions as to how it might be dealt with. I remember very clearly that one suggestion was that the worker-directors should have the same fees but that they should not be allowed to touch them. The fees would be put into a fund to be used in some way for worker or employee purposes. How-ever, that was not finally decided. I shall perhaps come back to the point that my noble friend has raised when I tell your Lordships what the outcome of all this was.

Before my noble friend asked his question, I had been going to say that a seat on the board must on no account be sought as a means of elevating controversial discussion that goes on at the negotiating table or elsewhere to the highest level of the company. The whole concept of worker-directors should not be considered in any company unless and until there already exists at lower levels of the company a real spirit of participation from which has grown an understanding and a degree of good will that makes a move up to the board not a difficulty but a natural and welcome next step.

I believe it follows that anything like the blanket Statute which I interpret the Bullock Report to be advocating in spite of what the report says in paragraph 6 of page 161, which speaks about the ballot, is just not on. Every company should be allowed to proceed in its own way and at the pace which is likely to suit it best, whether it be by way of a one-tier board, a two-tier board, some other formula or no formula at all—that is, by some ad hoc mutually agreed arrangement. It may be that I am regarded as rather naive for talking about what I regard as the idealistic approach. It may be suggested that I am paying no more than lip service to the appointment of worker-directors. But I hope that your Lordships will accept from me that that would be an entirely wrong interpretation of my intention.

I am not at all keen on the Bullock proposals, but I feel that one must give some credit to the Committee for having assembled a great deal of very relevant material. It must have taken a lot of effort. Your Lordships may not know, but I was the chairman of two major Government Committees of Inquiry and I know the enormous amount of effort that it took to assemble the material which they needed. I feel that one must say, "Thank you" to Bullock for having assembled this, even though there are serious gaps and a lack of balance which have led the majority to conclusions which I cannot possibly support. For instance, there is not nearly sufficient emphasis placed on the role and position of management at all levels, or on the damaging effect that these recommendations may have upon management, particularly at board level.

In my view, the Committee seems far too ready to accept the inevitability of conflict on controversial matters, whether it is between labour and capital on the one hand or between labour and management on the other. That tendency to expect controversy seems to paint an entirely wrong picture of British industry today. It paints a picture that is far less harmonious than is in fact the case, as other noble Lords have pointed out. It merely seeks to continue the picture that we often get from the media, who produce what to them is newsworthy and which is usually the acrimonious aspects.

The majority report is obviously too formalised. I do not agree with their conclusion on page 161, conclusion 6, where they say that the plant ballot gives, in their view, a good compromise between enabling and mandatory legislation. It may sound very well, it may appear that that was to be the case, but I am quite sure that in practice when it came to be invoked it would amount really to mandatory action. On the other hand, I definitely agree that some legislation is called for. For instance, I agree with paragraph 38 of the report, on page 84, where it deals with the fact that when directors are formulating their policy and decisions they should take into account the interests of employees as well as of shareholders. Of course, as has been mentioned by many noble Lords today, most good chairmen already see that that is so; but if it is argued that that may not be strictly within the Companies Act, then I say let us have the Companies Act altered to put that right.

I would also agree that legislation would be helpful to cover and encourage participation at lower levels. And I would go further, and I would suggest that there could well be within the legislation some clearly defined intention that this initial legislation—and let it be fairly soon, as other noble Lords have said—should be intended to pave the way for companies to have worker-directors on their boards. The phrasing of such an intention would be a difficult matter. It would have to be very broad and certainly not go into any detail as to the type of board. That must be left entirely to the individual companies.

I should very much have liked personally to have the opportunity of seeing right through the introduction of worker-directors on to our board. I should want, however, to have been left to settle it myself within the company, with the trade unions, and not to be interfered with from outside. If we had come to an agreement it could then have been put to a general meeting, and I hope approved; and as we had only one shareholder, the Government, I think that it would not have been too difficult.

But I would have addressed to myself two words of caution, which I should like to address to your Lordships this evening before I sit down. The first deals with manual workers—potential worker-directors—and the other with executive directors. Bullock rightly rehearses the problems that potential worker-directors will have to face: problems of divided loyalties and responsibilities, the difficulty but absolute necessity of continued credibility with their own constituents, and so on.

How real these difficulties are is, I think, evidenced by the fact that I want to mention to your Lordships now. When I left Harland and Wolff in November 1975, the form of the board was settled and there was every intention that worker-directors would be in the saddle, in their place in the boardroom within a couple of months or so. That is now 16 months ago, and worker-directors have not yet been elected. I am not saying that in any cynical way. I am not saying it in any critical way. But I believe that whatever the factors, all of us who are interested in this question should consider very carefully what has gone on in that particular company during the past 16 months, because I think that we should find it most interesting. We should study it not only carefully, but with very considerable sympathy.

My second point is that under Bullock many executive directors will of course lose their seats on their boards because they will be supernumery to the new formula. This alone would undermine morale in management; but when, in addition, it is suggested—and this in on page 102 of the report, paragraphs 34 and 35—that if an executive loses his status as a director, so that his contract is abrogated, but otherwise the company is prepared to keep in being his terms of employment below board level, then if that executive director decided to leave the compensation to which he had a contractual right would be severely limited, that really shocks me most terribly. It shows a complete lack of human imagination and understanding of the feelings of the man who is expected to continue his daily work, but in the embarrassing and often humiliating position of having lost the director's status he previously held. It surely would be far better for such a man to leave that company and go to an entirely new company, and be able to start afresh without the stigma of having lost his directorship.

I can clearly call to mind two individuals in Belfast—I will not name them—whose case absolutely fits the situation I have just outlined. These two individuals left prematurely because, under the formula which was agreed by the Government, there were to be only so many executive director positions. There was no provision for transition, so that if there were too many at the time the process started one or other could be dropped off in due course; they had to go then and there. Both these people came to me and said, "We really cannot stay; we must go". While one realised it was not doing the company any good, one had to sympathise with them, and they left.

That sort of thing does an immense amount of harm to the good will and morale of management; and if anything else is needed for a big move to worker-directors, a big change in the composition of the board, it is good will—good will from everyone; from management, from manual workers, from shareholders, from all with whom the company has to trade. That good will is an absolute necessity if the changes we are now discussing for our boards are to bear any fruit at all.

My Lords, I will conclude with one quotation which I think absolutely fits the problems of a board: every kingdom divided against itself is brought to desolation", and that is what will happen unless a new board starts up with complete good will from all concerned.

9.43 p.m.


My Lords, speaking at this late stage from these Benches, I feel it is my duty to be short. At the same time, there are perhaps a few things which, though they will not be new in this debate, are worth saying. I can mention them only on behalf of myself, but I think they may represent views widely held here. May I first congratulate our maiden speakers. I think one may say that both the noble Viscount and the noble Lord, Lord Elibank, were remarkably articulate and confident, and original in their contributions, and we hope we shall hear from them often again. I should also like to express indebtedness to the noble Lord, Lord Carr of Hadley, for enabling us to have this extended debate on a most important matter which needed discussing.

My Lords, my speech is fortunately very much shortened by the speeches of the noble Lord, Lord George-Brown, and the noble Lord, Lord Shackleton. This is a very gratifying experience, because both distinguished noble Lords have at one time or another been advised by me, though, fortunately for them, not on industrial relations. The noble Lord, Lord George-Brown, gave his opinion in language which I could hardly have used myself; but I would add that, quite frankly, if I had received the Bullock Report in my capacity as a senior civil servant at that time, I should have sent it back to the Department and said, "Who has sent me this unfinished document?"

In extenuation of the document, I think that one can and must say that the Committee in a way did not have a chance because it was asked to base its report on the acceptance of the idea of a radical extension of industrial democracy. I must say that if I had been given that mandate, I think I should either have returned it or asked for a great deal more explanation as to the work of the Committee. It was an unfair burden to put on that Committee. If the noble Lord, Lord Bullock, whom we all admire as a scholar and historian, had been a hardened politician, he might have refused the assignment; but, gallantly if misguidedly, he went ahead in the very limited space of time allowed him. We must have some sympathy for him.

