EUROPEAN
ACTION PROGRAMME
FOR
EMPLOYEE OWNERSHIP AND PARTICIPATION
(PEPPER
POLICY)
As
our EUROPEAN ACTION PROGRAMME, you find herewith the “Summary and conclusions”
part of the final report of the First European Workshop for Employee
Ownership and Participation, held at the European Parliament, Brussels,
on 30 April 1999.
The
Workshop of 30th April was an important step forward
for a policy of employee share ownership and participation in Europe
:
-
the main European institutions (European Parliament, European Commission,
Council of Ministers, Economic and Social Committee) were around
the table. Their representatives were all strongly in favour of
an active and voluntary policy to promote employee ownership and
participation.
-
an action plan was drafted, including what role of national and
European organisations and institutions could play in implementing
it.
The
“Summary and Conclusions” of the Workshop are aimed to be a clear, short, and concrete document.
It basically consists in an action plan for policy developments
in employee ownership and participation.
The complete final report also includes the “Minutes”.
FIRST
EUROPEAN WORKSHOP
FOR
EMPLOYEE OWNERSHIP AND PARTICIPATION
30 April 1999 – European Parliament, Brussels
FINAL
REPORT
Summary and conclusions
Action programme
Action programme
Ways
and means
A
framework for action at European level
Obstacles
to a European policy
The
benefits of employee share ownership and participation
Outline
of good practice models
Conclusion
and follow-up
The FIRST EUROPEAN WORKSHOP
FOR EMPLOYEE OWNERSHIP AND PARTICIPATION was organised with the
support of the EUROPEAN COMMISSION, Directorate-General for Employment,
Industrial Relations and Social Affairs, and of the SOFICATRA.
07/09/99
FIRST EUROPEAN WORKSHOP
FOR EMPLOYEE OWNERSHIP AND PARTICIPATION
30 April 1999 –
European Parliament, Brussels
Summary and conclusions *
(* The complete
report on the conference is available in both French and English
from EFES.)
The
First European Workshop for Employee Ownership and Participation
was held on 30 April in the European Parliament, at the instigation
of the European Federation of Employed Shareholders. Initially planned
for 40 participants, it was a success, attracting 80. The quantity
and quality of contributions made it possible to achieve the objectives
set for the day: deciding what activities to undertake and the ways
and means to promote employee share ownership and financial participation
within the European Union.
The meeting was
endorsed by the European institutions and the social partners. In
particular, it was supported by the European Commission's Directorate-General
for Employment, Industrial Relations and Social Affairs (DGV), and was held in the European Parliament.
One of the main
speakers was Ms Elisa Maria Damiao, Member of the European Parliament,
who came to express the support of Ms Pauline Green, President of
the Group of the European Socialist Party. The European People's
Party and the European Liberal Democratic and Reformist Partywere also represented.
As Ms Odile Quintin,
Deputy Director-General of DG V, emphasised, financial participation
in general and employee share ownership in particular are complex
issues for the European institutions. They touch on the sphere of
competence not only of several Commission departments, but also
and more importantly of the Member States and social partners. Hence
the participation of Mr Manuel Hernández López, Director at DG II
(Economic and Financial Affairs), accompanied by a number of other
representatives from DG II and some from DG III (Industry),
DG VI (Agriculture) and DG XXIII (Enterprise Policy, Distributive
Trades, Tourism and Social Economy).
In the context
of the German Presidency of the Council of Ministers, Dr Peter Mozet,
of the German ministry for labour and social affairs, took part
in the workshop’s opening session, which included many German speakers
and participants.
Mr Antonello Pezzini
attended on behalf of the Economic and Social Committee of the European
Communities and its President, Ms Béatrice Rangoni Machiavelli.
Mr Wolfgang Kowalski,
for the European Trade Union Confederation, expressed his support
for financial participation and set out the conditions for its implementation,
outlining the possibility of constructive dialogue on the matter.
A working paper
prepared by the secretariat general of EFES – the "1999 EFES
draft memorandum" – was distributed to all the speakers and
participants. In particular, the document detailed the benefits
of employee share ownership and the action already undertaken by
the European institutions, and pinpointed, among the recommendations
of the Council of Ministers and European Parliament, some initiatives
to be implemented at European level:
1. A standing working party comprising representatives
of the social partners and employee shareholder associations, members
of the European Parliament, Commission experts and representatives
of the Member States.
2. A European programme endowed with the financial
resources needed to promote the pooling of information and good
practice and provide training on financial participation systems
for the social partners.
3. Organisations and legislative measures
at national level to promote employee share ownership and financial
participation.
Participants agreed
on the need to develop models of good practice in financial participation
at European level. They reviewed the benefits of employee share
ownership and discussed the factors involved in making the most
of them. These factors must be included in the models of good practice
to be developed.
They also mentioned
the obstacles to developing financial participation and a European
policy in this area. Lastly, proposals were issued on the action
required at Community level and the means to be employed.
Action programme
The aim of EFES
and the participants at this workshop is to achieve a degree of
convergence and promote good practice in Europe, both by lobbying
governments and national institutions and by working through the
Community institutions. It is neither to impose employee share ownership
nor even to harmonise the existing systems through legislation.
Professor Erik Poutsma of Nijmegen Business School kicked
off the debate by proposing a six-point programme which generated
considerable interest among participants.
1. Developing clear models of financial participation practice and pooling the
relevant information (on the British trustee system and French savings
plans scheme, for instance).
2. Defining a common overall framework for tax incentives. A solution must be found, in particular
for multinational companies.
3. Developing capital savings systems, enabling capital ownership to be shared
between workers and other holders.
4. Pooling good practice, particularly by means of information and training for workers.
5. Lifting legislative barriers. There should, of course, be a European framework to promote
financial participation and, at the same time, interaction between
the three pillars of participation. The three pillars will necessarily
reflect individual cultural environments, which will have an impact
on financial participation. Dialogue within the works councils depends
on the procedures established by each company. Obstacles can therefore
also arise inside companies. Better use must be made of financial
participation to encourage dialogue within companies.
6. Supporting the social partners’ programmes. Action at European level should essentially
aim at getting the social partners involved in these issues. The
many meetings organised by German trade unions for the year 2000
are worth mentioning in this respect.
An action programme at both European and national level can
be identified on this basis, as follows:
At
European level
Developing employee
share ownership and financial participation requires research and
analysis, pooling of information (on legislation and taxation systems,
good practice in the various countries and administrative and tax
barriers) and corporate governance.
