Key Elements of a Labor Program
EMPLOYEE SHARE OWNERSHIP
Compensation Packages for Redundant Workers
Shares as an Incentive or Reward
Employee Share Ownership Plans
Material and Sources
Compensation Packages for Redundant Workers
As part of a compensation package, share transfers are probably best viewed as a supplement to, rather than a substitute for, severance or early retirement. This is true for three reasons:
Shares transfers are best seen as an addition to, rather than a substitute for, voluntary departure or early retirement compensation plans.
- As a social safety measure, share transfers are problematic because the benefits that workers receive will depend on movements in share prices. Those movements in turn depend on uncertain micro- and macroeconomic factors. Implementing agencies should exercise considerable caution if they wish to promote share ownership as a compensation mechanism; dramatic falls in share prices during 2001 are reminders of share price volatility. Although in the past some workers have done very well from shares, these successes have been in sectors- such as telecommunications-that have recorded very high levels of growth for a period. A strategy that provides a large proportion of workers' post-PPI compensation and safety net in the form of shares is too risky an investment strategy-particularly for older workers. Governments, however, have sometimes offered shares backed by a guarantee to workers.
- Many developing countries have relatively weak institutional environments for their capital markets (that is, uncertain property rights, limited protection of minority shareholders, poor share registration and depository systems, and weak regulation and oversight). Combine that environment with a work force that has little experience of share ownership, and there are significant risks of governance failure and abuse.
- If only a limited number of shares are available for allocation to employees, many managers would prefer to see those allocated to the remaining work force as a performance incentive rather than to departing workers.
