Financial Participation in SA in Comparative Perspective. A Cross-National Study [email protected]...

Financial Participation in SA in Comparative Perspective. A

Cross-National [email protected]

Erik Poutsma, Paul Ligthart, Institute for Management Research, Radboud University Nijmegen

Ulke Veersma, University of Greenwich Business School

1ILERA FP Workshop Capetown

September 2015

ILERA FP Workshop Capetown September 2015 2

Why FP (despite crisis?)

Focus on Broad Based FP: employee share ownership

Corporate objectives; (principle – agency)employees as stakeholders with an

interest as capital owners HPWS paradigm Changing employment relationship: how much? Alignment between interests of owner, manager

and worker Rousseau & Shperling, 2004

Attraction – Motivation – Retention - Productivity; Pay off HR investments

Why FP? Critical: potential to deconstruct the underlying

unitarist, best practice approach with managers interests put first Marchington & Gurgulus, 2000

Gain tax benefits; Flexibility of pay; reduce labour costs

Self enrichment; artificially boosting earnings with short term results;

Circumvent unions and collective bargaining: win-win or zero-sum?

Insider coalition – takeover defence as a corporate interest

3ILERA FP Workshop Capetown

September 2015

Why FP?

Macro objectives: Wage flexibility; Income and Wealth redistribution (Germany) Sustained community investments

In practice mixed objectives -> Different historically determined institutional

arrangements lead to different configurations of interests, motives and outcomes



Comparative Research FP Australia, France, Germany, NL, UK and

South Africa, with focus here on last three countries

Qualitative: Interviews with main actors: governments, trade unions, employer federations (Pendleton & Poutsma, 2004); additional information for SA

Quantitative: CRANET data; Across the six countries -1999 and 2008/2009

Business units with > 200 employees

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The institutional embeddedness of financial participation(see Pendleton & Poutsma 2004)

GOVERNMENT Philosophies and

policies on financial

participation

LEGISLATIONFinancial participation

TaxationSecurities lawCompany law

Employment law

Company financial participation practice

‘Business systems’Labour management

Corporate governanceAccounting standardsOwnership structures

TRADE UNIONS

ConfederationsSectoral/

occupational/general unions

EMPLOYERS’ ASSOCIATIONS

ConfederationsSectoral/regional

associations

Sect. agreements

National agreements

Powerful employers

Powerful

unions


Different histories - objectives; different institutional designs of

national FP system

Income and wealth redistribution

Corporate objectives

Individual

Collective basis

UKNL

F

G

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SA?

IR and trade unions in SA

Trade unions part of resistance against Apartheid regime: community based unions

25.3 % union density in formal sector COSATU largest of three major TU centres

(1.8 mill. Members) politically linked with ANC as the ruling

party in government Community based and craft based unions


IR and trade unions in SA (contnd.)

Voluntary system with tripartite elements Regulation of rights of trade unions and

employers; not specifically regarding the content and level of collective bargaining

Establishment of bargaining councils in sectors

Scepcis towards impact and objectives of FP


Regulation of (fair) employment

New Labour Relations Act (LRA): regulating collective bargaining and dispute resolution. Also addresses employee participation in decision-making

Employment Equity Act (1998): equity in the workplace by (a) promoting equal opportunity and fair treatment in employment through the elimination of unfair discrimination, and (b) implementing affirmative action to ensure their equitable representation of designated groups, and equal pay, in all occupational categories and

levels in the workforce.