Participants unanimously
agreed on the need to:
- Draw up models of good practice by organising exchanges and meetings,
while bearing in mind the diversity of European cultures and the
need to apply the models in a flexible manner which is consistent
with the policy in each country. Initial steps for drawing up these
models were identified.
- Define the social values that are fundamental
to EO so that it can be promoted on a common basis. This point was
stressed by a number of participants who consider that EO is not
a goal in itself, but rather a means for reaching the common objectives.
- Organise the pooling of information and good practice.
- Develop methods for measuring, evaluating
and comparing the implementation of the PEPPER report in the Member
States.
- Stimulate research by disseminating information
and results relating to completed research projects and undertaking
new ones.
- Promoting employee share ownership and participation through
training and information.
At
national level
Participants pointed
out that implementing the PEPPER report was the responsibility of
national governments and the social partners.
- Implementation of the 1992 Council recommendation and 1998
European Parliament resolution (see
the EFES memorandum)
The participants
stressed the need to take account of the January 1998 resolution
of the European Parliament and to implement the Council’s 1992 recommendation.
In the latter, the Member States proposed inter
alia to recognise the benefits of employee share ownership and
financial participation, and to provide for an appropriate legislative
framework in order for them to be introduced in good conditions.
- Establishment of national institutions
There was particular
support for the idea – already expressed in the European Parliament’s
resolution – of establishing national institutions to promote financial
participation.
- Pensions
The question of
pensions and of social welfare was raised as a general policy issue.
But it is not just a political issue; it also has macroeconomic
implications. Participation plans are an additional source of income,
but they cannot replace the current system of social welfare and
pensions, and they do not, by themselves, resolve the pensions problem.
- Promoting a share ownership and participation culture through the provision of information on
training. Particular attention was devoted to the idea of "rating
agencies", which would supply information on the performance
of companies offering participation schemes.
Ways and means
Financial resources
Action at European
level entails securing adequate financial resources.
Everyone agreed
that the Community institutions must do more. As soon as the new
Commission is up and running, it must play its part in this area.
- Use of existing
resources
Mention was made
of the European Social Fund and RTD programmes. DG V is providing
assistance for public events such as the First and Second European
Meetings of Employed Shareholders, along with smaller-scale activities
such as a meeting on financial participation by employees in multinational
companies and a survey of barriers to the introduction of participation
plans.
All existing resources
should be examined with a view to PEPPER-related projects (developing
SMEs, research, Structural Funds, CEECs, etc.).
- Development
of an appropriate financing programme
The European Parliament
called on the Commission to "implement an adequately financed
programme to promote the exchange of information and best practice,
together with training for both sides of industry in financial participation
schemes".
The European Parliament
– and in particular the Committee on Social Affairs, the Committee
on Economic Affairs and the Committee on Budgets – has its own role
to play in this area. During the budget procedure it must press
for a specific European programme endowed with its own budget, enabling
it to support the pooling of information, dissemination of good
practice and promotion of research and training to build on the
PEPPER report.
A standing framework for exchange and dialogue
- Formation of
a working party
A priority set
out in the European Parliament resolution is for the European Commission
to establish a working party comprising representatives of the social
partners and associations of employee shareholders, together with
Members of the European Parliament and Commission experts. Participants
also called for the establishment of a group of experts comparable
to the Davignon Committee, which made it possible to break the deadlock
on the European company statute.
- Creation of
a European institute
A European institute
for financial participation should be established, along the lines
of the national institutions for promoting participation and employee
share ownership. This institute will act at European level by helping
the social partners and national institutions to coordinate their
strategies and encourage governmental measures.
- Formation of
a European Parliament intergroup
The importance
of policies on employee share ownership and financial participation
should be reflected within the European Parliament by the establishment
of an ad hoc parliament intergroup.
Initiatives to be taken by the European institutions
European Parliament
Given the now
acknowledged significance of financial participation, the European
Parliament should monitor the issue on an ongoing basis. The formation
of an ad hoc parliament intergroup will be a
useful step forward. The European Parliament – and in particular
the Committee on Social Affairs, the Committee on Economic Affairs
and the Committee on Budgets – has its own role to play in budgetary
matters. During the budget procedure it must press for a specific
European programme endowed with its own budget, enabling it to support
the pooling of information, dissemination of good practice and promotion
of research and training to build on the PEPPER report. It should
also follow up, supervise and guide the action to be taken by the
Commission, in particular regarding its participation in the working
party it has called for.
European Commission
The next step
for the European Commission is now to submit a proposal for an appropriate
European financing programme for the PEPPER policy to the European
Parliament and the Council. It is also up to the Commission to take
measures for the establishment of a standing framework for sharing
information and promoting dialogue, such as the working party requested
by the European Parliament and a European institute for financial
participation.
Economic and Social Committee
An own-initiative
report will shortly be issued by the Economic and Social Committee.
A framework for action at European level
Although a policy
on worker participation is the responsibility of Member States and
the social partners, this does not mean that the European institutions
do not have an important role to play in areas such as promoting
exchanges of information, experience and good practice between the
Member States.
- The contribution of employee share ownership to the European
employment strategy
Ms Quintin reviewed
the initiatives undertaken by the Commission (see the EFES memorandum)
and added that, with regard to wider policy initiatives, employee
share ownership and financial participation had been considered
in the context of work organisation. The Commission’s document "Modernising
the organisation of work – a positive approach to change" (November
1998) identifies the role of the social partners in this field,
and mentions financial participation as an area to be investigated.
What is the link
between modernising work organisation and stimulating the expansion
of dynamic firms? The answer is the European employment strategy,
also known as "the Luxembourg process".
It is based on
four "pillars": employability, entrepreneurship, adaptability
and equal opportunities. Two of them are relevant to financial participation
and employee share ownership. Work organisation plays a crucial
role in "encouraging adaptability", and risk capital markets
are mentioned under "developing entrepreneurship".
- The fundamental role of the social partners and social dialogue
The social dialogue,
involving trade unions, employers and employee shareholders, is
crucial. Participants stressed the vital role of the social partners
in employee share ownership and participation, at both national
and European level, as regards establishing legal frameworks and
implementing participation plans within companies. The social partners
must be involved.
