Not a Member? Get access to HR news and resources that you can trust.
Change can be scary, but deploying new HR software doesn't have to be.
Is your employee handbook ready for the New Year? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Get the HR education you need without travel expenses or time out of the office.
We don’t just visit a city, we take it over. Join the HR community in NOLA -- June 18-21, 2017.
Swedish firm H&M gives employees 4 million shares
The founding family of the Swedish clothing giant H&M announced plans to show appreciation to more than 76,000 employees worldwide by donating 4 million shares in the company, worth about 1 billion kronor ($137 million U.S.), to fund a new incentive program.
The goal of the program “is to encourage and acknowledge employees’ long-term involvement and to further strengthen H&M as an attractive employer,” said Kristina Stenvinkel, a spokesperson for H&M in Stockholm, Sweden.
She said H&M hopes the program will help recruitment as the company expands. H&M Hennes & Mauritz AB is the third largest fashion group in the world after Gap of the United States and Spain's Inditex (Zara).
The program will be initiated through a donation of H&M shares from the Stefan Persson family to a newly established Swedish foundation, with H&M making annual contributions to the foundation.
“The idea is to create a long-term incentive program which is the same for all employees. The program is also a way of generating further involvement. Our hope is that H&M will continue to develop well and that the employees will be able to benefit from H&M’s value growth in the same manner as a shareholder,” said Stefan Persson, chairman of the board.
All employees in all countries are included based on the amount of time worked in the company, regardless of position or salary level, according to a company statement. The number of years the employee has worked will be included in the qualification period, which is five years, unless local regulations stipulate otherwise.
“The basic principle is that payment begins when the employee turns 62. However, it will be possible to choose to receive payment of the employee’s portion already after 10 years of employment, although no earlier than 2021,” according to the statement.
Incentive or Retirement Benefit?
While H&M uses the term “incentive” and states that the program is intended to help with recruitment, Gaurab Ghosh, a senior consultant in Aon Hewitt’s Compensation Consulting practice, said the program appears to be something else.
“The way it’s paying out, it’s almost a supplemental benefit for retirement, it’s almost a deferred share program,” Ghosh said. “Is it to augment some retirement benefits [employees] have lost over a period of time?”
The new H&M program will probably work better as a retention tool than an incentive plan, Ghosh said. “It’s noble to extend something to all employees. It’s good of the owners to share. There’s nothing wrong with the intent, with putting in money to be paid out on retirement. ... But when you look at the plan, it is more of a benefit to retain employees than an incentive. It’s a long-term plan. It is a reward for folks who stay for a long time. It isn’t something to drive performance.”
If the reward is 10 years down the road, “I don’t think this would drive performance significantly unless there is a considerable amount of money in the stock,” he said. Requiring 10 years to vest in a program is very unusual, Ghosh added. With a restricted stock program there is a vesting schedule attached before an individual can sell shares, but it is usually one to five years, with three years being the most common, he said.
Whether the H&M program will work as a retention tool depends upon whether the reward is enough to keep people in a generally high-turnover industry, he said.“You have to look at how much money they are offering. Is it attractive enough to retain people?”
Ghosh called it uncommon to have a plan that extends to all employment levels. Organizations that have such long-term programs usually focus on key executives and middle management.
The program will need to be adapted to cover H&M’s more than 76,000 employees in stores in 37 countries. The company planned to open 180 stores in fall 2010, mostly in its primary markets of Germany, the United States, Britain, Italy and France. It has announced that it will enter markets in Korea, Israel, Croatia and Romania.
“As H&M operates in many different countries, there may be certain local deviations as a result of differing laws and regulations concerning, for example, tax and employment, to which the program must adhere,” Kristina Stenvinkel said. “Of course the basic principle is the same for all countries, but we have to follow local regulations.”
In Europe and the United States, “there wouldn’t be anything stopping an organization from offering shares of stock,” Ghosh said. “But you have to consider different countries. Taxation varies country by country. Most countries would have long-term capital gains. Most countries have different sets of guidelines.”
Stephenie Overman is author of Next-Generation Wellness (Praeger, 2009).
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Become a SHRM Member
SHRM’s HR Vendor Directory contains over 3,200 companies