FP in SA

ESOP legislation Trust acquires shares from the company

(contribution by employer company) Shares allocated to employees Rights to dividends and net capital Participants ‘locked in’ for 5 years; tax

exemption. After 5 years, capital gains tax will be applied


FP system in SA

Embedded in the Broad-based Black Economic Empowerment framework (BBBEE)

Wider distribution of ownership to the lower ranked in terms of race and gender

ESOP Offer should be broad-based: > 90% of personnel eligible

Total value of distributed shares max R3000 per employee per year

Sweetener for employer: tax deductions



Implementation of agreements and role for unions NL: FP agreed between the social partners, but no

specification how this should take place. Consultation by Works Councils with implementation

UK: implementation should be left to the company level

SA: Left to company level - no specific requirement to agreement with unions or employee reps. However, according to BBBEE and EEA, employees need to be informed

Specific cases of involvement of unions in ESOP agreements (mining, bustransport and fisheries)


Attitude of individual employers

Favourable - loyalty and commitment of staff; supporting recruitment and retention

Wage flexibility and decentralisation of bargaining (but not in cases where there is already decentralised forms (UK)

Freedom for companies to implement Demand for absence of restrictions by governments

and IR regulatory frameworks – SA employers more reluctant

Problematic for SMEs


Attitude of Unions

Negative (left) – Scepticism – Selective acceptance (Liberal; professional unions)

Too risky – acceptable if equity and limited risk Unions in conflicting position as representation of both

capital and labour Use of FP for union avoidance FP used to decentralise, and therefore, fear for

undermining collective bargaining. SA: focus on immediate cash benefits for union members

Consequence: Unions largely ignore FP or are not able to be involved

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Results Qualitative Governments differ in positions and attitudes;

major tax incentives in F and UK Employers go for flexibility: alignment argument

for FP Unions go for security, but are less involved in

ESO development; more with PS FP develops separate from collective

agreements; more likely with PS Often selective plans; less in case of PS Seldom (effective) take-over defence

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20

Incidence of FP broad based (% of organisations; >200)

ILERA FP Workshop Capetown September 2015

2121

Determinants for existence of broad basef fp

ILERA FP Workshop Capetown September 2015

Determinants ESObb se

CountryUnited Kingdom 1.378+ [0.264]France 0.482** [0.116]Germany 0.305** [0.068]The Netherlands 0.477* [0.153]Australia 1.267 [0.306]SouthAfrica (ref.cat.)

Size 1.355** [0.060]Industry

Construction 1.182 [0.303]Transportation 1.238 [0.341]Banking and finance 1.885** [0.357]Chemicals (energy; non-energy) 1.533* [0.313]Other industries (eg services) 1.14 [0.171]Manufacturing (refcat)

Multinationals 1.476** [0.196]Trend

Year 1999 (refcat)Year 2008 0.787 [0.116]

StocklistingNo stocklisting (refcat)stocklisting 5.951** [0.745]stocklisting (missing) 1.423 [0.312]

Collective BargainingNational or regional broad-based Bargaining 1.025 [0.058]Company or site broad-based Bargaining 0.984 [0.047]Individual broad-based Bargaining 0.983 [0.052]

UnionisationNo unionisation (refcat) 1-25% 1.267 [0.227] 26-50% 0.852 [0.196] 51-75% 1.022 [0.245] 76-100% 0.775 [0.207]missings 1.036 [0.227]

Joint Work CouncilNo JWC (refcat)JWC present 1.123 [0.156]

Alternative Financial ParticipationAvailability PS 2.059** [0.258]Availability ESO

Results quantitative

ESO: Large Listed companies and MNCs In addition in SA: significant negative

effective of high unionized companies Level of collective bargaining does not

influence the adoption Almost no sectoral differences



What do we learn from this?

Different configurations of financial participation in different economies

BB-FP in SA mainly determined by historical institutional regulations AND less by corporate objectives: relationship with performance?

Unions usually do not want (or are not able) to be involved.

When implemented: Managerialist approach may dominate with possible transfer of risks to employees

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FP in SA: conclusion and dilemma’s IR system resembles elements of both LME (UK)

and CME (NL) Regulation emphasises corporatist elements Unions community based with political orientation FP embedded in regulation aimed at equity and

fairness Schemes however focused primarily on short term

gains: how much impact on underpriviliged workers?


Financial Participation in SA in Comparative Perspective. A Cross-National Study [email protected]...

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