- Realistic goals: the harmonisation issue
Given the current
policy environment – enormous disparities between Member States
and a lack of Community competence in areas (mainly social affairs
and taxation) relevant to employee share ownership –, the EU's decision-making
procedures and the obstacles mentioned earlier, Community harmonisation,
meaning a common framework to be imposed on all Member States by
means of a directive, is neither realistic nor – for some – even
desirable.
- Action at all levels of power and decision-making, under
the principle of subsidiarity
Subsidiarity,
in European jargon, means that decisions should be made and action
taken as close as possible to those directly concerned. This involves
doing at Community level only what cannot be done at a lower level,
and leaving decisions in other cases to the Member States, the social
partners or individual companies. Models or principles formulated
at Community level should be implemented in a flexible manner to
ensure that each country’s specific features are respected.
- Incorporating action into a broader international context
In particular,
there is the prospect of the accession to the EU of a number of
central and eastern European countries (CEECs), and participation
in networks such as the Capital Ownership Group, an informal worldwide
network whose purpose is to establish an international coalition
with a view to promoting wider ownership of productive capital,
reducing inequalities, contributing to stable growth, facilitating
the development of productive capacity and improving quality of
life and living conditions for everyone.
Obstacles to a European policy
Only 6% of European
firms have provided for financial participation to date. Hierarchy
still prevails in both public- and private-sector organisations.
In some countries, such as France and the United Kingdom, financial
participation is officially recognised; in other countries it is
just a form of salary given to the executives.
- No Community competence
Industrial relations,
taxation, social security and pension systems, and wages policy
are exclusively the preserve of Member States and of the social
partners. The EU can at most promote pooling of information and
a Europe-wide social dialogue in these areas.
- Great disparities
between Member States
In the spheres
of taxation and industrial relations – and employee shareholding
and financial participation –, many disparities remain between the
Member States, relating to financial markets, forms of participation,
the purpose of participation schemes, and worker protection and
representation.
- Fragmented markets
The European financial
market is too fragmented, unlike that of the United States. In Europe,
there are a number of legal barriers to listing on the stock market,
there are relatively few large companies and the great majority
of firms – SMEs and micro-enterprises – do not have access to the
financial markets.
- Dubious or hostile
social partners
At European level,
the European Trade Union Confederation
(ETUC) has expressed support for employee shareholding and
participation but has laid down a set of conditions reflecting the
fundamental concerns of its members (72 national trade unions and
15 sectoral organisations, from 33 European countries). ETUC’s priority
is to maintain and promote employment, and it is by linking the
financial participation and employment issues – and removing the
connection with wages – that it can promote it most effectively
both among its national members and at European level.
ETUC nevertheless
emphasises that no Europe-wide framework agreement can emerge unless
European employers, represented by UNICE, express their stance on
the matter.
The
benefits of employee share ownership and participation
A survey commissioned
by the Dublin-based European Foundation for the Improvement of Working
and Living Conditions showed that firms with high participation
levels are more innovative than others, and also benefit from other
positive effects such as increased motivation, productivity and
wage flexibility.
The workshop confirmed
the advantages outlined in the EFES draft memorandum:
- Staff motivation – improved business performance
- Fairer distribution of corporate wealth
- Job preservation and creation
- Fostering of entrepreneurship
- Sustainable development
- Additional resources for staff
- A more stable society
The workshop identified
the following additional benefits:
- Controlled inflation
Growth without
inflationary pressure is fundamental for Europe. One of Bill Clinton’s
economic advisers has evaluated the effect of the USA’s lead in
developing employee share ownership and financial participation
at 100 additional basis points in GDP growth.
- Wage flexibility
The surveys have
shown that financial participation increases wages instead of replacing
them, except in specific circumstances.
- Capital formation, accessible to people
with small and medium incomes.
- Corporate independence
EO strengthens
the independence of companies, which belong to local owners.
Outline of good practice models
The participants
indicated a set of prerequisites for making the most of financial
participation.
- Participation in decision-making
In Europe, participation
breaks down into direct participation, representative participation
and financial participation. The best way to improve participation
is to improve the interaction between these three "pillars".
Financial participation complements the other types of participation.
It must be combined with participation in decision-making, information
and adequate training for workers (corporate governance).
-
Restricting or covering risks
for workers
Shares are risk
capital. Safeguards can be introduced against speculation, the risk
of losses for workers and inappropriate use of participation plans
(to get rid of the devalued shares of a troubled company, for instance).
The means put
forward to restrict or cover risks include: legal certainty, tax
breaks and economic stability; professional legal advice and a sound
financial partnership to back the introduction of the participation
plan; and the creation of investment companies.
- Voluntary participation
Most participants
agreed that worker participation must be voluntary, under both national
and corporate regulations. This is not the case in France, where
employee share ownership is a legal obligation. The French argument
for a mandatory framework is based on the desire to make good an
imbalance between employers and workers, which prevents fair bargaining
and freedom of choice for employees.
- Respect for the rights
of all workers
Financial participation
and the resulting involvement in decision-making should not undermine
the workers’ existing rights relating
to participation in works councils, information and access to decision-making,
whether or not they are employee shareholders. Also, they must be
without prejudice to applicable collective agreements.
- Training and information
for workers
For employee shareholders
to enjoy full access to their rights and to balanced dialogue alongside
the company’s other shareholders, provision must be made for training
and information on fundamental business issues and the company's
management. In addition, an ethos of shareholding and participation
must be promoted.
- Access to shareholding
and participation for all employees
A number of participants
stressed the need to reduce rather than increase discrepancies between
company employees and the importance of redistributing income through
employee share ownership and participation. This implies that participation
plans must be available to all employees rather than just senior
executives as is, unfortunately, sometimes the case.
- Participation in SMEs,
unlisted companies and public services
SMEs also play
a very important role in the economy, alongside multinational companies.
They must be taken into account, together with firms which are not
listed on the stock exchange, in the drafting of models and legislation.
Introducing participation plans is costly for SMEs, so provision
must be made for specific aids and tax relief measures. The benefits
of participation in public services were also mentioned.
Conclusion and follow-up
This European
workshop was an important step in developing the EFES campaign to
make 1999 the year of public support for employee share ownership
and financial participation in Europe.
It met with a
favourable response from all the European institutions.
Priorities for
action were decided, with each institution having its own role to
play.
EFES will ensure
that the conclusions of this First European Workshop are acted on;
a first follow-up workshop will be held during the Second European
Meeting of Employed Shareholders, in Warsaw on 13 November 1999.
