LO wants employee share-ownership regulated by collective agreements

There has been a boom in employee share-ownership in Danish companies over the past decade. Provoked by a dramatic article in a newspaper on its attitude to such schemes, the Confederation of Danish Trade Unions (LO) was prompted to express its views in a press release in September 2000, stating that employee share-ownership should be regulated by collective agreements. This generated comments from both the employers - which rejected LO's proposals - and from the organisations in the public sector - which took a sceptical position.

On 6 September 2000, under the headline "LO fighting for shares", the Politiken newspaper published an exclusive story which painted a very dramatic picture of a break by the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) with old traditions. "LO is ready for a historical break with the trade union movement's role as spearhead in the traditional wage fight on the labour market", according to the article. It stated that LO would demand that schemes providing company shares for employees be included in collective agreements under the slogan shares for all. The story was so strongly worded that LO took immediate action by publishing a press release clarifying its position.

In the press release, LO stated that it will in the future continue to stand for the traditional trade union fight for better wages and that it is the clear position of LO that employee share-ownership should not replace wages, but might be considered as an extra benefit offered by companies. LO does not want to promote employee share-ownership, but believes that the increased use of such schemes makes it necessary for unions to decide how they will tackle the issue. The press release gives some clear signals as to the approach to be taken:

• if the employees in a company are to be offered shares, the offer must be made to all employees on the same terms;

• its is the clear position of LO that the question of employee share-ownership is subject to agreement between the social partners; and

• it is up to the members of an individual trade union to decide the priority which should be given to employee share-ownership in future collective bargaining rounds.

Boom in employee shares

Over the past decade, employee share-ownership has become very popular in Danish enterprises and increasingly common. The media regularly report stories about employees who have suddenly become millionaires by virtue of their shares in their employing company. For instance, when the American company, Intel, took over the Danish computer firm Giga, each employee received DKK 15 million for their shares. This "fairy tale" is not unique and such stories contribute to making this practice more widely used. According to the management of Radiometer in Copenhagen, which produces hospital equipment and has many employee shareholders, the experience with this type of pay in the form of shares has been good. "Our employees feel a closer attachment to Radiometer when they hold shares. This makes our firm an attractive place to work when we are to recruit new people. The employees tend to think in a longer perspective when they are shareholders in the firm," says the company's financial manager, Erik Dahl.

Danish companies have three options as regards the allocation of shares to employees. They may: offer shares to employees free of charge; sell shares to the employees at a favourable price; or sell shares to employees at the normal price. Each option is governed by specific rules on matters such as taxation.

DA opposed to the idea

LO proposes that employee share-ownership possibilities should be offered to all employees. Jørn Neergaard Larsen, the managing director of the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA), categorically rejects this idea: "If you start making demands that such schemes shall be open to all, this may mean that some companies will be forced to give up such schemes," he argues. The employers are quite happy with the schemes as they are now. "The fact that we have succeeded in combining the companies' need for productivity with the involvement of the employees and their wish to make a profit comes near to the optimum solution," says Mr Neergaard Larsen.

Commentary

It is DA and the employers who hold the upper hand at present in the development of pay systems in Denmark, and LO has to find its place in a system which some fear could end up with strongly employee-oriented companies, making the trade unions redundant. This is why LO has to take a position on pay in the form of shares - it is high time for it to do so, especially because LO's affiliated union cannot be said to have the same interest in this matter as the employers.

The two major trade unions in the public sector, the Union of Commercial and Clerical Employees (Handels- og Kontorfunktionærerne i Danmark, HK) and the Federation of Public Employees (Foreningen af Offentligt Ansatte, FOA) - respectively the second and third-biggest unions in Denmark - are very sceptical. No similar schemes are found in the public sector. It is not possible for the employees to own a share in the school or hospital where they work. There is an obvious risk that an extended use of employee share-ownership may lead to large wage differentials between the public and the private sector, and that this may make it more difficult to attract highly qualified staff to the public sector. Recruitment may become a serious problem and this is why FOA and most groups in HK have rejected the idea already.

However, LO's plans to regulate employee share-ownership in collective agreements may be realised - it will be up to the individual trade unions. However, the public sector needs compensation in order to retain employees and it will be difficult to make public employees accept wage moderation in a situation where private employees benefit from employee share-ownership. (Carsten Jørgensen, FAOS)