I must say that I took what I think was the right course of reading the first ten chapters at one sitting. It seemed to me that that would give the best impression of what it was really like. I must confess that when I got to the end I had gone through a world that I simply did not recognise. I am not a director of any long term or of any great number of companies, but after seven years I know a little of what happens, and there seems to be no relationship between what was described in those chapters and what went on. I do not need to elaborate on this, because all the points have already been made by other noble Lords, but the particular item that I would wish to underline, as other noble Lords have done, is the complete mobility of the concept of director, manager and so on, and the degrees of responsibility that they all have within the greater responsibility of simply making the show work in the general interest.

My Lords, there are perhaps one or two points on which I should like to intervene, again just to show where I am sure future reports will have to do rather better. There was the point about consumers. The report says in page 55, paragraph 44: We do not believe that boards representing labour and capital could, even if they wanted, pursue profit without regard to the interests of the consumers. But that happened a few weeks ago in the circumstances of the strike of drivers of lorries carrying bread, with the employers, in order to go on selling bread, and the drivers, in order to keep up their earnings, conspiring together to keep the price higher against the interest of the consumers of bread.

Then there is the question of the German system, which was the subject of much discussion. The report in page 68 says that this is the operation of a system where a supervisory board and a management board are roughly divided between the different levels of management. That is a direct rebuke to the rest of the report in its sketchiness about management. But having set out what is very briefly the essence of the German system, the attitude of the Committee, without any great explanation, simply seems to be: "No SB for us! We are British". Really, no great argument is mounted against this system of getting worker-directors on the supreme policy board, except that it does not seem to be what we are used to. With great deference to my noble friend Lord Kings Norton, with whom I practically never disagree, I do not think that the fact that we are not used to it is a very good argument against it. It may be that people running their industries rather better than we have something that we have not; and not the other way round. We should approach the EEC system not only with a certain comradeship with our fellow Members but also with a little humility about our own performance.

I should like to sum up this brief intervention by saying that I hope that the Government will accept that there is a great need for much more work on this subject in the sense of what a committee could do if it were really experienced and expert, if it had enough time, and if it had a certain determination to agree or to come as near as possible to agreeing. All these ingredients were absent in this case which unfortunately has made something of a shambles of the report. One must do it justice, however. It has given us an opportunity for this exceptionally interesting and valuable debate.

If I may make one more point on an intervention by one noble Lord, who asked what the noble Viscount, Lord Watkinson, had to offer out of what he had to say. The short answer is success. It seems possible, with good leadership in industry, to work out pragmatically a form of worker or employee participation which works. That may not be adequate for a general application. There obviously are expressions of power, intention, prestige and, indeed, participation, which may require more than that. I do not think that we should dismiss any form of participation and working together as impracticable or inadequate if it is susceptible of further development.

I hope that the Government will arrange the machinery for more study on this matter. If, as would be right, they then publish a Paper, they should bear in mind that the colour matters supremely. I think some noble Lords did not think it mattered. We need some kind of consultative paper which will be debated in whatever forum is available. There should be no limitation of access to any committee that was formed for the consideration. It is far too important to say, "You and you can attend, but that is it". It must be open, on the lines of the American committee system, to anybody who wants to come and say his piece.

Document No. 1 of any body that might be set up should be the Hansard account of this debate, because so much of what is needed to be known has come from your noble and expert Lordships this afternoon. That would be a very good jumping off point for any future discussion. Perhaps the noble Lord, Lord Oram, could say something on this point: after the noble Lord, Lord Kirkhill, opened for the Government, I had another look at the report. I am still baffled about where the so-called trade union monopoly comes in. I do not think that the expression is a good one. At what precise point is it that the non-members of trade unions appear to be umpired off from this business? The noble Lord, Lord Kirkhill, gave us a little hope that the situation might be better than the report suggests. I also have the impression that other noble Lords are not clear what the Government are saying on that point. My Lords, it has been a privilege to participate in this debate which I am sure will bring about great things in the future.

9.54 p.m.


My Lords, I should like to endorse what the noble Lord, Lord Gore-Booth, has said, particularly before he asked his question, that this is a good starting point for something better. The debate has been a disappointment in one respect; there have been so many speeches from this side of the House and the opposite side of the House which, on the whole, reflect the feeling that the Bullock Report is a bad one. There have not been many speeches saying what is good about it. I hope to bring out something good as I proceed with my speech, which I am sure noble Lords would be delighted if I hurried.

In particular I was disappointed by the introduction by the noble Lord, Lord Kirkhill. What he said was just as disappointing and absolutely a repetition of the public statement which was made when the Bullock Report was published. I hope very much that, in closing, the noble Lord, Lord Oram, might take into account some of the remarks that have been made which, on the whole, have endeavoured to be constructive, and give us a slightly different view of how the Government might be going to act in the future.

I think we should be most grateful to my noble friend Lord Carr for having introduced the subject at this stage—good and early, while we are all thinking about it, which will give us a lot of food for thought and an opportunity for developing arguments for putting before the Government, as requested in the report. I should like also to congratulate the two maiden speakers. My noble friend and colleague, if I may so describe him, Lord Trenchard, I have heard before as an after-dinner speaker. I think it is rather a pity that until today he has spared himself from using his great qualities as an orator in our presence. I thought that his was a splendid speech, and I am also very proud that my noble kinsman, Lord Elibank made such a splendid speech that he fooled the noble Lord, Lord Brown, into thinking that he had addressed your Lordships' House many times before.

I hope not to keep your Lordships too long, but I venture to speak for one or two reasons. I suppose the main reason is that in my last job I worked for a training board, which is as near a mirror image of a 2X+Y management situation as you can find. I would suggest to your Lordships that perhaps this is a somewhat unique experience for all those who adorn this Chamber, and I should have thought that perhaps some of the experience I gained in that job might be of value.

Your Lordships will remember that training board membership, by Statute, represents an equal number of employers' representatives and employees' representatives, with a lesser number of educational representatives to make a balance. That really looks rather like 2X+Y. I am not in any way "getting at" my noble friend Lord Carr, who is known to be the father of the training boards, because in introducing this subject I am sure he did not think of it in quite the same respect. Indeed, close as the similarity may be between these two formulae, I would urge your Lordships not to read too much into it, because there is a world of difference between a non-profit-making body under-pinned by State support and a free enterprise company subject to the rigorous financial disciplines of the market. It is quite fundamental to the thinking that I believe one must give to this particular point.

What the experience of working with a board has done for me is to accustom me to working with trade union officials in a managerial role, which I rather gather that my noble friend Lord Rochdale was about to experience but never did. I learned, of course, that trade union officials are nothing like as ineffective and partisan as some people seem to believe. On the contrary, people with a trade union back-ground often bring welcome and practical sense to the problems and discussions which take place on a board.

On the other hand, it was clear to me that experience as a trade union representative in many cases is not a good preparation for a top managerial role. Indeed, when one reflects, why should it be? The needs of the two jobs are totally different. Thus, I urge your Lordships to view with considerable scepticism the sections of the report which imply that any old elected shop steward, with a little training, can walk straight into the board-room and make a worthwhile contribution. Some might, but I fear that most will not.

If I might now turn to the details of the report, there are so many flaws in it that one hardly knows where to begin, but I have picked out a few of the most important. First, there are the terms of reference. Many noble Lords have referred to these but I must refer to them myself, because these surely are the principal reason why the report is so strongly biased, and why the conclusions have resulted in a one-sided majority report, with an important note of dissent and a strong minority report. These three alternatives surely show that the report is a most inadequate basis for action. When, many years ago, I did a staff course, the one cardinal sin that we were warned against when learning to do appreciations of situations, and indeed when writing any form of study paper, was situating the appreciation. This is exactly what the terms of reference have done, and I am sad to say that as a result the study is made fairly worthless.

Secondly, in this very important development of company management, it is surely unwise to press for the report to be completed in a time limit as short as a year. There was a need for a much more careful consideration of the issues involved, and of the effects of the various proposals on ordinary people, before the conclusions were reached. As a result of these two mistaken starting points, inspired by the Government, the report inevitably has many basic failings, but I will single out three of a general nature for comment.

The first is the elaborate arithmetical machinery which has been devised for putting the recommendations into effect. When encouraging social change of any kind, it is surely unwise to devise a scheme in such detail, apparently trying to anticipate every organisational difficulty that may arise. Even within the 700 enterprises concerned, there will be vast differences of detail in organisation and in attitude. The scheme which is best for some will be detrimental to others. It would seem that Mr. Wilson in his note of dissent and, more especially, the signatories of the minority report recognised this.