FIRST EUROPEAN WORKSHOP FOR EMPLOYEE
OWNERSHIP AND PARTICIPATION
Brussels 30.4.99
Rapporteur Report, by David Erdal
I am grateful
for the chance to be here, and for the job of rapporteur, which
is very beneficial, since makes you listen to everything that is
said, and think about it.
I am a member
of EFES because of two things: I led a buyout of Tullis Russell,
a paper manufacturing company employing about 1200, into 100% employee
and trust ownership in 1994; and I am chairman of Job Ownership
Ltd, which has been lobbying in the UK on employee ownership matters
for over 20 years.
I will try to
summarise and make a few comments on the main points of the conference
as I see them, under two headings: the benefits of employee ownership
and participation, and what we can do at the European level to promote
it.
The Benefits of Employee Ownership and Participation.
A wide range of
benefits has been identified.
At the macro-economic
level, a major benefit is growth without increasing inflationary
pressure. One of the US president's senior economic advisers is
on record as concluding that if employee ownership was spread throughout
the US economy then GNP could grow a full percentage point faster
with no inflationary pressure. That of course feeds directly into
employment.
The mechanism by which this occurs
is mainly wage flexibility, and we heard from the unions on that;
but we also heard that research shows that generally emloyee share
ownership is on top of wages, and is not associated with reduced
wages except in special circumstances.
At the micro-economic
level, the main benefit is improved company performance. More and
more people are realising that the old authoritarian structures
- which are still standard in our cultures, with the inevitable
Trade Union reaction to such a system - are more costly than structures
of involvement. On this question of company performance and employee
ownership, the distinguished economist Professor Richard Freeman
gave a series of lectures at the London School of Economics recently
in which he presented the conclusions of a meta-study of all the
research into this question: he says that there is now no doubt
whatsoever that improved performance follows from employee ownership
combined with other forms of involvement.
We also heard
about capital formation, which is a newer and less studied angle
on employee ownership. In the UK two working groups have been set
up to design new schemes: one is on this question of using equity
incentives in start-up hig tec companies.
But there is also
no doubt that employee owernship makes people more entrepreneurial
in their attitudes. The performance effect comes about primarily
through engendering greater commitment. One aspect of employee ownership
that was not mentioned is that it tends to keep companies independent
and locally owned too.
Beneficial social
effects identified in the conference include the fact that employee
ownership spreads wealth more widely. Of course this only happens
if the schemes are designed to do so. I would like to add this observation:
some speakers seemed to assume that the main way of generating employee
ownership is for employees to save their wages and use these savings
to buy shares. This does not have any wealth spreading effect: if
companies do well then share values rise much faster than wages,
so the employees will lose out. Instead, the company must use some
of its cash flow to achieve the transfer of ownership into employee
hands: this is the only way in which capital ownershhip can be spread
to any significant extent. The fundamental insight behind the US
ESOP system, from back in the 1950's, is that business assets pay
for themselves. This fact allows them to be leveraged to pay for
the transfer of ownership, and the borrowings repaid out of future
earnings. I do not know of any studies on the spread of wealth,
but it must happen: in the UK 50% of households have les than Ł50
in liquid assets, but the employees in the buyout I led will have
shares worth at least a year's salary when they retire. that is
genuine wealth reditribution, with this magic ingredient too: it
is wealth redistribution achieved in a way that enhances company
performance - unlike redistributive taxes.
We also heard
how employee share ownership leads people to become more involved
in wider capital ownership, owning shares in other companies too.
A second beneficial
social effect is the greater involvement of employees in their companies,
in two main ways: as shareholders they have rights to information,
and to influence. In fact it is only when these are systematically
developed that the strong performance effects are seen.
There are in some
cases strong personal benefits too: Tullis Russell is in Fife, which
sent a communist party MP to parliament for 15 years, and where
the mining culture made people hostile to the idea of share ownership.
But after the buyout, I witnessed a number of employees change,
sometimes quite suddently, as they realised after the years of suspicion
that the ownership system was real. The light went on and they became
energetically committed. It is a wonderful thing to see.
I am also completing
a study of two Italian towns now, one egalitarian town with 27%
of all those employed working in cooperatives and one normal town,
without cooperatives. In the egalitarian town mortality is lower,
especially cardiovascular mortality; also the children stay longer
in education (which I believe is because the people are less alienated
from the institutions) and get better qualifications; and they are
more socially active - voting more, joining more voluntary associations
and giving more blood, for example. Employee ownership has wider
effects than just in the companies.
So, this really
is the age of participation. The time is ripe, and we are lucky
to be here at this time.
But we also heard
that there are many diverse interests involved, with many diverse
views and cultures, and many concrete problems to solve. So it is
necessary to set about the task of promoting employee ownership
in a way that involves all the social partners, which is easier
said than done. Each social partner has their own history and tradition,
and both the trade unions and the employers will experience sometimes
a sense of threat as they move into employee ownership. But we heard
a message of careful support from the trade unions.
One of the great
things about employee ownership is the way in which it manages to
align interests that seem to be in conflict, changing "either....or..."
into "both...and...". For example, we have seen that,
done properly, it produces both wealth redistribution and company
performance; one speaker asked whether the motivation is wealth
or power or information - the answer is that it is all three together,
and it is only when you get all three together that the full performance
effect is achieved. From the Trade Unions we heard that it must
not be an alternative to co-determination. But it is completely
in line with co-determination, and even in the UK which does not
have codetermination it tends over time to produce something very
like it where it is implemented. In the case of United Airlines,
where the unions led a buyout of 55% of the shares at a value of
I think $5.4 bn, the union leaders now feel that they get more and
better information, and have much more influence, and are doing
much more beneficial things for their members than when they were
on the outside in a negotiating posture.
Given all these
benefits, it is not surprising that there is interest in employee
ownership throughout the world. In the UK we are in the process
of forming an official parliamentary body, a standing group on employee
ownership. The chairman and two deputy chairmen are all senior MPs
- one from each of the main parties. Given all these benefits, there
is support from all across the political spectrum.
What we can do at the European level
Moving to the
second topic: What we can do at the European level, the following
points seemed to me to have led more or less to consensus:
Firstly, everyone
wants the European institutions to do more. Of course there is a
crisis at the moment, but when the new Commission is established,
we all want it to do more on this question.
