The White Paper of the French Chamber of Industry and Commerce in Poland

Paweł Kawarski        30 October 2015        Comment (0)

Today I am referring again to the French Chamber of Industry and Commerce in Poland. The Chamber issued in 2014 a document named “The White Paper. Proposals of investors regarding improvement of doing business in Poland” (in Polish: “Biała Księga. Propozycje inwestorów dotyczące poprawy warunków prowadzenia biznesu w Polsce”), in which a number of problems that entrepreneurs in Poland encounter in their day-to-day activities as well as solutions to those problems were described. Obviously, my attention was drawn to the part of the document which deals with the idea of employee shareholding.

It has been noted that implementation of employee shareholding triggers creation of common interests of employees and employer, it gives employees the possibility to participate in the long-term build-up of capital of the company. What is more, employee shareholding enables systematic accumulation of savings by employees.

The Chamber proposes introduction in Poland of separate legal regulations related to employee shareholding, in particular, to participation of employees in profits of their respective employers. Uniform practice of application of tax laws and removal of various barriers have been also identified as the most important factors allowing development of employee shareholding.

Based on research of Chamber’s experts, such regulations would lead to development of effectiveness of Polish businesses in consequence of establishing additional source of financing based on employees’ possibility to invest their earnings in the company’s capital. Furthermore, such legal regulations would likely lead to stability of employment, as well as to generating new jobs.

As tax issues are crucial to the idea of employee ownership in Poland, the French Chamber of Industry and Commerce updated the tax section of the White Paper and published it in April 2015 (Polish version is available online).

It seems that problems and demands listed by the Chamber are worth serious considering most important of which is the call for separate legislation involving employee shareholding in Poland, or at least the tax burdens should be tempered.

“Employee Shareholding – experiences and perspectives”

Paweł Kawarski        31 August 2015        Comment (0)

While looking for ideas for next posts I have come across a report concerning the conference entitled “Employee Shareholding – experiences and perspectives” organized by Department of Labour Law of the Polish Academy of Science on 22 May 2014.

The conference hosted a number of prominent guests: scientists, representatives of Ministry of Economy, French Chamber of Industry and Commerce in Poland (La Chambre de Commerce et d’Industrie France PologneCCIFP), and entrepreneurs, including Auchan as the special guest. Many interesting issues, historical and current ones, were discussed. However, I would like to draw readers’ attention to one, particular area, namely, if there are any obstacles preventing development of employee shareholding in Poland.

The representative of CCIFP identified the following impediments:

– taxation of loans extended to employees for their subscription/purchase of shares;

– taxation of discount upon subscription of shares;

– taxation of revenues from redemption of units in FCPEs (Fonds Commun de Placement d’Entreprise, i.e., French collective employee-shareholder vehicles);

– unclear and imprecise tax regulations regarding tax treatment of share options (upon their grant and exercise);

– taxation of options;

– taxation of phantom shares.

Based on this brief report one may conclude that Polish tax regulations are the main obstacles of development of share ownership for local employees. From my observations it appears that after more than a year since the time of the conference, the situation has not changed.

A column about making a bid in “Parkiet”

Paweł Kawarski        15 May 2015        Comments (5)

The daily “Parkiet” of 9 May 2015 published my column on the proper moment of launching a bid titled “When a bid should be made”. Although this column does not directly discuss employee shareholding, it may be also interesting for employees being shareholders of public companies (their employers or others companies).

Directive 2004/25/EC on takeover bids makes a distinction between two actions: launching a bid and making public a document containing information about the bid, a few days after the launch (Art. 6.1 and Art. 6.2, respectively).

The Polish Public Offer Act consolidates these actions – making public the bid document (Art. 77.1). I call for an amendment to the Polish Act in order to adapt the Directive’s model. It is in the interest of all market participants, including employee-shareholders, that they learn about the bid as soon as possible.