It might be relevant at this point to remind your Lordships of what I believe to be a profound quotation from the introduction to Trevelyan's English Social History, where he is reviewing the whole scene of social development in this country at a time when we were collectively and justifiably full of confidence. He said: On the whole, social change moves like an underground river obeying its own laws or those of economic change, rather than following the direction of political happenings that move on the surface of life. Perhaps we would be wise to ponder this thought before introducing yet more social legislation.

The second failure in the report is the proposal to limit full voting within an enterprise to the initial choice of whether or not to adopt a system. Surely we have discovered during the past 100 years or so that one of the cardinal features of true democracy is universal suffrage, slow though we may have been to introduce it. I recognise that trade unionists do not think it is fair that non-members should have equal treatment in all respects to those who bear the heat and burden of collective bargaining, and in such bargaining situations the argument has much validity. I suggest, however, that the democratic election of employee-directors is not collective bargaining and this brings me to my third point.

The third weakness is the proposal that ordinary people will be able to be both practising shop stewards concerned with the wellbeing of their members in bargaining situations, and at the same time directors of a company. There may be a few gifted individuals who can cope with the divided loyalties which will inevitably result, but I suggest that most of us, when confronted with such situations, have found that it is impossible to serve two masters—as, indeed, the Bible tells us.

I was going to leave it at three shortcomings, but there is a fourth. I have a little note which reads, "McCarthy corporate collective bargaining in the board-room". If ever there has been a more ridiculous statement, that a board room can function if it has corporate collective bargaining within it, I have not heard it. If that is the implication of the report, with the greatest possible respect I must say to the noble Lord, Lord McCarthy, that that condemns it, if nothing else does.

Having touched on the shortcomings of the report, what can we find in it that is good? I suggest that the first point which is good is that it is very well written. I found myself reading it all night, which is more than one can say for most Government-issued documents. It is a little difficult to refer to afterwards because it reads so felicitously—no doubt owing to the scholarship of the chairman of the committee. The report is easy to read but difficult to refer to; but perhaps other noble Lords have not encountered that difficulty. The most important feature of the report is that it has accelerated the consideration by enterprises of the need to introduce some form of industrial democracy. Surely this is good. However, as your Lordships will know, many firms are already moving in that direction and approach the problem in ways which are best designed to meet their own affairs.

I suggest to your Lordships that the conundrum which is before us is how to harness these moves in the way best designed to encourage them to develop rather than to impose upon them a theoretical basis which, for all kinds of reasons, some of which I have touched upon, are most unlikely to apply to the individual company, and to harness them in such a way that one does not do too much imposing and yet does not allow the momentum to be lost.

It seems to me that the main failing in this country, of which this is but one solution to the problem, is that we lack two-way communication. There are all kinds of methods and easy ways for directions to come down from the top to the bottom, if that is the way to put it—although in these modern times perhaps one should think of communications going sideways rather than up and down. However, there is not enough machinery for the communications to go the other way. We need to pay attention mainly to developing two-way communication. We need also to recognise that this is a greater failing than the ability of people to be able to jump straight on to a board. This seems to me to be the way forward.

While we are thinking about how things should work in the future one point must certainly not be forgotten. Many noble Lords have touched upon it but it is so important that I cannot omit it from what I have to say. There is a real need to consider the position and authority of the middle managers, many of whom are working towards positions on the board the hard way. The efficiency of an enterprise depends greatly on these people. Indeed, in many cases where businesses have faltered in recent years a contributory cause has been the under-mining of the authority of middle management. This has been caused by unions dealing direct with senior management. The majority proposals of the Bullock Report would create just this situation. Indeed, while working for my training board I found that, as a middle manager, there were dangers of that happening to me.

I must conclude by saying that I think industrial democracy is already on its way. If the Bullock Report hastens the process, it will have done good, but the detail of Bullock is partisan and potentially destructive. To be against the detail is not to be against the principle of industrial democracy, and let no one pretend that it is. Let us therefore welcome and encourage movements towards industrial democracy but be wary of legislation at this stage.

Having listened to this debate, it has come into my mind that the answer might be to use the Bullock Report as a basis for a wider examination of the problem. I hesitate to suggest a Royal Commission because they have rather a bad name lately, but something of that order.




If the noble Lord feels that they have not got a bad name, that is splendid. It may be that that is the right answer, and if the noble Lord, Lord Shackleton, nods his way towards a Royal Commission I would go with him. I think there should be something more fundamental which would look in much greater detail at the problem and take rather longer. At the same time, the great point about it would be that while this was going on companies would have this impetus behind them, because the authority of a Royal Com-mission which takes time over a problem is surely greater than that of Bullock, which rushes through a preconceived answer. I would suggest to your Lord-ships that perhaps this is the answer. Something must be done to keep up the impetus, but for heaven's sake! we must not have something which establishes tight rules on the Bullock lines and forces them upon companies whose efficiency will be badly hurt and, what is worse, whose employees will suffer as a result of that sort of application.


My Lords, before the noble Lord sits down, I wonder whether he would agree that corporate collective bargaining in the boardroom is ridiculous. Collective bargaining at company level is perfectly reasonable and ought to be conceded. If it were conceded, we should not have all this talk about corporate collective bargaining in the boardroom.


My Lords, the noble Lord, Lord McCarthy, disarms me because he used the phrase. I picked the phrase from him; it is not mine, but his.

10.13 p.m.


My Lords, the passion which was aroused against Bullock at three o'clock in the afternoon has given way to a universal desire to go to bed, but I must say that apart from two occasions when I raised my hand in a desire to leave the room I have been in this place for 6½ hours. I have listened to most of the debate, but it is a curious thing that the two speeches that I should have liked to hear very much indeed, I missed. One was made by the noble Lord, Lord Elibank, and the other by the noble Viscount, Lord Trenchard. I particularly wanted to hear the latter, because I have something to say about the noble Viscount's father, and it is something very nice.

I was in the infantry through the Somme. I went to the Royal Flying Corps. I had a lot of hours in the line in the Royal Flying Corps and just before the Armistice I was shot down for the second time. I was very seriously wounded—so much so that I was at death's door for weeks. One thing I shall never forget about the noble Viscount's father was that he sent a personal letter to me at the casualty clearing station where I lay. It was read to me in one of my moments of conscious-ness, and I was told that I held on to that letter for several weeks. Who knows?—I might have had my life in my hand. That was due to the noble Viscount's father. He was always thought of as a disciplinarian, but there he was a humanitarian.

During the time in hospital, two and a half years after the war was over, before I could get back into civilian life and back to work, I went to Lewes Assizes. I am going to call in aid a story. Mr. Justice Avory was trying an old lag, a chap about as old as me, and he sentenced him to ten years penal servitude. The old lag looked up at him and said, "Oh, sir, that is a long time and I shall not be able to finish it". Old Avory looked at him over his spectacles and he said, "Well, do your best, my man." This is what I propose to do at this time of night.

What I want to say, in my comments about the Committee, is that unfortunately it was very biased in its terms of reference and in its membership, and as a result the Committee did not get off to a good start. It was not long before it became totally divided. One glaring weakness of the report is the small number of people who gave evidence. On only ten occasions were opportunities given for oral evidence. Contrast that with the 45 times that oral evidence was given to the Plowden Committee which examined the structure of the electricity industry in England and Wales, of which the noble Baroness was a member. Surely the Bullock Committee, with a far larger remit, should have given more time for people to state their case and argue it in front of them. This has been mentioned before. It should have been done. I know what Nye Bevan would have said about this. I often call Nye Bevan in aid in some of these things, because that man was a very wise politician. I heard him say once that he would rather have one piece of oral evidence, where he could see whether the witness believed in what he was talking about, than ten pieces of evidence in writing. It is human nature.

The response to this Committee has been universally negative, and serious commentators in this country and elsewhere have poured scorn on it. It polarises the CBI and the TUC instead of bringing them together. In fact, the only person in favour that I have met during this last fortnight since the publication of the report was a foreign businessman; he expressed delight that one of his competitors was going to have his arm tied behind his back. He was delighted; he said, "Get on with it". This report is not about practical industrial democracy; it is not about a genuine comparison with Europe; it is not about the practicalities of running a company. This is an unmistakable bid for more and more union power—let us face it—and that to be vested in the hands of the shop stewards. But will this transfer of power mean that employee representatives on the board will have some responsibility for disciplining or controlling the shop stewards when they are bad boys? Noble Lords should ask themselves that question.

