The workforce of a company can share in the profits or capital of a company. In 1866, Werner von Siemens had already introduced a stocktaking bonus, which enabled the employees to participate in the jointly achieved profits in addition to their regular wages. In 1927 his son Carl Friedrich, who was then Head of the Siemens Company, revived this element of company social policy by introducing an annual premium for salaried employees and wage employees. After World War Two, the profit-sharing plan was reintroduced in 1951. When in the second half of the 1960s profit-sharing was reduced because of the economic situation, it was agreed that the workforce should participate in the productive assets of the company by way of compensation.

In 1969, the employees of Siemens AG in Germany were given the opportunity for the first time to buy shares at the preferential price of DM 156; this was half the stock price on the day the resolution was passed (January 23, 1969). In accordance with the guidelines of the employee share law, both the difference between the preferential price and the stock price and the purchasing price itself were exempt from social security contributions and taxes. Since the so-called pecuniary advantage was not allowed to exceed DM 500 per person and calendar year, every employee entitled to participate could buy a maximum of three Siemens shares. The shares were ordinary shares which were subject under law to a restricted period of five years. Since for employees living abroad there were no regulations equivalent to those under German law, the issue of tax-free employee shares was initially limited to Germany.

In the spring of 1969, 135,725 employee shares with a nominal value of DM 6.8 million were issued. The success of this program – 24 percent of employees in Germany took advantage of this “general offer” – encouraged the management to continue to offer ordinary shares at preferential prices in the years that followed.

It was intended right from the beginning to offer employees abroad the opportunity to buy shares in the parent company as well. In principle, therefore, all Regional Companies were free to participate in this share program; the difference between the stock price and the preferential price was to be borne by the Regional Companies. However, although a number of companies showed interest in this form of employee participation, numerous local circumstances prevented this offer from being taken up. Only Siemens in the Netherlands offered its employees shares at preferential prices from 1975 on.

In Germany the Siemens share program has established itself over the past 40 years as an integral part of employee orientation; since 1989 the average participation rate has been around 70 percent. As a consequence of this success, the management decided in 2008 to broaden the participation of the employees and managers in the company’s success by creating a share-oriented corporate culture With “Shared Success” as its motto, the aim of this program is to provide if possible all the employees in the world with the opportunity to participate in the success of the company. In the meantime, around 50 countries have made major progress towards introduction of the share program by fulfilling the technical, fiscal and legal requirements for local implementation.  

 

November 17, 2009 | Sabine Dittler