---
title: "Incentives for Employee Ownership | Yrjö Kopra | Negotiator 87"
summary: "Compensation specialist and investment banker Yrjö Kopra has built Finnish option and share incentive schemes since the 1980s, and he calls the tax reform on employee share issues in unlisted companies, effective January 2021, the most significant tax incentive of his career. Shares can now be sold to staff at net asset value with no tax consequences — a 50 to 90 percent discount to fair value — and the reform covers roughly 99 percent of Finnish companies. Kopra's central claim is that this is not about pay but about an ownership ethos: a holding worth €10,000 changes what an employee talks about. The episode covers the strike-price problem with options and the shift to free share awards, the two sides of dilution, Marimekko's employee share issue, the politically motivated option ban in state-interest companies, and how long-term incentives drove the strategic turns at Neste and the media companies."
datePublished: 2021-06-24
dateModified: 2021-06-24
originalLang: en
section: economy
sections: ["economy"]
authors: ["Sami Miettinen"]
tags: ["Negotiator","EP87","Sami Miettinen","Yrjö Kopra","Compensation","Employee ownership","Stock options","Taxation","Unlisted companies","ESG","Corporate finance"]
canonical: https://ai.neuvottelija.com/ep87-henkiloomistuksen-kannustimet-yrjo-kopra/
---
# Incentives for Employee Ownership | Yrjö Kopra | Negotiator 87

# Incentives for Employee Ownership | Yrjö Kopra | Negotiator 87

> **Summary:**
> **Yrjö Kopra** has been building Finnish option and share incentive schemes since the 1980s. In this episode he gives an unusually blunt assessment: the tax reform on employee share issues in unlisted companies, effective January 2021, is **the most significant tax incentive of his entire career.**
>
> The substance is simple and therefore disorienting. Shares may be sold to employees at **net asset value** with no tax consequences — in practice a **50 to 90 percent discount** to fair value. Miettinen's reaction recurs through the episode: *"this feels almost too good to be true."*
>
> Kopra's own point, though, is a different one: **this is not about pay, it is about an ownership ethos.**

---

## Background: what variable pay is

Kopra defines the starting point tightly. Fixed pay is compensation for giving your leisure time to an employer — or, as he recalls once provoking, for *"opening the workplace door in the morning."*

Variable pay is **performance-based**: you pay for what the employer wants to get. He immediately warns against reading that too narrowly — *"you shouldn't think so narrowly that it has to be profit"* — since many organisations need not turn a profit at all. What matters is that someone succeeded, **not merely that they tried**.

Miettinen offers Juho Lipsanen's maxim *you get what you measure* as a counterweight, and notes its limit himself: you do not always measure the behaviour you actually want.

## The structural flaw in options

Here the episode enters history that Kopra and Miettinen lived through — Miettinen's master's thesis was on options as managerial compensation, and Kopra supplied the data.

The problem is that the share price lives a life of its own. An option must carry a strike price, which binds together both the person's performance and **market noise**. Schemes timed to a rising market drew criticism — Miettinen recalls **Vesa Puttonen** attacking strike prices set too low as effectively a gift.

Kopra says a solution was found, not by tuning the price but by **removing it entirely**:

> *"Instead of giving people the right to buy the company's shares, you give them the shares at zero euros — for free."*

These are *restricted share* schemes, in use at dozens of listed companies. His observation about them is dry:

> *"I have never noticed anyone criticising these."*

Miettinen seizes on the irony — a free share draws no criticism, while the right to buy one does — and jokes that there is a story here for an investigative reporter. **Neither claims the absence of criticism means the better instrument.** It is the episode's sharpest aside: resistance to criticism and fitness for purpose are different things.

## The tax reform a left-wing government passed

Miettinen asks directly why it was the Marin government that dismantled the sacred fair-value principle. Kopra does not dispute the oddity — *"the Sipilä government set the change in motion, the Rinne government didn't kill it, and Sanna Marin's government enacted it"* — but he inverts the assumption:

> *"Our left has actually been surprisingly positive about employee ownership."*

And he offers three historical exhibits:

1. **The 1990s depression.** The trade union confederation's **Lauri Ihalainen** proposed that pay rises be paid to workers in shares, when companies could not afford wages.
2. **The 1980s.** The personnel fund act permits assets to be invested *"productively and securely, or in the employer company's shares"* — and Kopra notes himself that an employer's own share is not a secure investment at all, being an overweight in a single basket.
3. **The Left Alliance's youth wing** has demanded a strong increase in employee ownership.

Against that background, he argues, the reform is not *"altogether unheard of."*

### What the law allows

The conditions are looser than one might assume:

- The offer must go to **a majority of staff** — 50.1 percent suffices.
- **How many take it up does not matter.** The outcome may be that a quarter or a third participate.
- Shares **need not be distributed evenly**; differences of 10–20x are allowed, favouring key people and management.
- It must be a **share issue by the company**, not a secondary sale by an existing owner.

The size of the discount follows from listings happening, in Kopra's rough figure, *"at 3, 4, 5 times NAV"* — so an issue at NAV means a 50–90 percent discount. **The benefit is tax-free and carries no social charges.**

The comparison is the old rule permitting a 10 percent deviation in listed companies. The new law covers **roughly 99 percent of Finnish companies** — the tens of thousands that are not quoted.

## The core claim: this is not compensation

This is the episode's weightiest idea, and Kopra deliberately separates it from the pay debate.