This report has been given the high-sounding title of Industrial Democracy, but some of its recommendations are far from democratic. What about the white collar workers, the blue collar workers, all those junior managerial grade chaps? It would be a folly and a travesty of justice to disenfranchise them. The Bullock Committee called in aid an analogy between its proposal and the great Reform Acts which extended the franchise. I was interested in the remarks made by the noble Lord, Lord Brown. We should take a bit more notice of the noble Lord. In the past many people had the idea that he was a bit of a crank; but he has many good ideas—make no mistake about that. I promised him that I would say that, but I do mean it.

However, this case is quite different. Under Bullock whole grades of workers could be excluded from representation because they are not unionised. It should be borne in mind by these historians that every extension of the franchise, from the granting of the householder's qualification in the last century to the present time when young people can vote at the age of 18, has been accompanied by more and more bureaucracy.

In the early paragraphs of the report Bullock used German and Swedish industrial relations successes to justify board representation in Britain—quite right too. But later in the report he rejects the German and Swedish methods because too much authority is given to management and too little control to employee representatives. However, Bullock again calls in aid the German example when he says that investors are not afraid of investing in Germany. The noble Lord, Lord Kirkhill, did nothing to dispel the feeling that this was a specious argument used by Bullock. Perhaps the Minister who will reply will direct some straight thinking to this matter. One cannot call in aid an example to get it off the ground, then suddenly turn round, reject it, start all over again and call it in aid when one needs it.

What about this German comparison which Bullock used when it suited him? To begin with, the Germans have only 16 unions and very often they operate with only one union to a plant. Their unions accept and work within a framework of law that makes collective agreements legally binding and many categories of strike illegal. They separate the management board from a supervisory board on which worker-representatives sit and the supervisory board can appoint or dismiss the managers. The Germans require representation from all the main groups of employees—the white collar workers, the blue collar workers, the junior managerial grades, the lot.

Many of the proposals contained in the report are wrong in principle—they show no understanding of how a board works. Boards in large companies are not run like local councils or old-style Co-op committees. Old-style Co-op committees ring a bell! I met an old employee of mine at the weekend, and he said in conversation, "What do you think about Bullock?". I said, "I dislike it. What do you think, Joe?". He said, "It reminds me of Dobcross Co-op". I said. "How come?".

To put the story in context, we have several villages, but Dobcross is a very hillside one. He said, "There were two Co-ops in Dobcross. One at the bottom and one at the top. They call the bottom one 'bottom shop' and the other 'top shop', but they also gave the name of 'blue Co-op' to the top shop. The bottom shop had a lot of committee men, and all they did on that committee was see to it that their employees did not have any more wages than they got in the mill. And they also put a brake on the manager when he wanted to buy something extra. They said, 'No, you must buy what you bought last week and then we will know that we can sell it'." Joe said. "The top shop has four committeemen and one was the manager, and they always paid more divi, and they always had more choice". Joe said that his mother often sent him to the top shop, although she was a member of the bottom shop, because they had more choice. But she always said to Joe, "Don't tell your father when he comes home tonight", because otherwise he would have got a hiding.


My Lords, may I ask the noble Lord a question? Is the view that he is now expressing on the Co-operative movement the view which he really holds at this present time?


No, my Lords, certainly not. I have a lot to thank the Co-op for, because it was the Co-op who found us a house when my father and mother were put out on the "flags" with six of us because they wanted the house for the coachman, and the Co-op did that. What I will say is that it was through the fire in the belly of about half-a-dozen men—and you were one of them, if I may say so to the noble Lord, Lord Wilson—who really got the Co-operative movement going again after the war was over, and a lot of its success is due to just a few people.

The duties of a large company board are not first and foremost representation and voting. They are there to make decisions, very often in commercial situations needing a speedy answer. How can a board work in these circumstances if it has a block of special interests that has a duty to report back? A board cannot work properly if it is a cockpit for extended collective bargaining either, and in this matter the Germans have it right. They have a vital and fundamental system of consultation at works level together with economic committees which involve employee representatives in the business policy of the enterprise.

I was in Venezuela last October on a Parliamentary Union visit. There had been a successful bid for a bar mill and a rod mill for making steel in Venezuela that we lost. I was interested to know that the big delegation that went out to talk about that project included one of their members from an economic committee which involved the employee representatives in the business policy of the enterprise. Surely there is a lesson to be learnt from that. Employee interests are safeguarded, but above all they have a management board which manages, and a supervisory board to which it is accountable.

The Committee has not grasped the fact that there is a difference between a company employing 2,000 and one employing 10,000. It has not grasped the fact that there is a difference between a company with 2,000 in one place and a company with 10,000 employees spread over 100 places. I will give an example. Take a large company with 100 factories, some employing 1,000 and others 10,000, with 20 unions. This is a practical consideration. For such a company, the statutory fallback according to Bullock would be seven employee representatives. How on earth could seven employee representatives create any kind of satisfactory reporting back process? It really is absurb. Any MP will confirm that in those circumstances reporting back would be just an illusion.

Even more important, the Committee has not grasped the fact that there is an enormous difference between industry on the one hand and industry in its structural needs on the other. This is what Plowden said: We do not believe that there is a single system of worker representation which could be applied to all industries. Worker representation on the board should not be based on abstract ideas but on the genuine needs of employees and the industry. In 1950, when I was sent to the Board of Trade by the late Lord Attlee, when Sir Harold Wilson was President of the Board of Trade, the big thing was statutory backing for the development council concept. Harold Wilson was full of the idea and he was going to Harrogate to a cotton board conference. He said, "I'm going to see to it that the wool men toe the line on this; they are going to have a development council". I replied, "You won't, you know". And when he asked, "Why not?" I said, "If the wool men say they're not, they won't. You can take their businesses away from them and it won't make any difference". He asked, "What shall we do, then? I'm going to Harrogate next month". I replied, "Ask them to come and see you and talk it over".

There then began one of the most fruitful associations between industry and Government we have ever seen, and it still applies. One of the first industries able to send back its particulars after it was asked for them—this was after the publication of Strategy for Industry and the 1975 conference at Chequers—was the wool industry; it was the first to send in its planning particulars. I do not think one can improve on what is said in paragraph 8.24 of Plowden: In our view employee participation will only work if a substantial number of workers want to make it work and are ready to accept their share of responsibility for the industry. Schemes for participation can be imposed from outside but the moral commitment which alone can make them worth while must come from within. Any moves in this direction should have the collective agreement of the industry's employees. It is Ash Wednesday today, a very important day in the life of churchmen, and I happened to notice in the Prayer Book what is the Scripture for today: Blow the trumpet in Zion, sanctify a fast, call a solemn assembly, gather the people, sanctify the congregation, assemble the elders, and let them say 'Spare thy people, O Lord, and give not thy heritage to reproach.' That is our responsibility in the months ahead. There has never been a more serious time in the history of this country. It will need all the wit and wisdom of both labour and management and the public generally coming together to weather the storm that is upon us. We can very well say, "Spare us, O Lord, and give not our heritage to reproach."

10.36 p.m.


My Lords, I must apologise to the House for not having been here at the beginning of this debate, and particularly to my noble friend Lord Carr and others who spoke early for not having heard their speeches. I ought probably also to apologise for presenting the House at this late hour with what must be an anti-climax after the wise and entertaining speech of the noble Lord, Lord Rhodes.

On reading this report, I could not help being reminded of the apocryphal civil servant who ended the presentation of a case to his Minister with the words, "And those, Minister, are the opinions on which I base my facts." In this report and in the consideration of it, there is really some danger of not seeing the wood for the trees. That is largely because of its biased terms of reference—biased in favour of trade unions, strongly biased against the professional manager.

I hope that your Lordships will allow me, even at this late hour, just a few minutes in which to direct attention to one or two basic issues. I hope, in doing so, not to overlap too much upon what has already been said. I suggest that we need to keep in mind the fundamental objectives of any change that is made in the organisation of industry. The first objective must surely be to make industry more efficient and more profitable; the second must be to provide more satisfying employment to all who work in it. I do not believe that those two objectives are unrelated: certainly, they are not. Nor do I believe that those objectives are in conflict. Of course there are other considerations, but they are secondary or embraced in those two objectives.

