Employee Stock Ownership: A Game Changer for Poland?
December 30, 2016
Poland is warming up to the idea of employee ownership, but it may take a while before this form of ownership becomes widespread in this country, officials say.
Promoted through financial incentives, tax allowances and training programs, employee ownership has become commonplace in a lot of countries. The upsides of it were discussed during the 26th Economic Forum conference in the southern Polish mountain resort of Krynica in September. The discussion accompanied the launch of the Polish edition of Equity: Why Employee Ownership Is Good for Business, a book originally published by Harvard Business School Press in the United States. The book launch was combined with a debate entitled “Equity and How It Can Foster Development in Poland.”
The Polish edition, entitled Własność Pracownicza. Jak wspieraç rozwój biznesu, comes with a preface written by Poland’s Deputy Prime Minister, Development and Finance Minister Mateusz Morawiecki. “We should focus on creating mechanisms that will enable Polish people to make a profit out of capital rather than their own work alone,” Morawiecki writes in the preface. “On the one hand, this capital will increase national savings by gradually leveling out Poland’s negative investment balance; on the other hand, it will help the economy, companies and people grow.”
On opening the Equity… debate, Zbigniew Jagiełło, CEO of Poland’s largest bank PKO BP, said he hoped the event would produce new ideas to “help Poland and Poles grow rich and live a dignified life.”
Employee ownership in its present-day form was invented and put into practice in the United States in the mid-20th century. Using funds from anticipated profits, the system was designed to enable employees to buy stock in their enterprises. In the beginning, employees were allotted with shares proportionately to job seniority.
The system has since evolved into over a dozen forms, the most basic and popular one being Employee Stock Ownership Plans (ESOP). At the start of last decade, international steel corporation voestalpine took advantage of a privatization process to launch an employee ownership program of its own design. Max Stelzer of voestalpine Mitarbeiterbeteiligung Privatstiftung, a company that manages stock owned by voestalpine employees, said in Krynica that the system had emerged through consultations with employees. “This employee ownership system turns employees into shareholders with their own contribution to the company’s economic success,” Stelzer told the debate audience. He added that the resulting system not only gives employees a share in the profits, but also “equips them with tools to motivate them and gives them voting rights.”
Polish examples of successful employee ownership programs include the privatization of TZMO SA, a dressing materials company in the central city of Toruń. The privatization was carried out under a law on employee leasing plans passed in 1990. According to TZMO CEO Jarosław Józefowicz, the staff at the then state-owned enterprise was well organized, which enabled it to make the most of the regulations in effect at the time. In 1991, several hundred TZMO employees joined forces to buy the company from the Treasury and establish a joint-stock company. They were joined by academics and medics many of whom work at TZMO to this day. The company has since grown to be a leader in its field and today, it operates in 18 countries.
Workers’ courage and determination were largely what saved the Silesia coal mine in the southern town of Czechowice-Dziedzice. In 2005, the owner of the mine decided to close it down, but the crew went on strike in defense of their jobs and national property and refused to emerge from underneath the ground for nine consecutive days. An agreement was eventually signed to allow the mine to carry on. Still, when the Kompania Węglowa coal corporation was established later, the mine was again scheduled for a shutdown. Dariusz Dudek, chairman of the mine’s Solidarity trade union, recounted in Krynica how the miners got together again to save the mine one more time. “We said to one another: why don’t we just buy the mine?” Dudek said. The miners registered their employee-owned company at a notary’s office and then more stockholders joined in. They managed to find a strategic investor in the Czech Republic and their business endeavor has since become one of the most cutting-edge coal mines in Poland, Dudek said in Krynica.
Prof. Andrzej Szumański from the Jagiellonian University in Cracow, who also took part in the debate, said that until recently employee ownership in Poland was predominately connected with privatization. “Now that privatization is coming to an end, we need to develop more wide-ranging employee ownership models,” Szumański said. He added that systems such as managerial stock options could be used provided they are enhanced with employee stock options.
Marc Mathieu, secretary general of the European Federation of Employee Share Ownership (EFES), said that companies with employee shares were healthier and reported higher profits than other businesses. According to Mathieu, this form of ownership needs political decisions and tax incentives to become more popular.
According to the Silesia coal mine’s Dudek, Poland should learn from the experience of other countries but come up with its own rules for employee ownership. Dudek argued in Krynica that local banking laws should be changed and that a special fund should be established to support enterprises interested in pursuing employee stock ownership plans.
Source: Polish Press Agency (PAP)