Employee Share Ownership Plans

A unique feature of Ireland’s privatisation experience has been the size of the shareholdings accrued by employees as part of all sales since the privatisation of Eircom in 1999. As discussed in earlier chapters, the Eircom privatisation set a precedent whereby employees secured a shareholding of 14.9 per cent of equity in privatised firms. This is far in excess of the size of shareholdings granted to employees as part of the divestiture of SOEs in other countries. The employee share ownership plans (ESOPs) granted in the Irish case have had significant impacts. In distributional terms, ESOPs have resulted in non-trivial losses of revenue to the exchequer while employees have made handsome gains. ESOPs have also had important consequences in terms of corporate governance with employees exercising considerable influence in the context of key strategic decisions. In this chapter, we examine the origins of ESOPs in the case of the Irish privatisation programme. We move on to describe the precise nature of the ESOPs and discuss the financial benefits accrued by employees as a consequence of significant share ownerships. We then turn to the role of the ESOP in strategic decisions in relation to Eircom and Aer Lingus, and ask whether these ESOPs have fulfilled the objectives normally ascribed to such schemes.