How Greggs can save capitalism

Greggs’ sausage rolls are part of the national conversation. The smart shift to offer a vegan variant caught the mood and bragging about your love of Greggs is an easy way for politicos to signal their down-with-the-proles ordinariness.

In fact, political types should be paying more attention to the company behind the sausage rolls, because it might just be the future (and saviour) of capitalism.

Greggs is a public company, part of the FTSE 250 and a good bet for the FTSE 100 one day. That and it treats people well.

The latest sign of this is the £300 bonus Greggs is paying to staff, reflecting those profits and a £35million dividend to shareholders. That bonus is on top of the firm’s existing profit share scheme. It’s also worth noting that those “shareholders” include quite a lot of staff, who are offered shares at a discounted rate.

Greggs also take pride in supporting and promoting staff. They pick staff who may not put themselves forward to be team leaders and urge them to try the step up to a management role. The firm offers those staff a promise: take the step up and we make sure it works out for you. Their original job will be kept open for them and they are guaranteed predictable working hours. (Greggs, like a lot of big retailers, know that predictable shifts can matter at least as much as pay to staff.)

The result of all this is that Greggs have lower staff turnover, more long-serving staff and happier staff, than many other big employers.

At a time when a lot of people regard big business with suspicion and hostility, this is not something to sniff at. Having spent a bit of time researching these questions, I think Greggs is a pretty good example of how the public company model can work in a way that is socially and politically sustainable. (Full disclosure: that research has involved talking to some Greggs executives, as part of my think-tank’s work on these issues. That research, in turn, was sponsored by the Joseph Rowntree Foundation). Our aim with that research was to understand how big companies make decisions that affect their staff and to explore the things that could be done to encourage (but not compel) those companies to treat those staff better and generally to be nicer.

Because quite simply the best answer to the “crisis of capitalism” is for public companies to justify the legal privileges they have been granted by Parliament (limited liability, shielding shareholders from company debts) is to act with more regard to the interests of groups beyond shareholders. Otherwise, business will lose what some call its “social licence to operate” as politicians eventually act on public concern and do things that make things much, much harder for companies.

That analysis is not radical. Last year, no less an organisation than the US Business Roundtable, a club for the American CEO class, declared that public companies have to move beyond the narrow “shareholder value” doctrine and do more for staff, suppliers, customers and other “stakeholders”.

This chimes with the vogue among investors, who are piling into the Environmental, Social and Governance (ESG) agenda that boils down to: only put your money into companies that don’t do bad stuff and are sometimes nice.

Is this all corporate hype, or is the future of responsible capitalism? I think there’s a bit of both, though it could, done right, be the latter. But that will require politicians to get more involved in this debate. While a lot of people at Westminster like to natter about the crisis of capitalism, few want to get into the nitty gritty of corporate governance that could address much (justified) concern about the way some companies operate.

I won’t reprise here in full two chunky think-tank papers on better corporate conduct (you can read them here and here if you want). But I will note that our first report in June 2019 recommended tax incentives to encourage precisely the sort of profit-sharing that Greggs has just highlighted. We also pointed out that there is a role for politicians in setting social standards for companies, helping to define what good behaviour is: new corporate reporting on pay and training, league tables and rankings. And a new “badge” scheme to highlight firms that “do the right thing” by their staff.

That all sounds a bit complicated and fiddly though. What we really should have recommended to politicians, of any party, who want to deliver a responsible capitalism that retains public trust is this: do everything you can to push more companies to be like Greggs. Never mind the sausage rolls, look at the corporate citizenship.