ESOP Act amended
Despite objection from Opposition members, the Senate last Friday voted to amend the Employees Share Ownership Plan (ESOP) Act at its first sitting of the new calendar year.
The ESOP Act, brainchild of late former prime minister Michael Manley, was passed in 1994 as a means of using tax incentives to encourage broad ownership of assets in companies.
The amendments, piloted in the House of Representatives by Finance Minister Omar Davies, seek to facilitate greater participation in ESOP by workers.
Senator Deika Morrison, who is also a junior finance minister, explained that the bill sought to amend the act in order to:
. facilitate the establishment of ESOPs in groups of companies spanning diverse industries with different employment and wage patterns;
. provide for tax relief to employees on repayment of loans made to them to acquire ESOP shares;
. set a specific and more favourable minimum threshold of tax relief for lower-paid workers; and
. amend the First, Second, Third and Fifth Schedules to the act in order to address certain technical discrepancies in relation to operational details.
But the Opposition Jamaica
Labour Party senators argued that the act should be returned to the Lower House or put to a joint select committee of Parliament for a complete review and further amendments.
According to Dwight Nelson, although he agreed with the basic intent and purpose of ESOP, the existing Act was “a bad piece of legislation” that was “so burdensome and cumbersome that it guaranteed the failure of the employee share ownership plan”.
Nelson’s Opposition colleague, David Panton, described the Act as “a well-intentioned piece of experimental legislation… that has failed to serve its original purpose”. Within this context, Panton recommended the formation of a joint select committee that would meet with all the relevant groups to identify what can be done to facilitate their participation under the Act.
Panton, who was making his first presentation to the Senate, added that this joint select committee’s overriding concern should be the simplification of the legislation. He said it should also strengthen safeguard mechanisms, such as the authority of the minister of labour and the commissioner of income tax, to de-certify ESOP plans that are not serving the original purpose but are instead being used in an attempt to abuse the tax incentives offered under the act.
In addition, he called for strengthening of “diversification mechanisms” to ensure that employees’ savings are protected, particularly when a company goes into receivership or liquidation.
Responding to the Opposition’s objections, Government senator, Trevor Munroe, pointed out that “although the Act is cumbersome, it is not the entire reason for the failure of ESOP”.
He listed other factors that he said mitigated against the success of ESOP as:
. workers’ distrust of employers, based on their past experience, even when enlightened owners and managers seek to implement measures that are in the interest of workers;
. workers’ low level of disposable income which stood at an average of $4,000 per week for persons working in establishments that employ 10 or more persons;
. job insecurity resulting from the prevalence of job redundancies over the past few years which saw 84 per cent of companies cutting their labour force; and
. the reluctance of too many enterprise owners to broaden ownership, not only to workers but also to the public as evidenced by the relatively few companies listed on the local stock exchange.
Munroe said that although the legislation was “not perfect”, the amendments seek to make it better and therefore should be seen as “part of an ongoing process of improving the efficacy of the Act”.
Hector Wynter remembered
At the sitting’s commencement, the leader of the Senate, Burchell Whiteman, expressed condolences to the widow and family of the late former senator, Hector Wynter.
Whiteman described the former diplomat and editor-in-chief of the Gleaner as “a distinguished servant of the people” who was still making his contributions to Jamaica at the time of his death.
Opposition senator, Anthony Johnson, said that Wynter was always proud to have been among the first senators appointed in independent Jamaica. He described his former colleague as “a renaissance man, friend and mentor, whose life continues to be a positive influence on the building of Jamaica”.
Funding of political parties and political campaigns
In the sitting’s “answers to questions” section, Burchell Whiteman responded to questions posed by Trevor Munroe on the Senate’s call on the Government, on May 3, 2002, “to establish, as a matter of urgency, a broad-based national commission, including representatives of political parties, the private sector and civil society, to examine and make recommendations on appropriate legislation, including provisions for regulating and publicly funding political parties and election campaigns”.
Whiteman stated that the Government expects to establish a broad-based commission within the first quarter of the new financial year.