Selected motivation plans of public companies

Paweł Kawarski        15 May 2015        Comment (0)

The latest column published by “Parkiet” on 25-26 April 2015 titled “Institutional investors liked motivation plans” contains a few observations on employee-shareholding in Polish public companies. The column discusses “motivation plans”, which are oriented solely towards executives and managers.

The plans may be divided into two groups. The first consisting of plans which main criterion of allocation of shares is the increase of net profit in a given period. Among the companies following this principle are: LPP, Pelion, Radpol, Kredyt Inkaso, BZ WBK

The second-group’s plans make share allocation dependent on the fulfilment of several criteria jointly, they may be: sales, EBITDA, net profit, or share price. The following companies in this group include: Kęty, Wawel, Stomil Sanok, Budimex, Vistula, CD Projekt, and Mercator Medical.

The concept of a company operating a motivation plan is positively received by analysts generally. However, analysts cited in the column prefer the plans of the second group underlining that net profit is strongly susceptible to accounting tricks or one-time events without the management’s efforts, while making share allocation dependent on the fulfilment of several criteria on many levels reflect how a company functions and better influences factors of significance for building the value of shares.

Referring to conclusions of the “2014 Survey” published by EFES, described in the previous blog entry, one might observe that the discussed column explains in a way why we deal in a relatively low level of “democratization” of employee-shareholding in Poland. It is difficult to do otherwise where the motivation plans motivate only managers. However, it is a bit surprising that management positively assesses, as one would assume, the effects of a motivation plan for the company and its shareholders and at the same limiting these effects by excluding employees of lower levels from the plan.

Aggregate data of employee-shareholding in Poland for 2014

Paweł Kawarski        28 April 2015        Comment (0)

The European Federation of Employee Share Ownership (EFES) has published on its website the annual report regarding employee-shareholding “Economic Survey of Employee Ownership in European Countries in 2014”. Across almost 160 pages there are more than 100 graphs and tables aggregating the data of 31 European countries (EU Member States plus Norway, Switzerland and Iceland) and providing for certain details on a per-country basis. This blog entry aims to report the most significant data regarding Poland.

European perspective

Before we go to the Poland-specific data, let’s take a look at the European landscape of employee-shareholding. First of all, the survey is based on the EFES’ own database of European employee ownership. The 2,509 largest companies were taken into account in 2014, of which 2,225 were listed (25% of all European listed companies) with a market capitalization of at least 200 million euro, they employ nearly 35 million employees (also counting employees in subsidiaries).

8,775,000 ordinary and executive employees hold 2.99% capital in European companies of a value of 301 billion euro. The “democratization rate” shows that more than 25.1% of employees are shareholders in their companies (30% in the UK and below 24% in continental Europe). 94% of companies had employee-share ownership, 53% had broad-based plans.

Poland’s performance

99 Polish companies were included in the Survey of which 96 were listed (they are named on p. 155), however, none of them were qualified by the EFES as “remarkable” (p. 31).

The 96 Polish listed companies had 104,808 employee-shareholders holding an average capital of 8,518 euro (below the European average of 20,000 euro) representing 0.71% of the capital (below the average of 2.99%). There were also 443 top executives being shareholders, each of whom held shares worth 5.2 million euro (below the European average of 14 million euro). The block of shares held by top executives accounted for 1.84% of the capital (data from Table 18).

One Polish company was highlighted in the Survey. Spółdzielnia Piekarsko-Ciastkarska based in Warsaw is mentioned in the list of “100 Top European majority employee-owned companies” (p. 38) ranked by number of employees. In fact, SPC is a workers’ cooperative. With 700 employees, SPC was ranked #59 on the list.

Even this brief summary allows us to conclude that there is massive potential to develop the idea of employee-shareholding in Poland, in particular, features such as value and share in capital held by employees fall well below 50% of the European standards. Also less than 20% of Polish companies have broad-based employee share plans, compared to the 53% European average, and less than 20% of Polish employees are employee-shareholders. For more specific data, readers are invited to analyze the survey themselves.