Workers encouraged to buy company stock

Employees of struggling small and midsize companies on the brink of bankruptcy or sale will be able to protect the businesses they work at by investing in company shares.
They will also be exempt from paying income taxes on these stocks if they own them for more than six years.
In a plan aimed at small businesses rather than large conglomerates, the Ministry of Employment and Labor announced on Monday that it will encourage employees to buy shares in companies they work at.
The government introduced an employee stock ownership program in 1968, but only 0.6 percent of the country’s companies adopted it.
According to the new plan, employees of small struggling enterprises won’t be restricted by any regulations and will be able to acquire corporate shares. Currently, at regular companies, employees cannot hold more than a 3 percent stake in the businesses they work at, and the face value of shares a worker owns cannot exceed 300 million won ($272,000).
If the restriction is removed for small businesses, more than 50 percent of an entire company’s shares could be owned by its employees. In this case, the government plans to lift the current cap on borrowing to buy shares and will extend the period of the loan from three years to seven.
The Small and Medium Business Corporation will support those companies with funding.
Through this plan, the government is trying to increase the number of people involved in running smaller companies in order to reduce the risk of fragile businesses shutting down due to the wrongdoings or mistakes of a single owner.
For conglomerates, the government decided to keep the current 75 percent income tax reduction for employees who own corporate shares for more than six years.
Companies that donate a portion of their profits to run an employee stock ownership system will be exempt from the government’s taxation plan, barring businesses from hoarding surplus cash instead of making investments.
The new taxation plan goes into effect this year.
Employees who contribute to the management of their companies will receive opportunities to buy more shares, the government added.
BY PARK YU-MI [ssh@joongang.co.kr]