Where benevolent employers live on

UNILEVER still mows the front lawns of the houses at Port Sunlight, the model village built by William Lever for his workers on Merseyside. John Lewis has enshrined in its articles that employees come ahead of profits. The chocolate sector of Cadbury-Schweppes, observers say, still considers its workers part of a big family.

John Lewis can talk proudly of its attitude because it is not quoted. The other two have to be more careful. They are showing dangerous signs of paternalism which, if the widely read Lex column in the Financial Times is to believed, is inimicable to good stewardship. "The appointment of Nigel Rudd [of Williams Holdings] as Pilkington's next non-executive chairman will remove any vestigial conflict between paternalism and maximising shareholder value at the world's largest glassmaker," it said. "There can be no doubt that shareholders' interests come squarely ahead of those of employees and the community of St Helens."

Sir Antony Pilkington, the current chairman, is only distantly related to the founding family, but it is true that Pilkington, firm and family, is still thought of as the backbone of St Helens. The group has provided not only most of the jobs, but also the social amenities in the Merseyside town. Pilkington has never been highly regarded by the City, and this in part is why. If you are busy pampering workers and mowing their lawns, the argument goes, you cannot also be giving shareholders the best return.

Robin Buchanan, managing director of the management consultancy Bain & Co, disagrees. "If you go into a company and don't see respect and caring, you know it's a sick organisation," he says.

The strange thing is that as paternalism has gone out of fashion in the City, it has come back into vogue elsewhere. The dictionary definition - "dealing with employees in an authoritarian but benevolent way" - describes the management style of many companies that are often held up as models. John Lewis, Marks & Spencer, IBM (in the old days) and Unipart (recently) regard their employees as part of a family. They are expected to follow strict rules and to absorb a strong corporate culture, but if they do they are well cared for. "I love coming to work here now," one Unipart worker said to me, without a trace of irony.

Unipart, which even has its own university, has seen its profits rise through the recession. It has learned its ways from the Japanese, who are, of course, the great paternalists. "They look at people as an asset," says Shaun Tyson, professor of human resources at Cranfield School of Management. "Mitsubishi will go into another business just to keep its people employed."

While no one suggests that British companies should go to this extreme, many managers can see that paternalism (dressed up with fancy new names such as team-building) is a logical way of increasing morale, and therefore productivity - and profits.

The trick is to draw out its benefits, while suppressing its negative aspects. "It can mean disempowering people and not letting them attain their potential," Mr Buchanan says. "Paternalism is all the things that are good and bad in a family."

Professor Tyson points out that companies can have paternalistic pockets. "The drinks part of Cadbury-Schweppes is not paternalistic, but the confectionery part is," he says. This, he suggests, may be because sweet makers (Rowntree is another example) employ mostly women, towards whom management feels more protective.

ICI had the first personnel manager in the country and is still remarkably nice to its workers (except those it has made redundant). Unilever only stopped reserving its Port Sunlight houses for employees in 1980, and still encourages its operating companies to support their local communities. Norwich Union continues to take care of chunks of East Anglia.

Do not tell the City, but paternalism is alive and well - and a good thing too.