Privatisation and Employment The Dutch Perspective Melle Hendrikse Ministry of Finance, The Netherlands

Privatisation and Employment
The Dutch Perspective
Melle Hendrikse
Ministry of Finance, The Netherlands
October 10, 2002
Explicit two-phased approach
towards privatisations
 Restructuring phase:
 Transformation of public entity into private entity
 Shares owned by the State; State is regular shareholder
 Regulatory framework in place (or at least a.s.a.p.)
 Privatisation phase:
 Usually five years or more after restructuring
 All usual forms (IPOs, private sale, etc.)
 Public offerings in various tranches
 Only in exceptional cases restructuring and
privatisation at once
Problems in restructuring phase
Consequences for employment and employees in
restructuring phase rather than privatisation phase
Loss of status as civil servant
Job security, lay-offs (both short and long run)
Change in primary and secondary benefits
Change in job content
Starting point in restructuring
 Extensive social safety net in place
 Traditionally good relationships with labour unions
and workers’ councils
 Existing collective labour agreements provide clear
framework for future labour conditions
Possible additional measures
 Additional social plan for redundant personnel
 In co-operation and negotiation with unions and workers`
 Return guarantee to government
 If necessary and feasible
 Small and medium-size companies
 Usually 2-3 years
 Commitments for employee stock ownership plans
 Larger companies
 Should not block private sale
Problems in privatisation phase
 According to current policy, privatisation shall not take place
 SOE has been restructured properly
 Commercial and financial track record has been established
 Public interests have been safeguarded by means of law,
contracts, concessions, etc.
 An ideal privatisation is nothing more than the technical ending
point of a broader process of becoming independent. SOEs
should function as regular companies before they are offered for
sale. Therefore, major problems should not arise during
 In the actual privatisation (second phase) the main
employment problem relates to pensions.
 Pension schemes of employees of state-owned
enterprises are executed by the ABP (General
pension fund for civil servants)
 If State ownership falls below 50%, the company
should leave ABP and enter a private fund
Dutch pension system
 Largely based on a savings system (instead of
current workforce paying for the older
 This means that financial settlement with ABP is
 Financial settlement is unfavourable for the
company concerned
Pension transfers
Pension problems
 Unclear prospects for partially state-owned
 Collective pension transfers not legally taken
care of
Good policy, but…
the current case of NOB
NOB: Dutch Broadcast Production Company
Legally restructured in 1989
Privatisation intended for around 2000
Blocked by deteriorating results in 1999/2000:
 High labour costs, compared to competitors
 Bad relationship with customers, due to mix of
monopoly and market activities
 No earlier measures taken due to overwhelming
assets (real estate) allocated in restructuring phase
Measures taken
 Experienced supervisory board member
appointed as new CEO
 Good housekeeping within the company
 Restructuring: split into three parts (monopoloid
broadcasting functions, commercial production
company and real estate)
Drastic employment measures
 Collective labour agreement renegotiated:
 salaries reduced with 20 % over five-year period;
 job cuts: 450 out of a total of 2000
 Result:
 privatisation process of real estate almost completed
 privatisation of commercial production envisaged for 2003
Concluding remarks
 The case of NOB is relatively exceptional. Generally
effects on employment in both phases (restructuring
and privatisation) are limited.
 The total number of employees of state-owned
enterprises account for no more than 1-2% of the
total Dutch workforce.
 In order to prevent problems in privatisation
process, more and more emphasis professional
governance by the State is necessary.