On the other hand
there was unanimity that the target is not to impose employee ownership,
nor even to harmonise systems by legislation. But we do want to
work towards convergence, developing a good system across Europe,
perhaps as much by bottom-up lobbying of each country's government
and institutions as by working through the European institutions.
The system must be voluntary at the level of the country as well
as the enterprise. No one spoke in favour of the French system of
requiring employee ownership by law.
However it is
also clear that significant political parties are prepared to take
legislative initiatives if we can identify key issues where it would
be beneficial.
The main task
identified was to gather ad disseminate information. People seek
more research and analysis; systematic exchange of information on
legislation, fiscal frameworks (e.g. those that best express the
ethic of fairness); best practice from all the various countries;
and barriers and problems, such as fiscal barriers and bureaucracy;
also corporate governance issues. One of the main ideas is to develop
a series of models.
At the same time,
recognising the diversity of European cultures, there is a need
to present these models in the way that best fits each country's
particular circumstances. May I echo the appeal from the SME experts
to keep it simple.
Some of the ideas
presented were very novel - how to introduce employee ownership
into organisations without ownership, for example. There is in fact
an initiative just now in Scotland which is trying to develop a
model based on employee ownership for the national health service,
involving the patients.
The main method
that everyone seemed to support is the idea for a standing working
party. This would need to include the main social partners. It would
carry out the various information tasks.
Other ideas were
put forward for consideration: introducing the topic into works
council agendas; working through the training and development initiatives;
using the old tools while the present crisis prevents significant
new developments; starting pilot projects using the European Social
Fund; including the countries which will join Europe in future;
and we have the American invitation to join in a truly global network
on this topic.
To close the best
I can do is repeat my conviction that this is an idea with a great
future. This is the place to be. This is the program to carry forward.
David Erdal, West
Court, Hepburn Gardens, St Andrews, Fife, KY16 9LN, UK
Tel:
(+44)(0)1334 473724. fax: (+44)(0)1334 473129
28/04/99
First
European Workshop on
Employee
Share Ownership and Participation
Brussels,
European Parliament, 30 April 1999
1999
EFES draft memorandum
The European Federation of Employed Shareholders
for Employee Ownership and Participation (EFES) has issued a call
for 1999 to be the year of public support for employee share ownership
and participation in Europe. In the context of the elections to
the European Parliament and the establishment of a new Commission,
we are calling upon all Europe's political groupings to take a stand.
Throughout Europe and around the
world, employee participation in equity and profits has grown steadily.
A new actor has entered the social stage – the employed shareholder,
more than just an employee or just a shareholder: both salaried
worker and co-entrepreneur.
The European institutions have encouraged
this movement since 1990, when the European Commission's first PEPPER
(Promotion of Employee Participation in Profits and Enterprise Results)
report was published. But little progress has been made since the
Council of the European Union issued the PEPPER recommendation in
1992 – despite growing evidence that companies with employee participation
are more efficient, develop more sustainably and provide more secure
employment.
What
instruments should the European institutions implement as of now
to promote the development of employee share ownership and participation
and apply the PEPPER recommendations? What practical action can
be taken at Community level? Between the European Commission, the
European Parliament, the Council of the European Union and the Member
States, where do the responsibilities for promoting employee share
ownership and participation lie? What action is planned, and within
what time frame? That is the subject of this memorandum, and of
the first European workshop on employee share ownership and participation,
to be held at the European Parliament in Brussels on 30 April 1999.
The
First European Workshop on Employee Share Ownership and Participation
is organised with the support of the European Commission, Directorate-General
for Employment, Industrial Relations and Social Affairs.
EFES draft memorandum
Table of contents
1.
THE DEVELOPMENT OF EMPLOYEE SHARE OWNERSHIP AND PARTICIPATION 13
2.
WHAT IS EFES? 13
3.
WHY PROMOTE EMPLOYEE SHARE OWNERSHIP?
15
Staff
motivation – improved business performance...
15
A
fairer distribution of corporate wealth
15
Job
preservation and creation..........
15
Fostering
of entrepreneurship..........
15
Sustainable
development 15
Additional
resources for staff..........
15
A
more stable society 15
4.
WHY DEVELOP EMPLOYEE SHARE OWNERSHIP AT EUROPEAN LEVEL? 16
5.
ACTION TAKEN AT COMMUNITY LEVEL
17
The
1992 recommendation..........
17
The
PEPPER I report 17
The
PEPPER II report..........
17
The
European Parliament resolution.......
17
The
communication on risk capital
17
The
social action programme 1998-2000
18
6.
WHAT ACTION IS NEEDED AT EUROPEAN LEVEL?
19
Formation
of a standing working party.
19
An
adequately financed programme and pilot projects.......... 19
National
bodies and legislation.......
19
7.
THE EUROPEAN INSTITUTIONS' POSITIONS AND RECOMMENDATIONS SINCE 1991 21
The
1992 Council recommendations.......
21
The
Commission's proposals.......
22
The
European Parliament resolution of January 1998
23
References 25
Commission.. 25
Council.......... 25
European
Parliament...... 25
See
also.......... 25
Employee
share ownership and financial participation has become a key to
business success. This is a sociological phenomenon observed worldwide.
On the New York stock exchange, 9% of the equity of American businesses
is held by their staff, and that figure is set to rise to 25% over
the next 10 years. Companies are more dynamic and more efficient
when employee shareholders take a hand in running them. That much
is clear from employee ownership indexes. And the phenomenon is
growing in Europe too, in small, medium-sized and very large businesses
alike.
Neither
just a shareholder nor just an employee, a new actor has entered
the social stage.
As
both members of staff and owners of a significant share of the capital,
employee shareholders are concerned that key decisions should not
be dictated solely by the interests of outside shareholders, but
should form part of a genuine corporate strategy geared to sustainable
development.
Employee
share ownership requires constructive, proactive participation.
It involves dialogue with the various corporate decision-making
and management bodies. Employees make the most stable of shareholders,
with a special interest in the long-term viability and growth of
the company.
All
around the world, employee participation is growing, generally in
a succession of stages:
-
the first stage is often profit participation (participation and
profit sharing);
-
the second stage is equity participation (share allocation and capital
stock increases reserved for employees); to begin with employed
shareholders, despite having corporate responsibilities and commitments,
often remain passive shareholders with no decision-making power;
-
and that raises the question of the third stage: participation in
decision-making and management.
As
a worldwide sociological phenomenon, the spread of employee share
ownership transcends ideology, goes beyond theorising, philosophising
or wishful thinking. It is a reality which is currently imposing
its own needs and seeking its own means of expression. And those
needs and means are those of association and federation.
