Labour threat to dividends
Corbyn warns firms over ‘cheap labour’
Labour leader Jeremy Corbyn is set for a showdown with big business over suggestions they could be banned from paying dividends if they try to succeed on the back of “cheap labour”.
He will warn that they could face a control on payouts to shareholders if they fail to pay their employees the living wage.
He is also floating the idea of setting a ratio to ensure that the pay packages received by top executive is aligned to those of other staff.
His comments are expected to divide public opinion. His supporters will argue that executive rewards are too high and that shareholders are put before the interests of company employees.
Opponents will say that controlling pay and dividends in this way would make companies unable to compete for top staff, add to costs and interrupt the flow of investment.
Matthew Fell, CBI Chief of Staff, said today: “The idea of politicians stepping into the relationship between a private company and its shareholders would be a significant intervention, and not one that we would support.
“Business is the catalyst for job creation and growth up and down the country, and has lots to offer in terms of investment, innovation and delivery of our critical national infrastructure.”
The government has announced a compulsory national living wage of £7.20 an hour from April, rising to £9 by 2020 for employees over 25. Almost six million workers in the UK are currently paid below the living wage.
In his speech to the Fabian Society, Mr Corbyn will say: “Everyone benefits when companies succeed.
“One proposal is pay ratios between top and bottom, so that the rewards don’t just accrue to those at the top. Of the G7 nations only the US has greater income inequality than the UK, pay inequality on this scale is neither necessary nor inevitable.
“Another proposal would be to bar or restrict companies from distributing dividends until they pay all their workers the living wage. Only profitable employers will be paying dividends, if they depend on cheap labour for those profits then I think there is a question over whether that is a business model to which we should be turning a blind eye.
“Too much of the proceeds of growth have accumulated to those at the top. Not only is this unfair, it actually holds back growth – as OECD research has found. A more equal society is not only fairer, it does better in terms of economic stability and wealth creation.”