Cantillon: Esop come, Esop go for Eircom

So farewell to the Eircom employee share ownership plan (Esop), we might never see its like again.

On April 30th, the Eircom Esop ceased business after about 14 years of distributing tax-free cash to 14,000 current and former staff of the once State-owned telecoms firm.

Earlier in the month, it divvied up the final €12.8 million in the pot to the members. Those with the full allocation of shares received €1,300 each in tax-free cash.

This was the 17th payout since May 2002, bringing to €940 million the total amount distributed by the trustees, according to the final document sent to members.

That’s an average of €67,142 tax free over the period. Kerching.

The Esop has in effect been an ATM for the participants since it was created in parallel to the privatisation of Eircom in 1999. It gave staff a shareholding in the business in return for agreeing to certain changes in work practices, which in reality did not happen.

Some of the near 15 per cent original stake was paid for (in theory at least) by the staff and some was granted for free. Under a structure agreed with the Revenue Commissioners, the Esop was able to stagger payouts to members on a tax-free basis.

The Esop rolled over its interest each time Eircom changed hands over the years with the result that it owned about one-third of the business by the time it went into examinership in 2012 as part of a process that saw the company’s lenders take control of the business.

The fact that the Esop participated enthusiastically with each new owner meant that the outrage expressed by unions representing workers about how the company had been asset-stripped over the years rang hollow.

The Esop was more than just a mere onlooker in the various transactions that allowed a string of Eircom shareholders to pocket substantial windfalls while the company was saddled with €4 billion in debt and left relying on the High Court to approve its rescue plan.