German Multinational Sets Up ESOP-Like Program

Continental AG, one of the world's largest tire manufacturers, has set up a broad employee stock ownership program. The program could provide a model for other German companies, including former East German companies being privatized.

Continental had started a plan that allowed employees to buy shares at up to a 50% discount, but there were few takers. Unlike Americans, few Germans own stock as investments, and most German firms are capitalized though something more like bonds or preferred stock than common equity. Ownership of common stock is seen as much riskier than it is in other countries. Under the new plan, the company's 20,000 employees will be eligible to buy up to 100 shares at full price, but with an interest-free loan, no transaction fees (which can be very large in Germany), and a guarantee against the stock price falling during the minimum two-year holding period. The plan should put about 5% of the stock in employee hands. If successful, the consultants who developed the plan expect it could become common in larger German firms.