South Met. Gas. The Co-partnership Scheme Part 1

'We humbly submit that if no idea was entertained by you. of 'breaking our union a more successful

scheme was never promulgated to accomplish such an unintentional result'.

So said Mark Hutchins,  Chairman of the Gas Workers Union, about the profit sharing scheme set up by Livesey.  At this stage perhaps, the scheme itself should be explained and the objections to it examined.  Why did George Livesey think that it would both answer his aspirations for the South Met. and at the same time destroy the Gas Workers Union?

The 1894 Report to the Board of Trade on  Profit Sharing gives a detailed description of the scheme as it was originally proposed - a few amendments were made during the period between the announcement of the scheme and its implementation these will be discussed later.

The bonus  was paid in exactly the same way as the shareholders' dividend under the sliding scale.  It gas based on a relationship to the price of gas.  When the price of gas was not above a base price (in 1889 3/6 per 1,000 cubic feet) the shareholders received a dividend of 10 and this dividend was lower if the price of gas 'rose.  In the same way the employees received a dividend of on a year's wages for every 1d. the price of gas fell below a base price of 2/8d. (the actual price of gas charged by South Met. in 1889 was 2/3d. per 1,000).

All those who had signed the agreement within the first three months were  given a 'nest egg' - that is a sum of money equal to the amount that they would have had had the scheme been running for the past three years, plus 4% interest.  In order to get both bonus and nest egg, workers had to sign an agreement to work for the Company for twelve months at the current rate of wages' the Company guaranteeing that these wages would not be altered in that time to the disadvantage of the men. 

The nest-egg and half of the bonus was not to be withdrawn and spent by the men for a period.  This period of time was to be the subject of subsequent discussions between the Company and the newly formed Profit Sharing Committee. Exceptions would be made in the case of death or retirement but it was to be totally forfeit in the case of strike or 'wilful injury'.

In this way the workforce was linked into the sliding scale in the way that Livesey had suggested fifteen years earlier. It immediately gave an incentive to workers to lower the price of gas.  Livesey had said in 1882 that 'if they were to get the men to work heartily and thoroughly the men must have the motive of self interest'. He felt that if this motive could be brought to bear on all who had any influence on the prosperity of the Company 'it would be a good thing'.

In his address to the professional gas institute in 1882 Thomas Travers had suggested two ways in which workmen could influence the Company so that the price of gas might be lowered - they could watch every outlet of waste and 'constant effort would be made by all to popularise and extend the

consumption of gas'.   Indeed the most immediate impact of the scheme, according to pronouncements made by Livesey, were the instances of workmen adapting existing practices  in order to save the Company money.  Prizes and awards were instituted whereby members of the workforce were encouraged to act as salesmen for the Company not only for gas but also for appliances - a sales effort directed at the growing working class custom in South London.

It is very difficult to discover how far this scheme is a replica of the one set up in 1886 for the Officers of  the Company.  The Minute Books merely say: ' that in the event of the profit on the years'

working being sufficient after paying interest on the debentures and bonds to pay a dividend of not less than 14% on capital for the year ... a bonus on the following scale will be paid'. Although alterations were made to the scheme in successive years, it is not clear if it was overtly tied to the sliding scale.  It is most probable that Livesey had not managed to get the Board to completely agree to the whole workings of the scheme.

 

As indicated earlier, Livesey claimed to have thought up the whole scheme in a quarter of an hour - but the scheme is so intricate that it rather bears the imprint of years of gestation.

The scheme was announced to the men in late October or November and as many as possible were encouraged to sign agreements.  On 21st November a meeting was held in the Board Room at Old Kent Road of delegates of those workmen who had signed the agreements.    Representatives of the 

Union had been invited to attend as observers, but none came. The proceedings of the meeting were taken down verbatim and circulated later to the men.

The meeting began with Livesey explaining some current difficulties in working - of a practical nature concerning the price of coal.  He talked about the threat from electricity and eventually came to the stokers' demands.  They were now asking for double time on Sundays, but 'the orange has been

squeezed dry'.  He went on.. 'now the time has come when it is necessary to have something more than the mere labour of the worknen - we want his interest and we want  to give him a share of the profits earned by the Company in order to purchase that interest as well as his labour'.

He dealt with objections already raised and pointed out areas in which the Company was still undecided.  Some of the delegates raised points themselves and entered into the discussions.   Most

 of them were on items which worried the men; was there any way by which they could be deprived of the bonus....were they doing the right thing in trusting the Company in this way?

Men were afraid that small misdemeanours might deprive them of  the bonus and had been mandated by those unable to attend to ask various questions about this.  They were also concerned to make suggestions about the future of the scheme and point out other ways in which the workforce might be benefitted.  Henry Austin, who later became an employee director, was moved to recite poetry - but also to ask the Company to consider a share purchase scheme for employees.

