Stock Purchase Plans Under Scrutiny by the European Commission

The European Commission is looking into stock purchase plans that offer incentives for employees to set aside monthly deferrals to invest in the shares of their employers. One response in the Commission's consultation paper "The EU corporate governance framework" suggests that this type of plan "places asymmetric risk upon the employee," according to Charles Cronin, formerly of CFA Institute, and John Mellor, of the Foundation for Governance Research and Education. An article in the Financial Times also cites John Collison, head of employee share ownership at IFS ProShare. He notes that over 900,000 employees in the UK participate in share incentive plans (SIPs). As of the end of 2010, the average value of a SIP holding approximately $4,700 per employee. Mr. Collison noted in the governments of the UK and other European countries limit the amount that can be invested in employee share plans. "Having a limit," he argues, "acts as a mechanism to prevent [an employee having] too much in a single savings vehicle." The European Economic and Social Committee will hold a conference on the topic in mid-October, in Brussels.