What sort of a
business is
John Lewis?
John Lewis, which operates John Lewis department stores, Waitrose supermarkets and
a number of other services, announced a 20% rise in pre-tax profits to £367.9 million for
the year to January 31 along with an 18% bonus for its staff . It is known as John Lewis
plc but it is actually owned and managed by its staff (who are called ‘partners’)- in other
words, like the Co-operative Group. So what sort of business is it? Is it a company, a
partnership or a co-operative.
Well for a start, we can dismiss the idea that it is
in law ‘a partnership’, despite the fact that the
firm is often referred to as ‘The John Lewis
partnership’. As you will know, a partnership in
the eyes of business law is an organisation
which has between two and twenty partners who
have unlimited liability for the debts of the firm.
Given that John Lewis employs around 70,000
people who do not bear individual responsibility
for the business’ losses, this is clearly not the
case!
So that leaves us with a company or a cooperative.
Well actually it is both and to understand ‘why
and how’, the history of the business needs to be
considered. The founder of John Lewis as it now
exists was John Spedan Lewis, an entrepreneur
in the 1920s who wanted to create an organisation
that (to quote from the business’ website) “would
be both commercial allowing us to move quickly
to stay ahead in a competitive industry, and
democratic giving every Partner a voice in the
business they co-own”. It continues “His
combination of commercial acumen and
corporate conscience, so ahead of its time,
is what makes us what we are today”.
The organisation was indeed a company but it
now has only a very limited number of preference
shareholders (those who are paid their dividend
before the ordinary shareholders) but there are
no ordinary shareholders because in 1949,
Lewis signed a Trust Settlement transferring
his shares and making the whole business the
property of the people employed within it. A Trust
is basically a legal action where an individual (in
this case, Lewis) transfers his or her assets to
another individual or company who holds and
manages these assets for the benefit of others in this case the employees - according to a clear
set of rules. Lewis made the trust settlement
‘irrevocable’’ i.e. permanent. Thus, although it is
a company, there is no way that anyone can
actually buy shares in John Lewis, even though
many have stated that they would like to.
The internal organisation of the business is very
democratic and is akin to cooperative principles.
Every employee has the opportunity to influence
the business through branch meetings which
discuss local issues at every store. There are
also divisional John Lewis and Waitrose
Councils, and above all of these is the Partnership
Council. The partners elect most of the
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What sort of a
business is
John Lewis?
continued
representatives, while the chairman appoints the
remaining ones. The councils have the power to
discuss ‘any matter whatsoever’. The Partnership
Council also elects some of the Partnership
Board which is responsible for the commercial
running of the business.
Expectations of employees are high in terms of
commitment to the organisation and personal
development. In return, employees can expect
benefits, such as paid training time, a staff
discount card, subsidised canteen facilities and
a clear promotional structure.
In recent years, analysts have been looking to
this model of running a business and asking why
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others cannot organise along similar lines and
achieve the same results. John Lewis has been
run on cooperative principles for over 80 years
and has existed in its current form for 60 years
with a very clearly understood culture amongst
its staff. It has had plenty of time to ‘iron out’
human resource and other difficulties along the
way and it would be naïve to assume that an
existing (or new business) could simply copy it
lock, stock and barrel. However, in these days of
‘The Big Society’ and where ideas of co-operation
and corporate responsibility have been under
going something of a renaissance, perhaps some
others will at least try. The results of John Lewis
in recent years suggest that it could be worth it.
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