The major part of the discussion concerned the agreements.  Men had to sign to work for twelve months and to remain sober, industrious and able to do their work.  They must serve in whatever capacity the Company wanted, and obey the orders of the foreman.

 

Obviously the sting was that strike action would become impossible because of the staggered dates of notice - hence the Union's objections that 'there would be at no time more than a few men able to take any combined action of any kind'.

 

Workers were, however, given job security through these agreements - they worked both ways.  One of the men at the "Interview", Skinner, said: 'it appears to be a good guarantee to me, by signing the agreement the Company guarantee to find me employment for the next twelve months'. Such a  guarantee was a valuable thing to a weekly paid labourer.

Many other detailed points worried these 'loyal' workmen. Objections were raised to the clause about obeying the orders of the foreman  - suppose the foreman was acting unfairly?  Livesey answered 'it is not our policy to support any foreman if they practise hardship or injustice'. No doubt Livesey meant this - but he had never worked under a foreman to know the pressures involved.

The men persisted: 'there may be a certain class of man who cannot satisfy the foreman and if a man who does not like to go tittle tattling thinks to himself that he would like to leave ... ' If he then left in this way, would he lose all his bonus?  They were assured that all the bonus would not be lost - a man would leave with all that was owed to him.

Another point which worried the men was the clause saying that they had to agree to perform in 'whatever capacity'.  That meant they could be shifted from job to job.  Suppose it was work that a man could not do by reason of his strength or skills - would he then be sacked.  Livesey answered: 'what we would expect in an emergency is what any of us would do ourselves - we would lend a hand to do anything. If a man was not suitable for one sort of work and said 'I cannot do this or that but I can do this and I will do it with all my heart' - that is all we want... '.

In other words what he wanted was 'loyalty'. This clause was objected to by the Union. They wrote to the Company pointing out that the clause would:  'damage the Union and be against its rules.   Compelling coal porters in time of dispute to do gas stokers work and vice versa would break the rules of the Unions'.   Which was, of course, from Livesey's point of view, exactly the point.

 

The Union continued to point out that the Company could discharge all labourers except the gas stokers through the slack season and 'reduce the latter to the vacancies at reduced wages'. This point about wage reductions should jobs be changed was brought up at the Interview. Livesey answered: 'if a man's regular wage is 10/- a day and he is asked to do work which is usually paid at the rate of 5/- a day then he would have his regular wage of 10/- and we should give him something more. '

The Union then pointed out another possibility: 'the agreement does not bind the Company a rate of wages as a class - at the date of the signing of the agreement'.  Thus, they thought, the Company could reduce all wages at the time agreements were re-signed.

Further discussion at the "Interview' was focussed on the clause in the agreements which read  "the money will be the absolute property of the men except in the case of a strike or wilful injury to the Company in which case it will be forfeit' . Men asked, what did 'wilful injury' mean?  Did it mean 

someone who 'should fall asleep at their post as they call it in the army?'.  One man, a lamplighter, quoted how he had accidentally damaged some equipment in the course of his work - would this mean he would lose his bonus?  Livesey agreed to remove the phrase 'wilful injury ' - the phrase meant, he explained, incidents which could be prosecuted through the courts, they were very rare.  Should a man have to prosecuted in this way they would dismiss him, and he could keep his bonus.

Livesey was, however, not so accommodating in the part of the phrase concerning strike action.  Men who struck would lose both bonus and nest egg. He was adamant in the face of protests:  'we mean that he would forfeit the whole of the money in that case standing in his name ... we want some protection'.

Objections were raised: one man, Jessie Day, said "I think it would be very hard. .. if he should lose the whole of it'. Another said: 'If a strike turns up ... is he to lose the whole of it because that would not encourage the men to leave it in.  Other men explained that the men they represented had specifically asked that the point be raised and made clear; others that it was a clause which was stopping many men from signing the agreements.

Livesey had asked a lawyer. Mark Knowles, to attend and it was he who suggested eventually: 'if it was understood that a man on joining a strike should forfeit what was owing to him for the last year'. Livesey then agreed that the whole bonus need not be forfeit in a strike - but two years back would go.

Some changes to the original scheme were therefore made in the face of opposition from potential participants but money was to be kept in hand by the Company to dissuade its owners from strike action.  The nest egg was to be kept by the Company,  and the exact amount  to be kept in hand was to be decided later.  Livesey had put it to the meeting; how long did the men want it to stay in? For five years, or for three?  Many of the men said they would want their money at once, and others that three years would be better - no one supported five.  The matter was left for the profit-sharing committee to decide.

Men put up pleas of urgent need for the money - for when the children were small or in the case of long term sickness.  Livesey countered all these arguments   the Company had always covered extra sick payments to men whose illness went beyond the sick pay period? they would always lend money to men to cover unforseen emergencies; there was no need for the accumulating bonus to be touched.  Only one exception would be made 'there might be cases where a man would like to pay a deposit on a house'. The extension of the scheme into property investment was to become a major feature of it in the succeeding years, as we shall see.

