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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
High Level GroupHigh Level Group
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
High Level GroupHigh Level Group
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
Elements of a Model PlanElements of a Model Plan
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
Elements of a Model PlanElements of a Model Plan
Elements of a Model PlanElements of a Model Plan
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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