Employee
shareholders are joining forces in collective bodies to exercise
their rights as shareholders. These may take the form of associations,
management cooperatives or investment trusts: it varies from one
country to another. Whatever the legal framework, the common experience
is that a formal framework such as a legal person or association
is needed to represent the collective interests of employee shareholders.
In every country concerned, these collectives and associations have
then come together within coordinating and representative bodies,
forming federations of employed shareholders to promote participation
at national level.
That
led on to the idea of a European federation and international cooperation.
And it was at the FIRST EUROPEAN MEETING OF EMPLOYED SHAREHOLDERS,
in Brussels on 8 May 1998, that 248 participants from 28 countries
agreed to create the EUROPEAN FEDERATION OF EMPLOYED SHAREHOLDERS
FOR EMPLOYEE OWNERSHIP AND PARTICIPATION (EFES).
One
of EFES's foremost aims is to make employee shareholders' voices
heard in the social and political dialogue at European level.
Employed shareholders, as neither just employees nor just shareholders
but co-entrepreneurs, are taking on a new voice and seeking to make
it heard at its rightful level: they are the new social partners.
They have a new and important contribution to make to debate and
policy on the objectives of growth, competitiveness and employment
in Europe.
At
the first European Meeting of Employed Shareholders, representatives
of employee shareholders called for a permanent structure to act
as:
·
a
centre for information and exchange on employee share ownership and related legislation
and on the various systems piloted and implemented in businesses
·
a
spearhead for defending the interests of employee shareholders belonging to the member associations
at European level, by means of joint recommendations
·
a
think-tank on the development of employee share ownership and on financial packages beneficial
for shareholding employees and former employees
·
a
representative body lobbying international institutions, at European level in particular
·
a
stimulus for all concerned in Europe: social partners, companies, institutions,
Member States, etc.
·
a
friendly forum for
people working towards the same goals
The
secretariat of that first meeting became the secretariat of the
European Federation of Employed Shareholders (EFES), based in Brussels.
It stages meetings to organise the European federation and the European
workshops on employee share ownership and participation at the European
Parliament, and will be orchestrating the SECOND EUROPEAN MEETING
OF EMPLOYED SHAREHOLDERS in Warsaw in October 1999.
Employee
share ownership is not a matter for employee shareholders alone.
It is also a way of achieving better results for everybody: employed
and other shareholders, employees and self-employed staff, managers,
and businesses generally. That is why EFES wants to be an open federation.
Open not only to employee shareholders, but to all those individuals,
organisations, institutions and businesses which are looking to
promote employee share ownership and participation, in order to
form as representative a federation as possible in all the countries
of Europe.
EFES
aims to be an open, democratic and participatory European organisation,
founded on shared values of receptiveness to other points of view,
dialogue and mutual respect.
Employee
participation, by taking the human factor into account, improves
business performance in terms of both productivity/competitiveness
and quality. Participation programmes help to develop more dynamic
and efficient companies.
In
its 1992 recommendation, the EU Council of ministers stated that:
"encouragement
of financial participation in enterprises by employed persons, without
discrimination on grounds of sex or nationality, may be seen as
a means of achieving a wider distribution of the wealth generated
by enterprises which the employed persons have helped to produce."
In
a context of privatisation or restructuring, employee share ownership
is a factor in preserving and promoting employment: employee shareholders
are more favourable to employment than outside shareholders.
It
has been demonstrated that participation programmes in the United
States enable employee shareholders to build up the initial capital
to start their own companies, while developing a stronger enterpreneurial
spirit and resolving the succession problems involved in director
share ownership.
Employee
shareholders take a longer view of the company's development. Because
they work there, they are also aware of the environmental consequences
of the strategies adopted. In eastern Europe in particular, employee
share ownership has sometimes saved the local environment from the
destructive consequences of an excessive focus on short-term commercial
gain on the part of outside shareholders.
Employee
share ownership schemes can provide workers with an additional income,
particularly welcome not only on retirement but for contingencies.
A
broader distribution of corporate wealth among employees yields
greater stability on financial markets.
Employee
share ownership is an important motivational factor in a company,
provided employed shareholders see the connection between their
individual endeavours, the company's performance and the rewards
obtained. Optimum results are achieved once the business has developed
a corporate culture of participation. These schemes also benefit
other shareholders, who gain from the performance improvements participation
secures.
Where
is the value in promoting employee share ownership at European level
rather than operating at national level within the Member States?
Employee
share ownership has developed in a variety of ways in the European
Union. Trans-European information exchange, particularly on good
practice and legislation, between employee shareholders, promoters
of employee share ownership, businesses, social partners and the
Member States will give all concerned a better basis on which to
develop the best possible practice and prepare legislation in the
light of the experience of the most advanced countries in this field.
European
firms are increasingly expanding their business beyond the borders
of their base country to operate at international level. European
law on share ownership and participation has not kept pace with
this change.
Many
employee shareholders in Europe have seen their businesses taken
over by companies from over the border and have lost access to the
benefits of the participation system in force in their own country;
some have lost their voting rights as shareholders from one day
to the next.
Others
belonging to European multinationals have found that the participation
scheme in the country of the parent company does not apply elsewhere.
Legal
disparities between countries are reversing progress and causing
inconsistencies in the management of businesses, staff, participation
schemes, remuneration, etc.
Little
progress has been made since the Council of the European Union issued
its recommendation on the promotion of employee participation in
profits and enterprise results (PEPPER) in 1992.
In
its 1992 recommendation, the Council of the European Union called
on the Member States to encourage participation schemes, in particular
by establishing appropriate legal structures and financial incentives
and facilitating the supply of information to all parties. The Council
also stressed the role of management and labour. It was a worthwhile
first step, but recommendations are not binding on Member States,
and this particular recommendation fell short of the European Commission's
initial proposals.
The
Council's 1992 recommendation followed on from a Commission report
known as PEPPER I. The introduction to that report stated:
"Little
is known about the concrete application of PEPPER schemes in practice
– the principal types, their diffusion over time, existing legislation,
and the effects PEPPER schemes have on enterprise performance."
The
report thus assessed the degree of employee participation in company
profits (and not necessarily in the decision-making process). It
examined the existing regulations in each country, but covered only
"conventional" public- and private-sector companies (and
not cooperatives). Nor did it take an intra-Community perspective:
what happens when a company established in several Community countries
sets up a PEPPER scheme in one of them? Do the company's employees
in other European countries receive the same benefits?