 

The Union pointed out 'it binds the labourer to work for five years and added, more sinisterly, that it was possible that after four and a half years of the agreements a new and different Board might be appointed after a Board Room coup and provoke a strike among men in order to cheat them of their bonuses.

There were two further points of interest in the initial draft of the scheme.  One of these was the setting up of a profit sharing committee to manage it.  This was to include an equal number of appointed management representatives and also elected delegates from the works based on the number of workmen participating in each workplace.  The Chairman of the Company - Livesey - was to be the Committee Chairman and to have a casting vote.  This Committee became increasingly important, as we shall see.

Another pointer for the future came from Henry Austin's speech requesting share purchase facilities for workmen.  It is very probable that workmen were already buying some shares, if we are to believe the Chairman's accusation that Livesey was promoting this in 1875 .  Livesey himself had raised this question and it is not impossible that Austin knew Livesey's views and was putting them forward.  Livesey promised, publicly, to investigate the matter.

This then was the package of incentives and deterrents which Livesey embodied in the first draft of the scheme.   It was a means by which, eventually, the workforce could be precisely controlled. The Union saw it as a device to put them out of business -  which it was.  Livesey protested that he did not intend to interfere with the Union and indeed some men at the 'Interview' expressed their support for the principles of 'combination'.  As Livesey saw it workers were perfectly free to give in their notices and leave South Met.'s employment.  If they did he would replace them, individually.

The scheme was complex and changes over the next ten years added to that complexity.   Was the manipulative element consciously part of it in its setting up?   Did management take advantage of the possibilities given to them as time went on?  The scheme was amended and added to between 1889 and the First World War - how did these changes affect the workforce's relations with management?

In 1889 it was argued by the Union and by the press that the scheme had been instituted for strike breaking purposes - and this has been the popular view since.  Livesey denied it.  Despite sharp comments at the 'Interview'  - 'we intend to have some protection out of it'-  nowhere else does he refer to an immediate strike breaking purpose.  He continued to tell the men that the purpose of the scheme was to purchase their interest.  The preamble to the rules say: 'to induce all employees to take a real interest in the work and to give a new motive for endeavouring to promote the prosperity of the Company'. 

A more detailed analysis of his motives was given by Livesey in 1899 in a paper given to the Newcastle-on-Tyne Industrial Remuneration Conference.  Having talked about the sliding scale
and elements of partnership to be achieved through it with customers and shareholders, he continued ... 'two objects of equal importance have always been kept in view, to attach the workmen to the Company by giving them a direct interest in its prosperity beyond their salaries and wages, and to give them an opportunity to practise thrift and thus improve their position in life, to make provision for misfortune and old age. In short to enable them to lift themselves from poverty to independence. '

Thus the aspirations of the scheme can be first of all seen clearly in terms of Livesey's general thesis of partnership of the various elements necessary in the gas industry - capital, labour and customers.  This is carried on to the idea that workers should be involved in the industry in which they work and that this could only be achieved through incentives making them not only partners, but willing ones.  Because of their debased positions they must be helped, to achieve that respectability which has given the middle classes a commitment  to both the economic status quo and a more generalised patriotic ideal.  If this could be achieved not only did the Company gain in having the loyal workforce but the general political ideals of capital could be assisted in a group of workers    interested in what is 'good for England'  - and could only re-bound to re-inforce the position of independent gas companies.

The key phrase is 'attaching men to the Company".  The idea that they were to be merely prevented from striking is too limited. It has more to do with Livesey's interpretation of the changes which had come about in society and his methods of reconciliation.  Livesey talked about 'the old friendly relations' when business relations between master and man were based on personal relations rather than mutuality of interest'.   Coupled with this analysis of changes in industry were his own memories of how South Met. had seemed in his boyhood - the small works on the edge of the city, the banks of the Surrey Canal overgrown with flowers and full of fish.  To attach the men to the Company' meant to some extent a re-creation of the relationships which he thought had existed in that smaller industrial world.  But the initiative must come from the employers. 'It seems to be that the employers have to choose between the division of the industrial host into two hostile camps ..... and partnership'.

This attachment which the workers should feel for the Company, said Livesey, must spring from a feeling of ownership - of investment in and partnership in - both the Company and the nation. 'the great weakness of this Country is that our great working population have no share in its vast accumulated property, discontent will grow until it becomes a real danger to the state'.

As London grew with its industries, gas companies were employing a larger and more diversified body of labour - rather than the small localised workforce of the 1840s.  Many workers were seasonal with the uncertainties that that brought.  George Livesey not only wanted to save the industry from strikes but hoped to make the workforce that God-fearing property owning elite which would have enough commitment to the industry to back it politically against muncipalisers and be  worthy participants in a community in which the gas industry was able to serve and to prosper.