Workshop Employee Financial Participation - Szestay

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Workshop Employee Financial Participation - Szestay

  1. 1. Employee Ownership at the Herend Porcelainmanufactory Ltd. The Impact of Financial Investors on Enterprises Employee Financial Participation Brussels - 2010 July 5th
  2. 2. Introduction of Herend Herend Village Herend Porcelain Manufactory
  3. 3. Road to political and economic independence for Herend & Hungary • 1956 Revolution in Hungary • 1968 Economic reforms (gulash communism) • 1978 FIM Ceramic Holding Co. dissolved • 1985 License to export independently • 1987 Enterprise Council (Yugoslav model) • 1989 East German migration via Hungary • 1989 Berlin Wall
  4. 4. Idea of employee-s participation in Herend’s privatization Trade Union conference in Budapest (1989) - Key Figures (Imre Palkovics, Janos Lukacs, Robert Oakeshott) Study visits in England (1990 – 1992) - Oxford ESOP Conferences - John Lewis - Baxi - Tullis Russel - Chesterfield Transport
  5. 5. Preparations and Implementation of ESOP at Herend Hungarian Parliament’s resolution for ESOP legislation - Law No. 1992. XLIV First general meeting of the Herend ESOP Trust was convened (1993) - constitution accepted
  6. 6. Ownership within ESOP at Herend Share Allocation • 50 % acquired by employees - individually - cash down payment - transfer of company bonds - ESOP Trust share distribution • 25 % kept collectively by ESOP Trust • 25 % remain with the Hungarian State
  7. 7. Primary function of the ESOP Trust 25% of Shares kept together by ESOP Trust to ensure that active employees own majority of shares, by: - buying back shares from retired / leaving employees - issue / sell shares to new employees
  8. 8. Structure of the ESOP Trust ESOP General Assembly (yearly) 1 500 employee – shareholders decide how the 25% „collective shares” should vote on the AGM of the Ltd. Co. Board of Trustees 7 elected trustees Honorary position (no financial compensation) ESOP Administration 2 part-time administrators Accounting, financial transactions, share transactions, organizing of General Assembly, documentation, etc.
  9. 9. Employee-s voice in important decisions • Annual Shareholders Meetings (25 % collective + 50 % individual) • ESOP Forums • Management by “big coalition”
  10. 10. Employee-s voice in important decisions Balance of power – Board of Directors - 1 ESOP delegate – Supervisory Board - 1 worker delegate – ESOP Board of Trustees (management and independent delegates) – Works Council (blue collar delegates) – Trade Union
  11. 11. „Lessons” of employee ownership • slow & complex decision making • save company from “predator management” • ensures worker-friendly management decisions • laws & by-laws to prevent management buy- out
  12. 12. CONCLUSION ESOPs - as a form of self governance - can offer a good economic model following - the failures of the centrally-planned communist economies & instead - of the stumbling capitalist market economy with its current economic crisis
  13. 13. ☺ Thank you for your attention !

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