Thursday, April 23, 2015

From the European Federation of Employee Share Ownership: 2014 Annual Economic Survey of Employee Ownership in Europe

(Pix (c) Larry Catá Backer 2015)

The European Federation of Employee Share Ownership (EFES), based in Brussels, Belgium,  serves as an umbrella organization for employee owners, and others who seek to promote employee ownership.  EFES has been recognized as a European Business Representative Organization by the European Commission Directorate General of Enterprise and Industry

EFES has recently released its "2014 Annual Economic Survey of Employee Ownership in European Countries" authored by Marc Mathieu, the EFES Secretary General  It includes much useful data and is worth a read, especially its graphs and tables.  A portion of the Introduction follows

Marc Mathieu (portions of pp. 8-11)


For the third consecutive year in 2014, the number of employee shareholders decreased in Europe. This should be a warning signal for everyone (see graph 5 page 14).

In fact, the number of employee shareholders in continental Europe decreased by 500.000 persons (-8%) from 2011 to 2014, while the number increased by 200.000 persons in the UK (+8%). 
These changes are clearly related to the regressive fiscal policies in many European countries. In contrast, the UK chose to double the fiscal incentives for employee share ownership, considering it is a key element of recovery and an investment for the future. 
Assets held by European employees in shares of their company increased to 301 billion Euro in 2014, a new record. However, these growing assets are spread over a declining number of employees. Lower incentives have thus a clear consequence in continental Europe: The democratization of employee share ownership regresses(see graph 6 page 15), leading to wealth concentration in the richest hands.

This is obvious through the comparison between the 8.800 top Executives in European listed companies, holding 14 million Euro each in shares of their company (all together 124 billion Euro in 2014) and the 8.775.000 ordinary employee shareholders, holding 20.000 Euro each in 2014 (all together 177 billion Euro).

The following graph shows how dramatic is the divorce between continental Europe and the UK. While 30% of employees held shares of their company last year in the UK (the highest rate since the statistic exists), a sharp drop below 24% was observed on the continent.

Employees' stake declined slightly to 2.99%, but this is not a break in the still growing trend (see graph 2 page 11).

The Survey of employee ownership in 2014 shows that still more and more of European companies organized employee share plans. In 2014, 94% of all large European companies had employee share ownership on which 86% had employee share plans of all kinds, while 53% had "broad-based" plans for all employees and 63% had stock option plans.

Finally, 28% of all large European companies launched new employee share plans in 2014, which seems not very different from previous years (see graph 8 page 17).
Corporate governance and profit-sharing

In addition to the whole information about employee share ownership and employee share plans, Top Executives and ordinary employees, this new Survey brings chapters about corporate governance and profit-sharing in European companies (including employee representation on boards and discrimination in voting rights), as well as a systematic comparison between listed companies and non-listed employee-owned companies in Europe.

List of most remarkable cases regarding employee ownership in Europe

The list of the 131 most remarkable European companies regarding employee share ownership can be found on page 31.

The European Employee Ownership Top 100

The European Employee Ownership TOP 100 rankings are designed with respect to two rankings of Europe's largest companies, considering employee ownership (see page 36 and following).

Employee representation on boards
Employee representation on boards is usual in many large European companies, either in Boards of Directors or in Supervisory Boards (see page 70 and following).

Employee shareholders are represented on boards in 13% of large French companies (but 30% in terms of employment). In France, employee shareholders representation on boards is thus typical in largest companies. However, it is much less frequent in other European countries.

On the other hand, employee representation on boards is usual for 37% of employees in large European companies. This is the case for 95% of employees in large companies in Austria, Germany or Slovenia. In France, it is the case for 49% of employees in large companies (wellover the European average), while it is only the case for 2.2% in the UK...and 0% in Italy.

Employee representation on boards is highly sophisticated in France. Altogether employee representatives are present on boards covering 49% of employment in large French companies. This is through unions or workers councils for 34% and it is for 30% through employee shareholders representatives (while both unions or workers councils and employee shareholders are present in 15% of cases).

Except in France (where it is by law), European listed companies applying profit-sharing are in very small numbers, -only 7,6% of all large listed companies (see page 85 and following).

Employee shareholders' voting rights
In most European countries, no discrimination exists, for or against employee shareholders'  voting rights. However, significant discrimination can well be observed in six countries (see page 88 and following).
Employee shareholders' voting rights are generally multiplied in France due to the fact that shares enjoy a double voting right when nominatives and held for at least two years.
At the contrary, employee shareholders' voting rights suffer negative discrimination in six other countries: Denmark, Sweden, Finland, The Netherlands, Switzerland and Germany. Typical cases here are companies issuing two classes of shares, A-shares with 10 votes and B-shares with 1 vote. Controlling owner shold high voting shares but employee share plans are based on low voting ones. This way, employee shareholders' voting rights are severely discriminated, in up to 44% of large companies in Sweden. Employee shareholders' voting rights are generally reduced by 30% to 50% in Denmark, in Finland and in Sweden compared with the one-share-one-voterule.
Listed companies compared to non-listed employee-owned companies
It has sometimes been declared since the financial crisis that non-listed employee-owned companies could be more resilient than listed ones. The systematic comparison between both sectors brings more information (see page 91 and following). 

Database of employee ownership in European companies
This Survey is based on a full database, including each of all large European listed companies (i.e. 2.225 companies, 25% of all European listed companies, but 98% of the whole capitalization and 94% in terms of employment, bringing thus a quasi-exhaustive picture of employee share ownership in European listed companies) and each of all large European non-listed employee-owned companies (the 282 employee-owned companies employing 100 persons or more).

All information in the EFES database is based on companies' Annual Reports (see page 101 and following).

No comments: