It was stated at the outset that employee financial participation and ownership is not nearly so well-ensconced in Canada as it is in other countries. CLMPC research finds that this will probably change in future as the promulgation of enabling legislation for labour-sponsored funds is doing a good deal to aid steady progression of this concept.
Labour-sponsored funds may advocate greater employee financial participation and ownership for different reasons. For instance, along with being valuable in its own right, purchases of company shares by workers may also help a fund leverage expansions or restructurings that create or preserve employment. Generally speaking, statutes governing the funds strongly encourage this kind of activity.
Furthermore, the acquisition financings of labour-sponsored funds almost always pertain to their function as a friendly equity partner in company buyouts by groups of workers or managers. This is the only circumstance, in fact, in which most funds may legally obtain majority voting shares in an enterprise. Frequently, buyouts occur in mature industries experiencing profound rationalization and restructuring and where firm owners/managers cannot locate sympathetic, first-in capital suppliers. The Fonds de solidarité has assisted scores of rescue operations whereby businesses have survived downturns to become profitable again, frequently with the help of worker ownership.
A recent illustration of successful rescuing by the Fonds de solidarité is the pulp and paper producer TRIPAP, of Trois-Rivières, Québec, for which a very heavy 1993 investment sum was justified by an unexpectedly strong industry recovery the following year. This event sparked the fund to reinvest in the plant to satisfy the new demand. On occasion, however, some rescues of the Fonds de solidarité have failed.
The Crocus Fund also places a premium on facilitating worker buyouts. This it will sometimes do using a debt instrument that levers takeovers, with corporate assets as collateral. Under this scenario, shares are purchased by the fund and sold to a worker trust in exchange for a security interest in the company. Over time, this equity stake is substituted with employer contributions. Fund directors anticipate this vehicle and further adaptions, derived from American ESOPs, will dramatically increase the universe of Manitoba establishments available for full or partial buyout.Endnote 61
In September, 1995, Buhler Industries of Manitoba became the first Canadian enterprise to receive a capital infusion using this mechanism.
Other forms of employee financial participation are also supported by labour-sponsored funds. To illustrate, the Fonds de solidarité has made inception of share purchase plans for employees a condition of every investment agreement. This initiative has given thousands of Québec workers a chance to save for retirement given that eight in ten investee firms of the fund do not have pension plans.Endnote 62
In the case of the Fonds de solidarité, shares bought, through employer and employee contributions, are those of the fund itself - an arrangement that may, or may not, persist once an investment is discontinued. In the case of Working Opportunity, share purchase plans are company-constituted and do not involve employer contributions. Rather, employers may offer up a portion of total equity (e.g., 10 percent) for acquisition by workers.