Document: Num on esops Anglo-Gold Ashanti ESOP

Num on esops

Anglo-Gold Ashanti ESOP (Bokamoso Trust)

BackgroundAs a signatory to the Mining Charter and Construction Charter, the National Union of Mineworkers (NUM) is one of the organisations that called upon companies to establish Employee Share Ownership Schemes (Esops) and community empowerment initiatives as part of addressing the imperatives of broad based socio-economic empowerment in the industry. Given the controversy generated by companies when they unilaterally attempted to establish Esops in the 1980s, two consecutive Num congresses, in the year 2003 and 2006, vigorously debated the political wisdom of endorsing and participating in the establishment of Esops. The deliberations were frank and honest, guided by the need to empower and enhance the economic welfare of the workers in the mining and construction industries. Delegates argued for the establishment of Esops as a way of boosting savings and enhancing workers earnings.It was argued, however, that it was important to maintain a firewall between collective bargaining issues and Esop affairs. With the congress having settled the political debate surrounding Esops, the only question remaining was how to establish Esops such that they created value and real benefits for workers.

AGA ESOPSWhen the Anglo-Gold Ashanti (AGA) chief executive officer, Bobby Godsell, met the former General Secretary of the Num, Gwede Mantashe, with the intention to establish Esops for their 31000 employees, the organisation was ready to engage in the process. As there were no South African case studies to learn from, the parties realised the need to establish a task team to deal with a host of issues ranging from the Esop financial model, trust deed, administration of the trust, and communication to workers. ESOP SHOP played a vital role in facilitating the process, ensuring convergence of ideas and discussions with the stated objectives of economically empowering workers. Whilst the parties adopted an open-minded approach, they realised the damaging effects the process would have should it fail. The members of the task team, Num, AGA, Solidarity and Uasa, adopted a set of principles that would guide discussions. One of the most important principles was involvement and participation of workers, through their representatives, in the process that would give birth to the Esop product. The parties also realised the need to minimise the risks of creating a trust that would be of no value to workers. As a union we could not afford to be associated with such a trust. Safeguards had to be put in place to ensure that the value of the trust would not be at the mercy of the stock market. Because of these stock market uncertainties, AGA allocated 30 of the 120 shares issued to each worker as “˜free shares’ and the remaining 90 shares as loan shares. The loan shares were also issued to the trust at a 10% discount. Such “˜free shares’ would guarantee workers a gain at any time when they were exercised.Whilst we are satisfied with the fundamentals of the AGA trust in benefiting workers, we are concerned about the seven year limited life-span for the trust. Limiting the life-span has been the underlying characteristic of all the Esop schemes that are in the process of being established by the mining companies. We would want parties to explore ways of extending Esops to the life of the mining companies. We contend that matching the Esops’ term to mining licence obligations is crude and does not make sense. We however commend AGA in blazing the trail by setting an industry benchmark for worker empowerment.We would like to caution those mining companies that have adopted a paternalistic approach to the establishment of Esops without worker involvement. It’s an old school management philosophy that says, “˜we know what is best for our employees’. In some cases these mining companies have sought to subordinate the worker Esop interest under some control of a BEE partner, working against the very ideals of worker empowerment. Such Esop schemes deprive workers of their voice and have neither legitimacy nor credibility and thus do not have the blessing of the organisation.legitimacy nor credibility and thus do not have the blessing of the organisation.

This article originally appeared in South African Labour Bulletin Vol 31 No 1 2007