Workshop Employee Financial Participation - O Kelly

FINANCIAL PARTICIPATION -AN OVERVIEW

FINANCIAL PARTICIPATION -AN OVERVIEW

Kevin P O’Kelly

International Association for Financial Participation

Kevin P O’Kelly

International Association for Financial Participation

A LONG HISTORY …A LONG HISTORY …

US since 19th century (e.g. Proctor & Gamble since 1887)o Interest grow after 1930s depression (Rucker

and Scanlon Plans)

In Europe it is rooted in the economic democracy movements of the 1960s and 1970s.Supporting legislation -o France since 1950so UK since 1978o Belgium since 1983o Denmark since 1958

US since 19th century (e.g. Proctor & Gamble since 1887)o Interest grow after 1930s depression (Rucker

and Scanlon Plans)

In Europe it is rooted in the economic democracy movements of the 1960s and 1970s.Supporting legislation -o France since 1950so UK since 1978o Belgium since 1983o Denmark since 1958

FORMS OF FINANCIAL PARTICIPATIONFORMS OF FINANCIAL PARTICIPATION

Profit-sharingEmployee Share Ownership Plans Share based profit-sharingShare Purchase PlansStock options

Profit-sharingEmployee Share Ownership Plans Share based profit-sharingShare Purchase PlansStock options

FINANCIAL PARTICIPATION AND THE EU

FINANCIAL PARTICIPATION AND THE EU

PEPPER I (1991) and II (1996) Reports o Council Recommendation 1992o Resolution of the European Parliament 1992

Commission Communiqué 2002Report of the High Level Group 2004European Foundation Benchmarking Study 2004IAFP Model Plan 2005 PEPPER III (2006) and IV (2008) Reports

PEPPER I (1991) and II (1996) Reports o Council Recommendation 1992o Resolution of the European Parliament 1992

Commission Communiqué 2002Report of the High Level Group 2004European Foundation Benchmarking Study 2004IAFP Model Plan 2005 PEPPER III (2006) and IV (2008) Reports

Promotion of Employee Participation in Profits and Enterprise Results

Promotion of Employee Participation in Profits and Enterprise Results

PEPPER ReportsPEPPER Reports

Expected to:Achieve a wider distribution of the wealth generated by the enterpriseEncourage greater employee involvement in the enterpriseDevelop positive motivation and productivity by the workforceEnhance the competitiveness of the enterprise through wage flexibilitySustain jobs

Expected to:Achieve a wider distribution of the wealth generated by the enterpriseEncourage greater employee involvement in the enterpriseDevelop positive motivation and productivity by the workforceEnhance the competitiveness of the enterprise through wage flexibilitySustain jobs

Commission Communiqué 2002Commission Communiqué 2002

Three key strands:General Principles Addressing transnational barriersThe role of the European Commission

Three key strands:General Principles Addressing transnational barriersThe role of the European Commission

VoluntaryBroad-basedLinked to enterprise resultsContinuityTransparencyRisk awarenessDistinct from normal remunerationAvoidance of barriers to mobility

VoluntaryBroad-basedLinked to enterprise resultsContinuityTransparencyRisk awarenessDistinct from normal remunerationAvoidance of barriers to mobility

Commission Communiqué 2002 -General Principles

Commission Communiqué 2002 -General Principles

Commission Communiqué 2002 -Transnational Barriers

Commission Communiqué 2002 -Transnational Barriers

A lack of co-ordination of taxation policiesSocial security contributions - a lack of legal clarity Legal differences between Member StatesCultural differencesA lack of information

A lack of co-ordination of taxation policiesSocial security contributions - a lack of legal clarity Legal differences between Member StatesCultural differencesA lack of information

Commission Communiqué 2002 -Actions at EU-level

Commission Communiqué 2002 -Actions at EU-level

A High-Level Expert Group

Develop indicators for benchmarking

A High-Level Expert Group

Develop indicators for benchmarking

High Level GroupHigh Level Group

Six Barriers:1. Diversity of legal, fiscal and social

frameworks2. The variety of Stock Exchange rules3. Definition of financial participation in

legislation4. Difference Corporate Governance traditions5. Industrial relations traditions, cultures and

practice6. Cost of introduction

Six Barriers:1. Diversity of legal, fiscal and social

frameworks2. The variety of Stock Exchange rules3. Definition of financial participation in

legislation4. Difference Corporate Governance traditions5. Industrial relations traditions, cultures and

practice6. Cost of introduction


Proposals to eliminate these barriers:Improve dialogue between Member StatesA greater role for the social partnersDissemination of ‘Good Practice’examplesReduce the complexities of the share offer

Proposals to eliminate these barriers:Improve dialogue between Member StatesA greater role for the social partnersDissemination of ‘Good Practice’examplesReduce the complexities of the share offer


Introduce a ‘convention’ on the taxation of share optionsIntroduce a procedure for the mutual recognition of other forms of financial participationA Model Plan for financial participation

Introduce a ‘convention’ on the taxation of share optionsIntroduce a procedure for the mutual recognition of other forms of financial participationA Model Plan for financial participation

Benchmarking StudyBenchmarking Study

Three dimensions:o Level of usageo Natureo National policies and characteristics

Sixteen indicators:o Themeso Sub-themes

Tested in Slovenia

Three dimensions:o Level of usageo Natureo National policies and characteristics

Sixteen indicators:o Themeso Sub-themes

Tested in Slovenia

Elements of a Model PlanElements of a Model Plan

General principlesGovernance and Fiduciary Responsibilitieso Involvement of employees in key decision

makingo Independent fiduciary custodian o Independent valuation of employees’ shareso Duty of care by directors

General principlesGovernance and Fiduciary Responsibilitieso Involvement of employees in key decision

makingo Independent fiduciary custodian o Independent valuation of employees’ shareso Duty of care by directors


Communicationso Adequate information before a plan is

introducedo Information annually when the plan is up and

runningo Information on implications for plan of company

changeso Social dialogue at all stages - involvement of

employee representativeso Languageo Economic/financial literacy

Communicationso Adequate information before a plan is

introducedo Information annually when the plan is up and

runningo Information on implications for plan of company

changeso Social dialogue at all stages - involvement of

employee representativeso Languageo Economic/financial literacy

Communications Strategyo Company wideo Two-way briefingso Sending documentationo Regular in-house bulletinso Help-lineo Electronic communications

Communications Strategyo Company wideo Two-way briefingso Sending documentationo Regular in-house bulletinso Help-lineo Electronic communications



Detailed General Rules for the design of a Plan

Detailed Rules for the different forms of Financial participation

Detailed General Rules for the design of a Plan

Detailed Rules for the different forms of Financial participation

PEPPER III and IVPEPPER III and IV

Cover all EU Member States, Croatia and TurkeyDescribes the legal environmentThe scope and nature of financial participation schemesComparative analysis

Cover all EU Member States, Croatia and TurkeyDescribes the legal environmentThe scope and nature of financial participation schemesComparative analysis

RESEARCHRESEARCH

Research projects have consistently shown that financial participation, together with other forms of employee involvement, has a positive influence on the economic performance of the enterprise, improves productivity, the general commitment of employees and trust between employees and management.Transfer, 1/2002

Research projects have consistently shown that financial participation, together with other forms of employee involvement, has a positive influence on the economic performance of the enterprise, improves productivity, the general commitment of employees and trust between employees and management.Transfer, 1/2002

Thank youThank you

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Workshop Employee Financial Participation - O Kelly

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