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
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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`
council
 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
unless:
 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
privatisation.
Pensions
 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
generation)
 This means that financial settlement with ABP is
necessary
 Financial settlement is unfavourable for the
company concerned
Pension transfers
Reserve
Costs
100%
of
Commitments
100%
of
Commitments
ABP
Individual
transfer
85-95%
of
Commitments
Collective
transfer
Pension problems
 Unclear prospects for partially state-owned
enterprises
 Collective pension transfers not legally taken
care of
Good policy, but…
the current case of NOB
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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
restored
 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.