The Ownership Culture in Practice

Employees become company owners

The whole idea behind employee participation is to enable employees to share in the company’s success and thus strengthen their loyalty to the company. That’s also a core component of Siemens’ corporate culture today. It’s based on the firm conviction that employees who are among the company’s owners will also feel a stronger sense of identification with the company. They’ll be more motivated and involved, take responsibility and act in the interest of the company’s long-term success. Currently (as of April 2018) more than 300,000 employees are Siemens shareholders –­ that’s around 80 percent of a workforce that totals 379,000 people. Employees have been able to buy Siemens AG shares on preferred terms since 1969. But the history of staff participation at Siemens goes back much farther than that.

One of the first – Siemens employees have been able to share in the company’s success since the 19th century

Werner von Siemens himself already had the vision of including employees among the company’s owners. Siemens & Halske employees had their first opportunity to share in the company’s profits back in 1858. Eight years later, Werner von Siemens introduced a “stocktaking bonus,” which enabled Siemens employees to share in the profits they had helped earn together, above and beyond their regular pay. In 1927, his son Carl Friedrich, who by then was heading the company, lent new impetus to this component of the company’s employee-relations policy by establishing an annual “financial report premium” for non-management employees, depending on the company’s results. After the disruption caused by World War II and a transitional phase for reconstruction, company management decided to reintroduce profit-sharing in 1951.

New ways of sharing in results – Siemens introduces employee shares

In the second half of the 1960s, profit-sharing was cut back because of general economic conditions, but it was agreed by way of compensation that the workforce would be able to participate in the company’s producing assets. In 1969, Siemens AG employees in Germany had the chance for the first time to buy employee shares at a preferred price of DM 156 – half the trading price on the stock market on the day when management’s decision was adopted (January 23, 1969). Under the guidelines of Germany’s Employee Shares Act, no social security contributions or other tax was payable on either the difference between the preferred price and the trading price, or on the purchase price itself. Since what was known as the noncash advantage could not exceed DM 500 per person per calendar year, this meant that each employee entitled to participate could buy no more than three Siemens shares. The law also prescribed a lockout period of five years during which the shares could not be sold.

A much-desired offer – from employee shares to “Profit Sharing”

In the spring of 1969, 135,725 employee shares were issued, with a nominal value of 6.8 million D-Mark. This first program was such a success – 24 percent of Siemens employees in Germany took advantage of the “general offer” – that management was encouraged to offer common stock at preferred prices in the coming years as well. From the very start, there had also been thoughts about offering Siemens shares to employees outside Germany. Accordingly, all local companies were free to participate in the share programs if they wished; the local company would absorb the difference between the trading price and the preferred price. But even though a number of companies were interested in this form of employee participation, their acceptance fell through in the face of a great many local circumstances. Only Siemens in the Netherlands began offering employees stock at a preferred price, in 1975.

In Germany, the Siemens share program has established itself over the past 50 years as an integral part of the company’s orientation to its employees. Participation since 1989 has averaged about 70 percent. Since demand was so strong, in 2008 corporate management decided to expand staff and management’s participation in the company’s success by creating a share-oriented corporate culture.

 

All employees worldwide, at all levels of the company, now have a chance to take part in Siemens’ results. Depending on the particular conditions in each country, a large number of share programs have been set up. A particular success has been the Share Matching Program introduced in 2008 – one of the biggest employee participation programs anywhere in the world. And in 2015, the Managing Board introduced “Siemens Profit Sharing,” so that all employees below senior management level can share in the company’s performance. All in all, Siemens employee shareholders hold something more than three percent of all Siemens stock – making them the third-largest group of Siemens investors. 

 

 

Sabine Dittler | Sham Jaff