So we need to judge the recommendations in this report against those two objectives. However, we must first clear away the misunderstandings and complications that arise from the use of the words "industrial democracy". The Oxford English Dictionary defines democracy as: That form of government in which sovereign power resides in the people. So it is clear, as has been pointed out many times today, that this report with its recommendations is about power. It is not about efficiency or about people getting more satisfaction out of their jobs. It is about power. Unfortunately, the expression "industrial democracy" has received a lot of publicity and is now widely but loosely used. I suggest that it needs a little further examination. Does it mean giving to all employees direct influence on decisions through voting by representatives by some kind of referendum at intervals in the conduct of business? If so, it must be opposed root and branch because it will lead neither to greater efficiency nor to greater contentment in industry.

In industry, just as in making shoes, the cobbler needs to stick to his last. That has been made very clear by many speakers today. We do not need amateurs. We must have professionals, experienced people to direct and manage companies. On the other hand, does it mean participation by all employees in the decision-making process through involvement wherever they can make a constructive contribution to the decisions to be taken? If that is what it means, then it has my full support, and I believe that it would have the support of everyone in your Lordships' House. If that is so, then we need to seek the best means to make that policy effective.

May I give your Lordships just one short example of what I mean? It would not be any use asking the financial director of a company to become involved in a discussion on how to make a new tool. It would be equally stupid to ask a toolmaker to become involved in a discussion on the issue of a new debenture. Neither of them could contribute constructively to those discussions. But it would be very sensible, and indeed highly desirable, to get them both around a table for a discussion on the development, design and manufacture of a new product, because each could contribute a lot to that discussion.

Whatever we do we must ensure the continuing authority of management in industry to enable efficient and timely decisions to be taken. But in saying that I should like to make quite clear at once that I reject utterly the expression "the right to manage". I do not believe that those who work as managers in industry have any right to manage at all. We certainly have a duty to manage to the best of our ability, to manage the resources entrusted to us, and to make the best use of them. But we are able to manage efficiently on a day-to-day basis only with the respect and the enthusiastic co-operation of all those who are involved.

But combining the authority needed to manage efficiently with effective employee participation and involvement in the decision-making process is a very difficult art. It cannot be achieved at a stroke. It cannot be achieved by law, least of all by coercion by law. Surely the Government ought to have learnt that, as other noble Lords have pointed out, through the experience of the Industrial Relations Act. It seems a tragedy if we are to repeat that mistake and bring in coercion and the law to force this kind of structure on industry, against the wishes of vast numbers of professional managers.

The practice of that art is possible only against a background of a clear, positive industrial relations policy. It often needs acceptance by management of an entirely new management philosophy. It often needs acceptance by trade union leaders of a new trade union philosophy. It is not at all easy to achieve. Managers and trade union officials are often very conservative, with a small "c". They are sometimes very slow and reluctant to change. If involvement is to be effective and achieve anything constructive, there needs to be a very wide exchange of information at all levels. That is vitally important if participation and involvement is to mean anything. You cannot become involved in things that you know nothing about, so the flow of information has to be up and down and sidewards. There have to be explanations and discussion. It is all immensely time-consuming, but it is all immensely worth while. It is time-consuming because it means meetings, visiting, talking, writing, morning, noon and night. If you are going to make the impact that needs to be made in a fair-sized company there is no alternative.

Of course the establishment of works councils, of committees at various levels is of great importance, as the noble Viscount, Lord Watkinson, has pointed out, and can make a huge contribution in dealing with the problem. We have found in our company the establishment of briefing groups—small numbers of people brought together and told the present position, asked their opinion about future plans, and involving feed-back of the views of people at every level on the shopfloor, in the office and at all levels of management——to be a very useful means of passing information, of obtaining opinions and getting people to share in the decision-making process.

But often progress is too slow, often it is frustrating, for neither managers, trade union officials nor employees can be pushed faster than a certain rate along a road of new ideas and new philosophies. As others have pointed out, it needs some of the old-fashioned leadership and example which is sometimes perhaps not accepted today as being as important as it used to be. It needs trust in people's judgment and in their integrity. They are all vital constituents to success, but success in what? It is success in making industry, I believe, more efficient, more profitable, through more enthusiastic and greater understanding co-operation of everybody who works in it; in making it a better and a happier place in which to work. But the law can contribute virtually nothing to all that. It is certainly no place for detailed legal interference at board or any level, as proposed by the majority of the Bullock Committee. It is a fallacy—a real, dangerous fallacy—to think of directors as representatives of shareholders intent on looking after their interests alone, vitally important though the shareholders are as providers of capital.

My Lords, as I see directors working in a company employing some 20,000 people here and 5,000 abroad, we look at every issue against the effect of the decisions we take on the continuing prosperity of the company as a whole, in the interests of the employees, of the shareholders and of the customers, and in the interests of a continuing, prosperous business. We do not vote, we do not negotiate, we do not have collective bargaining. The idea is really absurd. There is no room in such discussions for representatives of sectional interests. There is no room for the introduction of collective bargaining between groups of directors. But there are two areas, I believe, where changes in the law could be useful; first, to clarify the legal position of directors, to make it clear de jure as well as de facto, as it is now, that they are responsible for the continuing prosperity of the company as a whole, and of everybody connected with it. Secondly, to ensure steady progress along the path of greater involvement for all employees, and participation by them in the decision-making process, by companies which are too slow or reluctant to go along that road.

Both those points, it seems to me, are very well covered and supported by the policy and proposals of the CBI; and it is encouraging to see that the Prime Minister seems to be becoming converted to the importance of participation and involvement by employees below board level, to take away the concentration on employee directors elected by trade unions to the board. I hope he will proceed further along that road and will ultimately reject the majority proposals of the Bullock Committee, and will make it clear that he does so. It will be very interesting to know, when the noble Lord replies to this debate, whether the Government have now decided to set their face against the passing of detailed laws in this highly difficult and complex field. Is that the new trend of Government policy? It will be very interesting to hear if it is. For myself, I hope it is, because that would show that the Government have done what they are always telling us in industry we should do: they would have listened, have consulted, and shown it had been effective in changing decisions which have been taken.

So let us get away from a consideration of power and the law. Let us get back to common sense; to the flexible approach that the noble Lord, Lord Cooper, advocated and indicated to us that his union, the General and Municipal Workers' Union, advocate. Let us get back to the common sense of letting those who understand these problems at first-hand deal with them—the managers, the trade union officials, the employees. Let them all get together and work out a solution. In addition, we want the minimum interference by the law, and the minimum change necessary to make progress along those lines as easy as it can be. That, I believe, is the way to obtain greater involvement by employees, greater participation, greater efficiency in industry and, perhaps above all, greater happiness for everybody who works in it.

10.50 p.m.


My Lords, it is clear that the whole House is grateful to the noble Lord, Lord Carr of Hadley, for providing us with this opportunity today to discuss this very important subject, and I would accord to the subject the degree of importance which the noble Lord, Lord Brown, claimed for it. I think that we have had an extremely valuable debate, and in the course of it we have had the privilege of listening to the two most interesting maiden contributions from the noble Viscount, Lord Trenchard, and the noble Lord. Lord Elibank.

There are three principles, it seems to me, which are to be found in both the majority and the minority reports. These principles I welcome wholeheartedly. They are, first, that employees should participate in the election of directors in firms over a specified size; secondly, that there should be in these elections parity between share-holders and employees; and, thirdly, directors should be responsible to both shareholders and employees. Those three principles I think are to be found in both the majority and the minority reports. However, the authors of the minority report prefer development towards acceptance of these principles to be on a purely voluntary basis. I think that this was also the point of view of the noble Lord, Lord Harmar-Nicholls, at any rate as I understood it.

So far as I am concerned, I should like to see at least the degree of compulsion proposed in the majority report; and the noble Lord, Lord Kirkhill, described for us the triggering mechanism by which the employees in a company under the Bullock majority proposals would be able to opt for a statutory scheme. I would amend that triggering arrangement if I could by saying that instead of being only a union which had 20 per cent, of the employees in the company in its member-ship, that only that union should be able to ask for a ballot, I would say that a certain specified proportion of the employees, whether or not members of the union, should be allowed to do it. But the triggering process allows a degree of flexibility because employers and employees who have agreed a particular scheme are free to carry it on without interruption if they decide to do so. Indeed, it may be sensible to have a period of delay before the triggering system is even introduced in the first place to see what arrangements could be come to on a voluntary basis before the power to opt for a statutory scheme were available.