The
Commission proposed setting up a Community instrument designed in
particular to facilitate information exchange between Member States.
The
PEPPER I report found substantial disparities between Member States
regarding support for PEPPER schemes, and a lack of the information
exchange on legislative aspects and good practice which could help
increase the number of schemes in the Community.
It distinguished between three
groups of European countries:
1. France and
the United Kingdom, which have a long-standing tradition of incentives
for financial participation
2. Belgium,
Denmark, Germany, Greece, Spain, Italy, Luxembourg, Portugal, Austria
and Sweden, where government support remains limited or non-existent
3. Ireland,
the Netherlands and Finland, where governments appear increasingly
to be supporting PEPPER schemes
Five
years on, the situation was largely unchanged: progress continued
steadily in France and the United Kingdom, while in the other countries
it was slow at best. Few governments had moved to promote employee
share ownership and participation, and the disparities between Member
States remained.
In
its PEPPER II report (1996), the Commission reviewed progress on
the issues addressed by the previous document and found that there
had been no exchange of information between Member States on either
legislative aspects or good practice.
The
European Parliament concurred with the Commission's analysis, and
issued a resolution in January 1998 proposing action at European
level to secure progress.
Furthermore,
a communication on "Risk Capital – A Key to Job Creation in
the European Union" published by the European Commission (DG
II) in April 1998 emphasises the need to consider the benefits of
employee participation and share ownership schemes at European level:
"In
essence, what is at stake is the creation of a new entrepreneurial
culture in Europe. The real political challenge is to provide the
tools, enabling technologies and financial instruments for a new
generation of European entrepreneurs to start up and succeed. To
provide the conditions for European diversity to flourish. So European
skills and knowledge can be translated into winning global companies.
To create sustainable jobs and additional growth. In the European
Union. (…) In the US, equity pay and employee ownership schemes
have played an important role in helping to stimulate the growth
of new, dynamic companies. In particular, they have enabled individual
employees to build up capital to start their own entrepreneurial
activities, involved employees in the development and well-being
of the company (helping to promote stakeholding and an entrepreneurial
spirit) and eased the problems of company succession. The European
Union should draw on the lessons of this experience."
"The
Social Action Programme 1998-2000" sets out the Commission's
guidelines on social policy in response to the problems of unemployment
(jobs, skills and mobility), changes in the world of work (globalisation,
the information society) and poverty and social exclusion. In the
chapter on changes in the world of work, the Commission announces
plans to:
"launch
an initiative to encourage greater employee financial participation
in companies by highlighting good practice and identifying obstacles,
building on the 1992 Council Recommendation."
Since
1991, the European institutions and Member States have issued a
succession of opinions, proposals, recommendations and resolutions
on PEPPER initiatives. The texts are given below (see section 7).
We
have selected a number of proposals as the basis for debate at the
European workshop on employee share ownership and participation
on the priorities, content and form of measures to implement them.
In
its January 1998 resolution, the European Parliament called on the
Commission to set up a working party "consisting of representatives
of both sides of industry, Members of the European Parliament and
Commission experts".
This
group will have the task of promoting the introduction of PEPPER
schemes in equivalent conditions throughout the Community.
What
are the preconditions for setting up a group of this kind? When
and how could it be done? What should be its priorities and time
frame?
MEPs,
EFES and other partner organisations such as CECOP and ETUC have
a key part to play in setting up a European Parliament intergroup,
for example.
Setting
up a programme
The
European Parliament also called on the Commission "to implement
an adequately financed programme to promote the exchange of information
and best practice, together with training for both sides of industry
in financial participation schemes" and to develop pilot projects
for the participation of undertakings e.g. in connection with the
privatisation of State enterprises, including projects in the countries
of central and eastern Europe.
Accordingly,
European budget heading B3-4000 (industrial relations and social
dialogue) for 1999 states that "pilot projects to promote financial
participation by workers shall also be financed". The amount
reserved for such pilot projects is not indicated. The social partners
in central and eastern Europe are also eligible.
What
is needed to take this further? Does the European Commission plan
to put forward a full-scale, adequately financed programme?
˛Programme
scope and content
The
Community institutions have all recommended information exchange
between the Member States, and agree that such exchange has been
very limited to date. However, neither the development or expansion
to European level of an information network on employee share ownership
and participation nor the production and distribution of newsletters
is currently eligible for Community support.
How should exchange and information systems
be developed?
The
social partners and employee shareholders also lack training with
regard to PEPPER and the European dimension.
What would be the scope of an adequately
financed programme? What, broadly, would be the content of such
a programme: exchanges of information and experience, European networking,
consultation of the representatives of employee shareholders and
other parties in the social field, training, involvement of non-EU
countries, etc.? Does the Commission intend to consult those concerned
(employee shareholders, promoters of employee
share ownership and participation, social partners, Member States)?
Our
experience of the FIRST EUROPEAN MEETING OF EMPLOYED SHAREHOLDERS
and the follow-up to it showed the great potential benefits of developing
exchanges of experience, know-how and good practice with certain
non-EU countries, in particular the United States and the countries
of central and eastern Europe.
What should be the Community framework for such exchanges?
Parliament
recommended that the Member States "instruct national bodies
to draw up schemes for promoting and encouraging financial participation
schemes."
It
called on the Commission "to study the need for a Community
initiative concerning aspects of policy on capital, for example
a recommendation on the coordination or harmonisation of support
for enterprises with a European dimension or to ensure the promotion
of capital-forming payments to or by migrant workers."
The
EP also called on the Member States to develop framework legislation.
In 1992, the Council recommended that Member States ensure that
legal structures are adequate and consider the possibility of according
fiscal incentives and advantages. The Commission agreed, and further
proposed developing a framework law in all the Member States and
setting up PEPPER schemes in the course of privatising public bodies.
What are the prospects for the implementation of the European
Parliament's proposals, in the light of the minimal progress made
since the 1992 Council recommendation? What view do the Member States'
representatives take on the matter?
How can the special cases found in multinational companies
be accommodated? What obstacles remain to a European directive?
The
Council of the European Union, the Commission and the European Parliament
have called for a series of initiatives.
