Alcatel, France: Make work pay – make work attractive
Alcatel, an international communications provider, has implemented a wide range of measures related to profit-sharing in France. All the measures reflect the company’s desire to offer attractive salaries and benefits to its employees in order to remain competitive. Alcatel’s policy for granting stock options is extensive and thus very significant.
Alcatel is an international group providing communications tools to telecommunication companies, internet service providers and other companies, which deliver various types of data to their customers and employees. In 2005, sales were 13.1 billion euros. The group employs about 58,000 workers worldwide; however, most of the workforce is located in Europe. In France, Alcatel employs more than 14,000 persons at four different companies (as of 31 December 2005). At the group level, 23.6% of the employees are women. The company has recently committed to increase the number of women in top management positions and several tools have been set up in order to achieve this objective. Social dialogue is important within the group. Major French trades unions are present within the company. Alcatel has had a European Works Council since 1997 and a France group committee since 1983, including representatives of the different works councils existing in France. The group implements a social responsibility approach, through, for instance, a social charter set up in 2003. Regarding diversity issues, the group signed the French Diversity Charter in 2005. As of 31 December 2005, average monthly pay was 4,683 euros. Alcatel’s pay policy is founded on a non-discrimination principle. The management of this policy is decentralised, in order to take into account the situation in each unit. One of the main objectives is for the company to be sufficiently attractive to highly qualified workers.
Description of the initiative
As the pay policy is decentralised, it is obvious that measures implemented may change according to specific local contexts, and especially according to local legislative contexts. All measures planned by Labour Law in France in the field of profit-sharing are implemented by Alcatel. Financial participation in profits is compulsory for all companies within the French Alcatel group employing more than 50 employees. Such companies must assign a part of their profit to a specific financial reserve. Collective agreements will then define the manner in which these funds will be distributed to employees. French companies have the opportunity to conclude collective agreements when planning profit-sharing schemes. These agreements allow workers to receive grants, depending on the company’s results. All of the French Alcatel group companies have thus implemented profit-sharing plans. Alcatel has also implemented employee savings plans in accordance with French law. These plans are set up at group company level and allow workers to benefit from a shares portfolio. Companies have to assign funds to these employee savings plans. Alcatel complies with this rule by financing the acquisition of Alcatel shares. Alcatel shares are managed by a dedicated body, i.e. a mutual fund (FCPE in French), monitored by a supervisory board. The supervisory board includes 16 members: eight are elected by the shareholders and eight are appointed by Alcatel group and represent affiliated companies. Out of the eight elected members, two are members of the Alcatel board and represent the employees or former employees. As the group’s policy is decentralised, all these measures are decided and negotiated at each company level. Senior management addresses recommendations to all the units.
Apart from these measures, Alcatel also implemented capital increases reserved for employees. The last increases were in 2000 and 2001. In 2001, a total of 91,926 shares were issued. In addition, each subscribed share entitled the worker to three stock options. After four years, this represented more than 275,000 options, exercisable during a one-year period. Since 2001, no further capital increases reserved for employees have been decided, following the decision of the board under directions from the shareholders’ meeting.
Regarding the granting of stock options, the Alcatel board defined the main guidelines during several meetings held in 2000, 2001 and 2004. The grant of stock options is decided annually by the board on the recommendation of Alcatel’s Appointments and Pays Committee. The primary objective of this policy is to involve in the growth of the company the executives and the employees who play a key direct or indirect role in the achievement of company’s profitability. The board decides the number of options to be allocated and also the conditions for exercising them (especially the price for exercising). These decisions are based on different analyses: plans implemented by companies in the same sector, practices of each country, and levels of responsibility of the beneficiaries. Managers of each group’s units then decide to allocate options. Beneficiaries of the options do not acquire them immediately but progressively. Specific rules are implemented by annual plans. In France, a holder acquires 100% of their award after four years.
These different measures were initiated by company management. Depending on the measures considered and in compliance with French labour law, workers representatives are informed and consulted, especially in the framework of annual compulsory negotiation at company level.
Alcatel clearly wants to complement wages by implementing profit-sharing. To that end, Alcatel has implemented the different measures planned by French law in order to ensure profit-sharing. The measures aim to make the company attractive in a very competitive market. That is especially the case with the policy for granting stock options. This measure is not focused only on top managers but also on employees. This policy explicitly aims to allow Alcatel to remain competitive in a sector where numerous workers are highly qualified. Because Alcatel’s main competitors are American companies, the group needs to implement an ambitious pay policy. The number of beneficiaries of this policy for each annual plan has increased regularly: from 1,000 beneficiaries in 1996 to 9,470 in 2005. The beneficiaries include executives and employees, especially engineers and managers, who represent an important part of Alcatel’s workforce. About 40% of employees (70% of those employed in the United States) have received options. Considering the conditions in place to exercise these options, this policy is also a means to ensure the stability of the most crucial staff of the group.
Regarding capital shares, shares held by Alcatel’s employees represent 1.89% of the company’s capital as of 31 December 2005. Two employees of the parent company of the group are members of the board.
Exemplary and contextual factors
Alcatel’s case shows how a large company can implement profit-sharing policies in order to remain competitive. The extent of the policy for granting stock options is not typical of other large French companies.
Christophe Tessier, Université européenne du travail, Paris