I, myself, would prefer a different type of statutory scheme from that advocated in the majority report. I should like to see a lower threshold; for 2,000 employees seems very high and eliminates a considerable section of the population. I would put forward as a suggestion an alternative proposal which I believe would provide the best means whereby the three principles which I have just outlined could be put into practice. All the directors of a supervisory board would be jointly elected under this arrangement by shareholders and employees, each having 50 per cent, of the voting rights and the single transferable vote would be used.

Thus, if all the employee votes were to go to the employee candidates, then 50 per cent, of the directors would be employees; but with this method of election there would inevitably be some degree of cross voting and so no director on the supervisory board would be able to say with certainty, "I represent only shareholders" or "I represent only employees"; and directors would thus be responsible to the company as a whole which would be greatly to the advantage of the company.

We should be opting for a two-tier system and in that we should be in line with the proposals of the European Com-mission for the European company; and I agree with the noble Lord, Lord Elibank, that this is an important factor. I agree also with the noble Lord, Lord Gore-Booth, that we ought to be prepared to consider whether we can learn from what is done elsewhere. In opting for a supervisory board, we should be siding with the minority report in that particular issue. The authors of the main report seem to regard the supervisory board merely as an adjunct to the present system, an additional monitoring body; whereas I find it difficult to see how it could be entirely divorced from major policy considerations. In that respect I have a good deal of sympathy with what was said by the noble Lord, Lord Cooper of Stockton Heath.

We on these Benches insist that in the participation all employees of a company, whether or not members of a trade union should have equal voting rights. Just as I reject what appears to me to be the timidity of the minority report, so I also reject the undemocratic nature of the proposal by the Bullock Committee majority report, condemned so often today, for the election process to be entirely in the hands of the trade unions.

We also believe that industrial democracy is not something which operates only at board level; it must be applied at all levels. We want to see a structure of works councils as an essential counterpart to employee representation at board level, works councils of the kind which have been described to us today by the noble Viscount, Lord Watkinson, and by the noble Lord, Lord Brown. I cannot accept that the trade union structure—vitally important though it is—is sufficient in view of the fact that half the employed population are not union members.

Our aim must be a genuine partnership between shareholder and employee; and in my view where employee co-operatives are established, in which the shareholders are the employees acting collectively, then they should receive the fullest encouragement from the Government. The Bullock Committee reports deal with ways in which employees can share in control; but, as my noble friend Lady Seear pointed out, industrial partnership has two sides to it. One is a share in control, and the other is a share in profit and asset formation. I do not believe that these two aspects should be considered in isolation. They are essentially complementary.

There are objections to both the majority and minority reports of the Bullock Committee. I find myself in agreement with the noble Lord, Lord Shackleton, in saying that I cannot accept either as it stands. There are other ways as I have sought to indicate, of achieving the three important principles which underlie both reports. The noble Lord, Lord George-Brown, told us earlier that we must not make the inadequacies of Bullock an excuse for not going ahead. The Bullock Committee reports focus attention on the whole question of industrial democracy. While I look for a considerable improvement on what is so far offered, I welcome the fact that at last industrial democracy appears to be on the way in.

10.59 p.m.

The Earl of GOWRIE

My Lords, at this hour, an approaching middle-aged man's fancy lightly turns to the thought of a drink—

Several noble Lords: Oh come on!

The Earl of GOWRIE

I am very flattered by the noble Lord. My Lords, we are also all looking forward to hearing what the Government have to say in answer to the debate, whose length reflects the great chorus of anxiety and alarm which has greeted the publication of the Bullock Report. First, I should like from these Benches to add our congratulations to the maiden speeches of my noble friends Lord Trenchard and Lord Elibank—and how honoured we are on this side that they are our noble friends. We are really abandoning, as is appropriate to the age and the political atmosphere in which we live, the concept of the non-controversial maiden speech. Merely to hold the Bullock Report in one's hand is to be involved in controversy. But in the sense that to be controversial is by no means to be discourteous, both noble Lords are in the spirit of our tradition. They spoke much good sense very persuasively, and we all hope that we shall hear again from them before long.

Another tradition of this House is that we try as hard as we can to speak on subjects of which we have had experience. The maiden speech of my noble friend Lord Trenchard was an admirable instance of this tradition. As a former don, who is now a self-employed businessman, I could not be said to have experience working in or administering a company with more than 2,000 employees.

I am inclined, therefore, to approach the subject of industrial democracy with a proper diffidence. But I am fortified by two considerations. One is that neither Lord Bullock, nor Professor George Bain, nor Mr. Clive Jenkins, nor Mr. Jack Jones, nor Mr. David Lea, nor Professor Wedderburn, nor, I think, Mr. Nicholas Wilson (though that may be less certain)—all of them signatories to the majority report—has very special claims to having managed a very large company, either. That seems to me to be precisely what is wrong with, the majority report. The other consideration is that—


My Lords, if I may interrupt the noble Earl, Mr. Nicholas Wilson is a very distinguished lawyer who has advised a very large number of companies in a number of areas.

The Earl of GOWRIE

My Lords, that is precisely why I qualified my remarks when I came to his name. The other consideration is that we are here more or less all involved in politics, and it seems to me that this report is only peripherally involved with the participation of employees in the affairs and fortunes of their companies, which is what—and here I agree with my noble friend Lord Watkinson—that unsatisfactory catch-phrase "industrial democracy" really means. As my noble friend Lord Harmar-Nicholls pointed out, it is a political document. It is centrally involved in politics. It is, as my noble friend Lord Caldecote said, really about power.

The "iron corset" of the terms of reference, the haste with which the document was put together, the preponderance of academics and union officials—indeed, as witnessed by the very names of Jones, Jenkins and, above all, Wedder-burn—the commitment to legislation as part of the Social Contract before the report was completed, the impossibility of complete or coherent agreement even among the signatories of the majority report, let alone the prospect of legislation on the basis of the kind of division we find with the minority report—all these link the Bullock Committee not with other committees of inquiry or Royal Commissions, but with the Trade Unions and Labour Relations Act, the Employment Protection Act, with the various nationalisation measures and price controls: in short, with the whole machinery of the Social Contract.

I contend that machinery is inefficient. It is inefficient because we have not solved, and are nowhere near solving, the highest rate of unemployment since 1947. It is inefficient because, three years after the fall of the Heath Government and the instituting by Statute of the Social Contract, the inflation rate is nearly six percentage points higher, productivity is relatively lower and we have the largest peacetime borrowing on record. That is what seems to me to be the context of the Bullock Report, or of the part of it on which the Government say they will base legislative proposals.

Before I am accused of being merely negative, may I say that I am a convinced capitalist and I believe that participation by employees in the affairs and fortunes of their companies is essential to the survival of all capitalism. I scrawled that remark this morning before having the delight of listening to the speech of the noble Lord, Lord Houghton, when, with much more authority, he said exactly the same thing. I agree with the noble Lords, Lord Brown and Lord Houghton, in the elevation of this subject to a central position in any debate about our economic affairs. I published a little writing to that effect, which has been generally quite well received. My ideas are not in the least novel or original, so I can say that without immodesty. It is surely common sense that in our phase of capitalism the employee must become as important as the shareholder. Indeed, in so many cases he is the shareholder, as the report itself acknowledges, through his participation in the financial institutions of this country by way of bank savings, pension funds, insurance, building society mortgages and the like. As my noble friend Lord Carr said, the interest of the shareholder is only the interest of the man in the high street; or, I would say to the noble Baroness, Lady Seear, the interest of the consumer.

It is not common sense to say that this can be achieved within one Parliament, or even two, still less within two Sessions of Parliament, and at the dictation of men of pronounced political views and very decided political power. Of course there is a place for a legal framework, even if the picture inside it is necessarily an improvisation. My noble friend Lord Carr acknowleged this, with all his experience and authority. The CBI, in the person of my noble friend Lord Watkinson, has done so as well. I would add a small personal note here. I am not myself a great admirer of what I think of as cheer-leading legislation—I think I might be a little nearer to the noble Lord, Lord Byers, in that respect—but I acknowledge that such legislation has a place. As the noble Lord, Lord Elibank, said in his maiden speech, we may need the spur of legislation.

As I listened to the opening speech of my noble friend Lord Carr, I could not help reflecting that one of the ironies of Bullock is that in order for anything approaching the majority recommendations to be enacted, something like the Industrial Relations Act would have to be resurrected. All the comparisons with West Germany, for instance, fall to the ground so long as collective agreements are unenforceable in law; and I am glad that I have the authority of the noble Lord, Lord Rhodes, to bring in that point.

