South Africa Reduces Incentives for Broad-Based Ownership; Spain Expands Them

In a surprise development, South Africa has reduced the number of points companies with broad-based employee ownership plans earn for Black Economic Empowerment (BEE) credit. Companies that score high on BEE measures, which were designed in part to encourage capital ownership by black South Africans, get preference for government contracts, a large part of the South African economy. People familiar with broad-based plans said the new rules will significantly discourage companies from setting up or maintaining the plans.

Spain, however, is going the other way. Taxation on up to €12,000 ($13,700) annually of realized gains from equity compensation plans had been tax-exempt provided that the same stock plan was available to all employees within the same category or grade of the company. The new law provides this exemption only if the plan is available on the same terms to all employees of the company, including their subsidiaries, thereby encouraging broad-based equity compensation.