A short history of Partnership Benefit 1910-1948

Photo:John Spedan Lewis c1930

John Spedan Lewis c1930

John Lewis Partnership archive collection

Photo:The Constitution 1928

The Constitution 1928

Gazette image library

Photo:Return Journey - Partnership Bonus

Return Journey - Partnership Bonus

The Gazette

The Gazette

By Linda Moroney

1910 - The Partnership scheme was evolved in its present form by Mr J Spedan Lewis, the present Chairman of the John Lewis Partnership. He conceived that his Partnership enterprise would require three groups of collaborators, namely, Shareholders, who would provide capital, Managers and Managed.

The only dividend yielding Shares available to the public would be Debentures or Preference Shares, both bearing a fixed rate of interest. After paying all trading expenses and all the dividends upon the Debentures and Preference Shares, any remaining profit would be divided amongst the workers in the enterprise (that is, among the Managers and the Managed) in proportion to their pay. The profits so distributed would be called Partnership Benefit, and the workers would be called Partners.

Normally such profits are paid to the holders of the ordinary Shares of the Company. Mr Lewis decided that in his Partnership the profit attracted by the ordinary Shares would be administered by a body of Trustees who would be responsible for distributing these profits among the workers.

When the Partnership finally came into full being, all of the Ordinary Shares were in fact the property of Mr Lewis. They were valued at £1,120,000. He transferred them irrevocably to the Partnership for the benefit of all Partners, receiving in return Deferred Bonds upon which he has waived all claims to interest. This act of benevolent philanthropy can seldom be equalled.

The business would require an increasing amount of Capital if it were to flourish and expand, so it was decided that Partnership Benefit would be distributed in the form of Shares and the actual money represented by these Shares would be left in the business. These Shares could be sold upon the Stock Exchange and so converted into cash if the recipients desired.

1914 - The Partnership scheme was put into operation at Peter Jones in Sloane Square, of which Mr J Spedan Lewis was Chairman. This derelict shop was then running at a great loss.

1919  - The first distribution of Partnership Benefit was made. The rate of distribution was 15% ; that is to say each Partner received in Partnership Benefit £15 for every £100 paid to him as wages or salary during the year 1918/1919. This was the equivalent of approximately seven weeks’ extra pay. Owing to certain technical difficulties no actual Shares were issued, but instead Partners were given “Share Promises.” These qualified for the same dividends as the Shares they represented, and were to be exchanged for Shares at some suitable future date.

The Shares, for which the Share Promises would be exchanged, were to be Cumulative Preferred Ordinary Shares carrying a fixed annual rate of interest of 7½% payable twice yearly on the 1st June and the 1st December. They carried no voting rights, and were to be issued at a premium of ten shillings. This meant that for each thirty shillings of Partnership Benefit due to a Partner he would be given one twenty-shillings Share (i.e. at its nominal value as opposed to the price at which it could be sold). Since the dividend on the Shares would be 7½% the dividend paid to the Partner upon the actual money value of his Partnership Benefit would be 5%. For example:

Amount of Partnership Benefit in money                        ..£30

Shares, at 30/- per Share                                            ..£20

Yearly dividend of 7½% on 20 Shares30/- (i.e. 5% or one-twentieth of £20).

The justification for the ten shilling premium was that the Shares would sell for more than their nominal value if offered for sale, and a fixed yearly dividend of 5% upon the money represented by Partnership Benefit was quite a reasonably handsome return.

Exactly the same result would have been achieved by distributing Partnership Benefit in the form of 5% Shares issued at par, instead of 7½% Shares issued at a premium of ten shillings.

1924 - Partnership Benefit Share Promises distributed at the rate of 15% - the equivalent of approximately seven weeks’ extra pay.

1925 - Partnership Benefit Share Promises distributed at the rate of 20% - the equivalent of approximately ten weeks’ extra pay.

1926 - Partnership Benefit Share Promises distributed at the rate of 20% - the equivalent of approximately ten weeks’ extra pay.

1927 - Partnership Benefit Share Promises distributed at the rate of 20% - the equivalent of approximately ten weeks’ extra pay.

1928 - Partnership Benefit Share Promises distributed at the rate of 23½% - the equivalent of approximately twelve weeks’ extra pay.

1929 - Partnership Benefit Share Promises distributed at the rate of 15% - the equivalent of approximately seven weeks’ extra pay. (This distribution was made, not from the profits of the enterprise, but as a gift to all Partners from the Chairman).

The workers at John Lewis became Partners. An irrevocable trust settlement was made by which the whole of the Chairman’s holding of ordinary Shares (valued at £1,120,000) became the property of the Partnership for the benefit of all Partners.

Partnership Benefit Share Promises issued in previous years were converted into Shares. This was possible because the Chairman renounced his right to certain Preferred Ordinary Shares in the newly formed John Lewis Partnership Limited in favour of old Partners who held Share Promises. These Promises were then exchanged for the new Shares which would otherwise have been the Chairman’s personal property.

1930 - Partnership Benefit distributed at the rate of 15% - the equivalent of approximately seven weeks’ extra pay.

1931 - Partnership Benefit distributed at the rate of 10% - the equivalent of approximately five weeks’ extra pay.

1932 - Partnership Benefit distributed at the rate of 10% - the equivalent of approximately five weeks’ extra pay.

1933 - Partnership Benefit distributed at the rate of 10% - the equivalent of approximately five weeks’ extra pay.

Jessop and Son Limited of Nottingham and Lance and Lance Limited of Weston Super Mare acquired by the Partnership.

1934 - Partnership Benefit distributed at the rate of  9% - the equivalent of approximately four weeks’ extra pay. By a joint decision of the Management and the Managed (that is to say of the Council) this distribution was made only to Partners whose yearly earnings did not exceed £400.

Tyrrell and Green Limited of Southampton and Knight and Lee Limited of Southsea acquired by the Partnership.

1935 - Partnership Benefit distributed at the rate of 7% - the equivalent of approximately three and a half weeks’ extra pay.

1936 - Partnership Benefit distributed at the rate of 8% - the equivalent of approximately four weeks’ extra pay.

1937 - John Lewis Partnership 7½% Cumulative Preferred Ordinary Shares (Partnership Benefit Shares) converted into Stock. There is very little difference between Stocks and Shares, except that the latter must be numbered serially. The office work necessary to deal with Shares is consequently more complicated than that for dealing with Stocks.

Waitrose Limited acquired by the Partnership.

Partnership Benefit distributed at the rate of 6% - the equivalent of approximately three weeks’ extra pay.

1938 - None.

1940 - Selfridge Provincial Stores (now called Suburban and Provincial Stores) acquired by the Partnership.

1943 - The Silk Shops of Newcastle Upon Tyne, Hull and Edinburgh acquired by the Partnership.

1944 - John Pound and Company of Regent Street and Piccadilly, London, acquired by the Partnership.

1946 - Bon Marche Limited, Tunbridge Wells, acquired by the Partnership.

Partnership Benefit in respect of this year distributed at the rate of 6% - the equivalent of approximately three weeks’ extra pay.

It was decided to issue Partnership Benefit in the form of Stock bearing a dividend of 5% instead of 7½%. This issue would be at par instead of at a premium of ten shillings. Legal difficulties delayed the issue, which was eventually made in 7½% stock.

1947 - Vinalls of Eastbourne, acquired by the Partnership.

1948 - In January of this year the total number of John Lewis Partnership 7½% Cumulative Preferred Ordinary Shares (Partnership Benefit Shares) distributed to date is 319,971.

 

This page was added by Linda Moroney on 01/12/2012.

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