Surely industrial democracy should be a matter for free collective bargaining between workers and managers within each individual enterprise. No private sector company with over 2,000 employees exists that would not welcome a greater understanding of management problems among employees and a greater sense of involvement in the fortunes of the company, whether this involvement were by councils, or seats on the board or shareholdings. The tragedy of Bullock, it seems to me, is that it is using such necessary and evolving participation as a cover for further statutory extension of trade union power.

In all friendliness—and this has been a friendly debate—I warn the Government, and through them the union leaders, that if they legislate on the basis of the majority report their efforts will backfire as much as the other Social Contract legislation has backfired. The workers of this country, whether unionised or not, whether white or blue collar, have other things on their minds at the moment than this imposed blue-print for some academic idea of industrial health and efficiency. They are paid too little and they are paid in bad money; and the money they are paid bears little relation to the effort or the skill they bring to their work. They are taxed too highly, because what the Chancellor calls the social wage is too high; in other words, they are not trusted to spend what they do earn in a responsible way.

It may be that they need better management, but what prospect for entering management in the productive manufacturing sector—as the economists Bacon and Eltis have convinced the Prime Minister to encourage us all to do—does this document offer? The majority report is a positive disincentive to junior and middle management who, as my noble friend Lord Birdwood said, look to career prospects in their companies through merit, rather than through the patronage of a trade union. It may be that more workers wish to be able to join management, and this would indeed be desirable. But what likelihood is there of their being able to do so, if the road to management goes by way of the wage bargaining sector? As my noble friend implied, it is difficult to run with the hare and hunt with the hounds, or, to put it in the words of the noble Lord, Lord Brown, we really must guard against turning the board-room into a totally ineffective negotiating forum.

I would make just one more point. Although like most noble Lords who have spoken in this debate—I can think only of the noble Lord, Lord McCarthy, and the right reverend Prelate the Bishop of Southwell as exceptions—I have been very critical of both the motives and the conclusions of the majority report, I agree with the noble Lord, Lord George-Brown, when he said that we all, on all sides of the political or industrial divide, must not allow the inadequacies of Bullock to become an excuse for not going ahead with worker participation.

I am not at all frightened of the majority proposals of Bullock because I am wholly confident that legislation based upon them will never be enacted. The Government would simply be faced by too much informed and, indeed, loyal opposition. Consider the speeches of the noble Lord, Lord Cooper, the noble Lord, Lord Lee of Newton, the noble Lord, Lord Houghton of Sowerby, and the noble Lord, Lord Rhodes, in this context. Consider also the formidable arguments brought to bear by the noble Lord, Lord Shackleton, as an ex-Labour Cabinet Minister. It seems to me that the Government are too worried by this opposition—the Prime Minister has made heavy hints to this effect and even the speech of the noble Lord, Lord Kirkhill, showed signs of them today—and by opposition among trade unions themselves to be able to get such legislation through. That would need the improbable result of a massive Labour victory at the next Election. Our job, in the official Opposition, as in Parliament as a whole, is to keep this principle before us while uncovering, as I believe my noble friend's debate has today uncovered, a better way.

11.12 p.m.


My Lords, when a month ago the Bullock Report was published and the noble Lord, Lord Carr of Hadley, and I had our brief exchange on the subject in your Lordships' House, we agreed that Parliamentary debate would be an important element of the consultations into which the Government proposed to enter. As other noble Lords have said, today's debate has proved to be a most valuable occasion for this purpose. I agree with the noble Lord, Lord Gore-Booth, that the record of the debate will warrant the closest study and will indeed be an important document in those consultations.

The debate has been distinguished by a great number of contributions which have come from all quarters of the House and from very many noble Lords who have been able to bring to bear their own experience of industry and commerce. Like other noble Lords, I would refer in particular to the two maiden speeches to which we have listened. The noble Viscount, Lord Trenchard, said that when he joined the board of his company no one took any notice of him. I assure the noble Viscount that in this company he has been taken notice of and will be taken notice of in future. As to the noble Lord, Lord Elibank, he made a most impressive speech. I hope it does not embarrass him if I say that I agreed with practically everything that he said. In particular, I noted that he said that one of our objectives should be improved industrial performance by improved motivation, and he linked the whole subject of industrial democracy to that concept.

Perhaps at the outset I may be allowed to indicate my own experience in these matters which, though modest, is, I believe, highly relevant to the issues at stake. For five years I was the chairman of a large retail organisation employing some 2,000 workers and, therefore, of a size relevant to the Bullock Report. Yes, I would say to my noble friend Lord Rhodes, it was a Co-op, about which he poked some innocent though somewhat misplaced fun, and I was glad that my noble friend brought him sharply back to a more realistic assessment of the Co-operative movement in relation to industrial democracy.

The directors over whom I presided in those five years were all ordinary workers—some directly employed by the enter-prise, but others from other forms of employment—and they proved themselves wholly capable of tackling the important range of business decisions which it fell to us to deal with at that time: mobilisation of new capital, the redeployment of existing capital resources, recruitment of top level staff and the expansion of the enterprise through a wide geographical area. We overcame many difficult problems with great success, and therefore if in what I am about to say I betray a certain enthusiasm for industrial democracy with workers on the board I do so because I have seen it work.

Many of today's speakers have acknowledged that this problem of industrial democracy is indeed a complex one and goes far beyond the issue of worker-directors on boards, which is the proposition with which the Bullock Committee was mainly concerned. The debate has revealed that complexity, and during the course of the debate so many separate and inter-connected issues have been raised that it is clear that in trying to comment on the debate from the Government's point of view I shall not be able to deal with them all; but I hope by grouping them to do justice at least to the main threads of the arguments to which we have listened.

First, I will deal with certain themes which have characterised many of the speeches and upon which there seems to be a large measure of agreement, even among those who on certain issues are passionately at variance. I wish to stress this common ground at the outset because, as has been mentioned, the Prime Minister, when he met the CBI last week—and the noble Viscount, Lord Watkinson, in his speech acknowledged this—urged that we should start by concentrating on agreed propositions. But lest your Lordships should be misled by something said by the noble Viscount, Lord Caldecote, when he asked whether the Prime Minister had rejected the proposition of workers on the board, I should say that the Prime Minister did not, as I understand it, go that far. What he said was that the Government would begin the process of consultation with the CBI on participation below board level, but that would not be the end of the consultations. At a later stage in the consultations, the Government would wish to discuss with the CBI the question of employee representation on boards. I see the noble Viscount, Lord Watkinson, nodding in agreement that that is a fair statement of the position.

I was glad that the noble Lord, Lord Carr, in opening the debate, brought the second part of his speech to more emphasis upon a constructive approach to this whole question, and I was very glad that he brought forward those constructive suggestions in view of the rather—I will not say destructive, but rather open condemnation of the Bullock proposals in the opening stages of his speech.

The first area of agreement to which I wish to call attention arising out of the debate is the proposition that company law at present vests ultimately legal control in shareholders alone and that this is not in line with today's wide-spread acknowledgment that there are other interests deeply involved in the operation of a company, notably the workers, the consumers and the community at large. I agree with the noble Baroness, Lady Seear, in indicating that those are elements which are equally concerned with the shareholders. I think that is one area of agreement, even though we may disagree about the methods and the changes in law which are necessary to give recognition to the interests and rights of those other elements.

We would agree with the need for partnership, which was the word the noble Viscount, Lord Watkinson, emphasised, but we might disagree about the form of that partnership and the path towards it. What we need to ensure, in my view, is that the partnership is a real one, a real sharing of decision making and of power, not a shadowy substitute for that. Here I very much agreed with several parts of the notable speech of the noble Lord, Lord George-Brown, who emphasised the need to involve workers in decision-making and in the acceptance of responsibility.

The second thing upon which I believe there is a good consensus of agreement is that industrial democracy must be established at all levels in an enterprise. It is not just a question of what is the right structure at board level; there should be consultation and participation below the board level; works councils have been mentioned, participation agreements are being particularly put forward by the CBI, and similar means. But some argue that this participation at these lower levels is necessary before we can implement the system of worker-directors. Others, on the other hand, including myself, agree with the majority of Bullock that if the law established the right to worker-directors that would be the quicker way to the development of the democratic infrastructure. But, whatever approach we make to that question, we can, I think, at least agree that the provision for worker participation below board level is itself an important necessity.

