Rinascente introduces new form of employee financial participation

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In late May 2001, the management of the Rinascente group - one of Italy's largest retail chains - approved a scheme which allows its workers to purchase company shares on advantageous terms. This is the first time that an Italian company has offered its workers shares with a guaranteed yield higher than that available on the general market. The trade unions are very critical of this initiative, which they see as being merely a financial operation without any employee participation aspects.

The Rinascente group is one of Italy's main large-scale retail companies. It has more than 1,358 sales points in Italy with more than 30,000 employees. In 2000, the group invested more than EUR 303 million and had a turnover of EUR 5,543 million. The Rinascente group is listed on the stock market. The Eurofind company, owned by Ifil Spa (which manages the substantial assets of the important Agnelli family), together with the French-based Auchan group, one of the world's largest distribution groups, holds the majority of the shares.

At the end of May 2001, the company's management approved the launch of a share issue for its employees. The shares will be issued by the Imi Spa intermediation bank, and the issue will last three years, expiring in July 2004. Shares worth up to EUR 100 million will be available for purchase, though this amount could be increased if demand is high. The scheme will have the following characteristics:

• reimbursement for employees at the July 2002 deadline which will be no less than the nominal value of the shares;

• a guaranteed yearly minimum yield equal to the Euro Interbank Offered Rate (Euribor- the rate at which euro interbank term deposits within the euro-zone are offered by one bank to another); and

• an additional yield linked to the gross operating results of the Rinascente group.

Workers willing to take part in the share issue will be able to use up to ITL 10 million of their end-of-service allowance (trattamento di fine rapporto, Tfr) - a proportion of worker's pay set aside and paid as a lump sum at the end of the employment relationship (IT9906119N) - to buy them. According to the company, the share issue should make workers active participants in the life of the company.

This is the first time that an Italian company has offered its workers shares on terms more advantageous than those offered on the general market. The initiative was presented on 2 July 2001 to the commerce sector trade unions affiliated to the main confederations, Filcams-Cgil, Fisascat-Cisl and Uiltucs-Uil, which were very critical. According to the unions, this share issue is merely a financial operation aimed at gathering funds and reducing the company's dependence upon the banks.

Pietro Giordano, the national secretary of Fisascat-Cisl, is against the initiative, "which", he said, "does not have any characteristics of participation, just of financial opportunity". Mr Giordano also voiced concern that the amount of money put into the shares by workers (especially with regard to the portion of the Tfr which workers will be able to use) could hinder, due to a lack of cash-flow, future financial participation initiatives. He cited the examples of possible future union demands for the creation of a company-based supplementary pension fund, or possible legislation providing for the allocation of a portion of the Tfr to the public pensions system (IT0104184F).

Rinascente management is of a completely different opinion. Luigi Arnaudo, president of the group, underlined the importance of the initiative in terms of workers' active participation in the economic performance of the company: "The shares issued are an opportunity to obtain a profit, which is above the market average, on capital invested, while increasing the value of their activity for each individual employee who participates in the company's success."