Another New German Model for Privatization

We recently reported on a new model for employee ownership developed for Continental AG, one of Germany's largest firms. Now Deutsche Telekom AG, the German telephone monopoly, has come up with yet another approach. Each of Deutsche Telekom's 250,000 employees will be able to put 300 marks into a trust, which will buy stock for them. The trust will then borrow 1,250 marks for each 300 it receives to buy additional shares. In six years, the trust can put the stock back to the company at its original price should the share value fall. Employees would then get their 300 marks back and would have no obligation on the loan. If the share price goes up, the employee can keep all the shares at their appreciated price. The trust will be financed by dividend payments on the stock (which will not be passed on to employees) and a subsidy from the company.

The plan would only acquire about 5% of the company's stock, but is seen as a step towards encouraging Germans to become more interested in owning stock, something few are currently interested in doing, and in buying labor peace.