Thirdly, my Lords, I believe there is a wide measure of agreement that whatever methods are adopted they should be flexible—many noble Lords have used that word "flexibility"—so as to enable different companies to adopt those methods of participation which are most suited to their particular needs. I would draw your Lordships' attention to the fact that the Bullock Report itself provides for this flexibility, as will be seen if noble Lords will look at the beginning of the section proposing a legal framework at page 102. There is provision for flexibility in the proposals put forward by the Bullock Report. I believe that we should approach the consultations with this need for flexibility very much in our minds, and it will not be the intention of the Government that legislation should prevent companies and their employees from reaching agreement on arrangements which they both consider best suited for their particular needs.

My Lords, there is a further proposition on which I hope there is general consensus, and that is that worker's representatives are capable of reaching sound business decisions for their firms. Some have cast some doubt on this, implying that workers are not qualified; I think reference was made to "amateurs". But does this mean that they cannot become qualified given the opportunity and the training? I noted that the noble Viscount, Lord Watkinson, and the noble Lord, Lord Byers, made this point. They feared that the Bullock proposals would create an atmosphere of confrontation in the boardroom; delays would ensue and business opportunities might be lost through those confrontations. My own experience, limited though I admit it to be, is that that is not the case. It is not the case that the kind of worker representation that we envisage will lead to a wasteful confrontation. I agree that whatever machinery one has, it depends upon the way in which it is operated. I agree that we have to have the utmost of good will in operating whatever machinery is set up. However, I do not believe that in principle there is anything which suggests that an atmosphere of confrontation is inevitable.

Therefore, whatever our disagreements on any particular proposal in the Bullock Report, and whatever we may think of the report as a whole—and one has gathered during the debate that quite a number of noble Lords do not think very much of it—it behoves us in the interests of our country's economic well-being to strive towards as much agreement as possible so that when legislation comes, as I believe it must, it will have a unifying rather than a divisive effect.

It is in that spirit that I now approach a number of issues upon which widely different views have been expressed today. I take, first, the question of the Bullock recommendation that worker-directors should be elected through the established trade union machinery. Many speakers in this debate have taken strong exception to that particular recommendation. My noble friend Lord Kirkhill in his opening remarks dealt with this point at some length. Therefore, I need only summarise what he said in putting before your Lordships the Bullock majority argument in favour of trade union involvement in the process of appointing worker-directors.

In the larger companies, trade union membership is high and, moreover, the functions of unions are already considerably wider than collective bargaining. My noble friend Lord Cooper of Stockton Heath spelt out—significantly I thought—the ways in which the role of unions has developed beyond that of collective bar-gaining. The Bullock argument is that trade unions are, therefore, the natural vehicle for expressing employees' views at board level. These, in my view, are strong arguments, as is also the point asserted by the majority report that, far from creating conflict between worker-representation on the board and collective bargaining, its proposals would ensure that the two processes operate in a mutually helpful way. My noble friend Lord McCarthy expressed the same essential point in a forceful and realistic way. I was very glad to hear the right reverend Prelate utter words on this subject which were particularly welcome and, in my view, significant. As my noble friend Lord Kirkhill has said, on this subject of the trade union role, the Government recognise the many anxieties which have been so forcefully expressed today. In the consultations we shall seek to reach a solution which will command widespread support.

The noble Lord, Lord Gore-Booth, asked whether I could give him some guidance about the Bullock proposal as to how the trade union channel would come into operation. The noble Lord will realise that, first, the initial ballot—the triggering off proposal—is for all employees. Beyond that, the Bullock majority suggest that the Joint Representation Committee should decide selection arrangements. The noble Lord will find set out on page 118 at paragraph 28 of the Bullock Report various examples of the way in which the trade union machinery would be involved, including, I would stress, holding a secret ballot of all employees in the company, as one of the alternatives to which it directs attention.

The second point of disagreement is the principal one which separates the majority report from the minority report. This is the issue as to whether there should be a unitary board with worker and share-holder directors, or whether there should be a two-tier board structure. It was the judgment of the majority report that the unitary board would be best for this country and that too close a comparison with, say, Germany, is not useful because historically the two-tier system has been operated in Germany for many years before worker-directors were introduced.

Their main argument in favour of the unitary board must, I believe, be given all due weight when consultations take place. This main argument is that the two-tier structure would very much restrict the influence of worker representatives in decision-making. Obviously the argument on this issue is not clear cut, because at one time the TUC favoured a two-tier system and the CBI opposed it, and now their positions, as I understand it, are reversed. Therefore, I believe that the Government are right in stressing, as I do now, that this too is a matter for consultation, although I should make it clear, as I have on an earlier occasion, that the Government's starting point will undoubtedly be that of the Bullock majority report.

Another issue that was raised by a number of noble Lords, particularly the noble Lords, Lord George-Brown and Lord Brown, and also by the noble Baroness, Lady Seear, and the noble Viscount, Lord Rochdale, was the position of middle managers within a more democratic system of control in companies. We recognise this as a most important issue. In my personal view it is one on which we should all take an open-minded attitude until our discussions have proceeded a good deal further.

The Bullock majority made no special recommendations for middle management except that where they are unionised they will have an opportunity to take part in the process of adopting employee-directors. The Bullock minority, within the context of their preference for a two-tier system, suggested that, as in Germany, a seat on the supervisory board should be reserved for an employee-director representing management. Other countries have adopted other solutions. It is a matter which we shall have to take a close look at in the course of the consultations.

Finally, there is the question of whether industrial democracy can or should be brought about by legislative requirement or whether, as some have argued, it is a desirable objective which we should reach by a process of voluntary agreement. As I said in reply to the noble Lord, Lord Harmar-Nicholls, on the 26th January, I do not think that it is a matter of a choice between legislation on the one hand and voluntary development in these matters on the other. Both are necessary and both are possible. Legislation does not imply rigidity. It need not repress natural growth. But what it can do, and what it should do, is to establish the fundamental right of employee representation. Without it we can be sure that there would be many companies that would fail to act, however progressive and far-sighted others may be. I listened with particular interest to my noble friend Lord Lee of Newton on this matter. He spoke, as it seemed to me, some very wise words about the need both for proper grass roots progress and for ensuring that what he called the dinosaurs do not lag behind.

As the noble Lord, Lord Elibank, rightly said, we do not have time to await slow voluntary development; the spur of legislation is needed as well. In my view, legislation is necessary to provide a minimal structure on which and within which a whole range of voluntary growth of democracy can take place, and for these reasons the Government are committed to legislation. Every country in Europe where worker participation at board level has been brought about has felt the need to legislate, and I am sure that Britain cannot be the exception. Without basic legislation, industrial democracy will not be achieved and, without industrial democracy, economic revival will not be achieved. Therefore, after due consultation—we hope fruitful and constructive consultation—we intend to put on the Statute Book an Act which I believe will be a notable milestone in the course of this country's industrial development.

11.37 p.m.


My Lords, my wife is inclined to complain, or perhaps I should say comment with a certain fatalistic resignation, once I get involved in a subject, because I cannot stop talking about it, and what is worse I am inclined to provoke many other people to join in. When she realises how many noble Lords have participated in this debate she will think her complaints are well-founded. I assure noble Lords that at this late hour I shall be very brief and not take advantage of the privilege of my right to reply, and therefore I do not intend to take up any points, however tempted I may be to do so, or try to sum up, however briefly, the themes of this long debate.

I believe this has been a valuable debate in which we have had strongly argued opinions, often differing ones, but opinions which have been based on real experience and hard thinking and not on fixed positions of a partisan and prejudiced nature. What we have heard today has, in my view, been worth listening to and should be taken notice of seriously by Government and everybody else involved. Today has provided an example of where your Lordships' House can make a special and worthwhile contribution; Parliament as a whole is very fortunate to be able to call on such a wide range of real experience as we have seen and heard deployed today, and I hope the Government will indeed take seriously what has been said.

I hope they will take very seriously both the warnings which have come from all sides about many of the dangers and difficulties inherent in the Bullock majority report and the encouragement which has come from the House about the need and the will to proceed to develop broad, wide, deep participation at every level in industry. I wish to express my gratitude to all noble Lords who have taken part in the debate and in particular to offer my congratulations to the two noble Lords who both made notable speeches; they came to the House and gave us in real depth their experience of the matters about which they spoke. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.