Industry: Esops

What next?It seems that BEE will continue to drive esops. But there are dangers as Numsa knows from its past experience. What do you think Numsa’s policy stance should be?

Cosatu’s September Commission on Esops
Historically, Esops have been used by employers in South Africa as a device to co-opt workers. Workers were granted a small number of shares individually, which gave them no voice in the company.An alternative is collective Esops, where the shares are held in a trust under collective control, rather than by individuals (Numsa and Samcor established such a collective Esop when Ford disinvested in the 1980s). In the UK and the USA, employers have initiated such collective Esops in an effort to co-opt workers into adopting a management

Typically such management initiatives have transferred between 10% and 40% of the company shares to the Esop.The question is whether unions can make use of collective Esops to gain influence or control of companies. In the US, the Steelworkers have established collective Esops as a vehicle for employees to buy steel mills facing closure. Usually these Esops own 100% of the companies, and are therefore similar to co-operatives.Some unions argue that even a 20% stake can give workers the power to elect some directors and share in company

share in company profits.Esops also hold very real dangers.They may co-opt workers to the goals of management. They are frequently used to make workers accept increased workloads or pay cuts, or take responsibility for financing a failing company.The Commission does not recommend Esops. It proposes that Cosatu should discuss whether collective Esops have any benefits for workers and unions, and take decisions accordingly.

Numsa policy on Esops
Numsa’s 1989 congress came out strongly against employee share ownership schemes. It said that capital at the workplace tried to divide and weaken worker unity and to get workers to work harder.
One of the ways it tried to divide workers was by giving higher paid workers esops.However, Numsa has no policy on esops although it did agree to setting up a workers’ trust in the Ford
disinvestment case. This is not to say that Numsa members are not involved in esops. There are already some operating in Numsa-organised companies across the country.

Satawu on Putco EsopSatawu, Nactu affiliated Transport and Allied Workers Union of SA (Tawusa), Numsa (bus body) and Solidarity have just negotiated a 17% esop ownership of Putco. A further 14.4% was allocated to non-bargaining unit employees while a group of black women investors and a group of disabled black investors jointly secured a 12% share.The deal was driven by BEE ownership requirements and the need for Putco to secure future contracts from government. In terms of the deal:* each worker pays 1c for each share; the balance of R1.25 cost for each share is paid by a loan granted by Putco owners, Carleo Enterprises.* 66% of annual profits will go back into the company including cost of wages and wage increases; 33% will be divided between repaying Carleo Enterprises and paying dividends to shareholders ie wage increases will be kept separate from dividend payments.* if a worker retires, is retrenched, dies or leaves because of disability, s/he will receive the full market share* if he resigns, he will receive 33% of the value of the shares* if he is dismissed he will receive what he put out in the first place.Through the esop, parties have committed themselves to introduce a more participatory model of management.

(Thanks to SA Labour Bulletin Vol 30 Number 3, August/September 2006 for information)