The
Council took the view that:
"it
is appropriate to promote a wider spread of financial participation
schemes within the Community (…);
"the
interest and active involvement of management and labour in this
Community initiative are a pre-condition for its ultimate success;
(…)
"the
present action appears necessary to attain, in the course of the
operation of the common market, one of the objectives of the Community."
It
invited the Member States:
1.
"to
acknowledge the potential benefits of a wider use, individually
or collectively, of a broad variety of schemes to increase the participation
of employed persons in profits and enterprise results by means of
profit-sharing, employee share-ownership or a combination of both;
2.
"to
take account of the role and the responsibility of management and
labour in this context, in accordance with national law and/or practice;"
and
recommended that they should:
1.
"ensure
that legal structures are adequate to allow the introduction of
the financial participation schemes referred to in this recommendation;
2.
"consider
the possibility of according incentives such as fiscal or other
financial advantages to encourage the introduction of certain schemes;
3.
"encourage
the use of such schemes by facilitating the supply of adequate information
to all relevant parties;
4.
"take
account of experience gained in other Member States when deciding
on which participation schemes to promote;
5.
"ensure
that in the context of the laws, regulations and practice possibly
existing in the Member States the parties concerned have a wide
range of options or arrangements available, the implementation of
which would, when suitable, be the subject of consultations between
employers and employed persons or their representatives;
6.
"ensure
that this choice can be made at a level which, taking account of
national collective bargaining legislation and/or practices, is
as close as possible to the employed person and the enterprise."
The
Council set out a number of conditions for promoting employee share
ownership:
DG
V (Employment, Industrial Relations and Social Affairs), which coordinates
Commission action on promoting employee share ownership, proposes
in its PEPPER I and II reports to:
-
provide for a stimulating climate
-
stimulate information exchange between Member States
-
make an appeal to the social partners
-
avoid irresponsible risks for employees
-
tackle the problems for intra-EU schemes involving
subsidiaries in different national circumstances
-
promote the development of clear and understandable
models and plans for introduction
-
develop a framework law in all Member States to integrate
the regulations for all possible PEPPER schemes
-
offer fiscal and other financial advantages
-
clarify the distinction between wages subject to social
charges and the advantages derived from PEPPER schemes
-
enhance eligibility for PEPPER schemes
-
promote a national wage saving system as a vehicle
for share ownership and profit-sharing
-
establish national institutions to develop systems
for promoting PEPPER in the national context
-
set up PEPPER schemes in the course of privatisation
of public bodies
In
its communication on "Risk Capital: A Key to Job Creation in
the European Union", the European Commission (DG II – Economic
and Financial Affairs) proposes measures and a 1998-99 timetable
to:
"- Examine the advantages of equity pay and employee ownership schemes.
"- Explain the benefits of venture capital/equity participation and
promote the role of entrepreneurship in society.
"- Review European practice
as regards corporate governance."
"-
to conduct a study into the impact of financial participation schemes
in Member States on employment, productivity and wage flexibility,
and to assess the conditions for introducing such schemes in enterprises,
in particular small and medium-sized enterprises;
"-
to implement an adequately financed programme to promote the exchange
of information and best practice, together with training for both
sides of industry in financial participation schemes;
"-
to set up a working party consisting of representatives of both
sides of industry, Members of the European Parliament and Commission
experts to promote the introduction of PEPPER schemes in equivalent
conditions throughout the Community, in particular in transnational
enterprises (…);
"-
to study the need for a Community initiative concerning aspects
of policy on capital, for example a recommendation on the coordination
or harmonisation of support for enterprises with a European dimension
or to ensure the promotion of capital-forming payments to or by
migrant workers (…);
"-
to develop pilot projects, along the lines it has itself suggested,
for the participation of undertakings e.g. in connection with the
privatisation of state enterprises, including projects in the countries
of central and eastern Europe."
The
EP recommended that Member States:
"-
develop framework legislation in the Member States (promotion through
fiscal law and/or bonuses);
"-
instruct national bodies to draw up schemes for promoting and encouraging
financial participation schemes;
"-
include SMEs in any promotion through favourable treatment not only
of the acquisition of bonded securities but also of forms of participation
typical of these enterprises;
"-
extend eligibility for financial participation schemes to all categories
of employees, in particular part-time employees or those on fixed
contracts;
"-
set up financial participation schemes in conjunction with the privatisation
of public-sector organisations;
"-
ensure, in accordance with national practices, that financial participation
systems are planned, introduced and supervised in cooperation between
enterprises and employee groups;
"-
provide appropriate information so as to forestall unreasonable
risks associated with the issue of shares to employees (…);
"-
promote the idea of supplementary old-age protection by means of
the accumulation of capital by employees;
"-
develop alternative forms of investment where it is impossible for
employees to participate in equity, e.g. in the public service,
or where such participation is rejected.
Such
alternatives should provide SMEs with sufficient accumulated capital
with which to create jobs."
The
EP called on both sides of industry at national and European level:
"-
to organise information campaigns that will benefit the parties
concerned and raise public awareness of the options;
"-
to encourage PEPPER options as a feature of collective bargaining
and to draw attention to the favourable impact these options can
be expected to have on productivity, income enhancement, resources,
employment and worker participation."
"The
Pepper Report – Promotion of Employee Participation in Profits
and Enterprise Results", Commission of the European Communities,
Directorate-General for Employment, Industrial Relations and Social
Affairs and the European University Institute, Social Europe,
supplement 3/91
"The
PEPPER II Report – Promotion of Employee Participation in Profits
and Enterprise Results (Including Equity Participation) in the Member
States" – 1996, Commission communication, COM(96)0697
"Risk
Capital – A Key to Job Creation in the European Union",
European Commission communication, April 1998
Social
Action Programme 1998-2000, European Commission, Employment and Social Affairs, April 1998
Council
Recommendation No. 92/443/EEC of 27 July 1992 concerning the promotion of participation by employed
persons in profits and enterprise results (including equity participation),
Official Journal No. L 245, 26/08/1992
Report on the PEPPER II report, Committee
on Employment and Social Affairs, rapporteur: Ms Marie-Thérčse Hermange,
September 1997
Resolution on the PEPPER II report, 15 January
1998, Official Journal No. C 34, 2.2.1998
FEAS
News
No.1, September 1998
"Financial
Participation", working paper No.1, February 1998, European
Trade Union Confederation
"Capital Markets for Competitiveness",
Report to the President of the European Commission, the Prime Ministers
and Heads of States, Competitiveness Advisory Group, June 1998