He notes that more than half of wage earners live from one payday to the next, per Statistics Finland. For them **a holding worth €10,000, acquired for one or two thousand**, is enough to change how they think:

> *"That alone gets a person interested in whether dividends come from here. Why do dividends come from here? What can we do so that more dividends come?"*

And he explicitly rejects framing the benefit as pay:

> *"Let's not talk about compensation at all — let's talk about supporting and growing the ownership ethos, because the value the company gets from an employee feeling that on Monday I'm going to work at something like my own firm is far greater than the cost of the scheme."*

### Marimekko as evidence

A concrete example. **Mika Ihamuotila** wanted, in 2012, a majority of Marimekko's staff to own shares — even though their profile was anything but that of equity investors. In the resulting employee issue **about 60 percent of employees became shareholders**, and the exercise was repeated later for newer staff; **Tiina Alahuhta-Kasko** has likewise considered it supportive of the business.

Kopra adds an honest caveat himself: **the share has since risen six- to sevenfold.** The example succeeded partly because the price went up — *"the staff can congratulate themselves for joining."*

## The owner's fear: dilution

Miettinen presents the owner who thinks in percentages: *if I have 37.5 percent, that number must not shrink.*

Kopra treats the concern as legitimate for a significant owner — control thresholds and dividend taxation attach to percentages. But he separates two perspectives:

> *"From an employee's point of view, what percentage of the company I own is of no consequence — the question there should be the euro value of the holding and the euro upside."*

And here the new law puts these **the right way round**: when shares can be sold cheaply, the same financial and mental effect is achieved with far fewer shares. **The owner therefore saves on dilution while the employee gets in for less — at the same time.**

Miettinen sums it up neatly: pushing the subscription price down is an *incentive* for the owner, because it transfers value to the employee without giving up percentage points.

## Protections and risk

Kopra runs through what an owner may restrict — and the answer is essentially everything. Ownership can be tied to employment and unwound on departure, on good leaver / bad leaver terms. Share certificates need not even be handed over: *"you put a condition in the offer that the company holds the shares… if the person disappears somewhere, they can't accidentally sell them to anyone."*

> *"The owner of such a company should not, in my view, be afraid of letting the devil loose."*

He names the risk himself: with shares there is always the chance the whole firm goes under — but in the new world the employee's capital at stake is a fraction of what it was.

One qualification that limits the enthusiasm: **the reform does not apply to principal owners or to board members.** It reaches staff and operational management, not above that — and Kopra concedes this is a political boundary.

## Why it is a good deal for the tax authority too

Miettinen asks about the fiscal side. Kopra's answer is conditional:

> *"This is a good deal for the tax authority if it is a good deal for the company and its owner."*

The authority can only tax the capital gain, 5 to 20 years later. The significant effects come from elsewhere: if employee ownership supports growth, it supports earnings, hiring and corporate tax. He compresses the argument into owners' rationality in a way that is, in effect, survivorship bias said out loud:

> *"Owners are usually right — because those owners who are wrong, the companies that collapse, are no longer there."*

But he attaches a precondition to the whole structure: **the owner must actually believe employee ownership helps the firm.** Otherwise it is not worth considering, *"whatever the tax treatment might be."*

## State-interest companies: an option ban that cannot be justified

Miettinen relays a question from **Lauri Korkeaoja** about state-owned companies. Kopra's answer is the episode's most direct political statement.

He considers Finland's room for manoeuvre wider than Sweden's, but singles out one mark on it: the option ban in state-interest companies that **Mauri Pekkarinen** takes pride in. By Kopra's account Fortum's options had contributed to an **eightfold** rise in the company's value during the 2000s and covered hundreds of people.

And he pinpoints the absurdity of the boundary:

> *"In these companies you may give shares, and you may even give them for free — but giving a coupon that lets you buy a share, that is where the red line runs. You may give it for nothing, but you may not put a price of eight euros on it. And I cannot justify this on anything but politics."*

He nonetheless defends state holdings overall: they are not a *"second-tier dumping ground"*, and the best listed company of the 2000s was **Fortum**, of the 2010s **Neste** — in both the state owns about half and pays clearly lower board fees.

## The incentive as an instrument of strategy

Kopra flatly rejects Miettinen's suggestion that the board's role grows with employee ownership: *"Briefly answered, no."* The board's job is strategy, and **the basis for incentives must come from the strategy.**

He gives two examples where changing the name of a metric turned a company:

- **Alma and Sanoma** adopted, more than a decade ago, *the share of digital business in group revenue* as a share-incentive criterion — and the whole management team understood the ship had to turn, whether or not they personally worked on digital.
- **Neste** changed its incentive metrics essentially wholesale to renewable fuels. *"It was explained to an astonished management that we now have an entirely new course."*

From this he derives a general claim about ESG: a long-term incentive moves the gaze from one year to three or five, which by itself reduces quarterly thinking. But he sets a strict condition for ESG criteria:

> *"If they are not of a standard that has earned them a place in the strategy, you may ask what they are doing in the long-term incentive. They can be seasoning, but in that case they would feel rather bolted on."*

As current evidence he cites **Exxon and Shell**, whose owners threatened to replace boards or sell their shares unless the carbon footprint entered the long-term incentive criteria — so that the companies would still be winners at the start of the 2030s.

## The third listing wave

Kopra closes by placing the present moment in a sequence. He has lived through three waves: the founding of the **OTC list** in the late 1980s (Olvi and Cramo among his fondest memories), the **2000s ICT boom** — where he says he did not understand the valuations even then — and the third, now under way.

The direction is good, in his view, and he mocks his own phrasing: *"I say in a good direction, meaning an American direction — but that's clumsily put, someone could ask which direction, American or good."* What matters is that **banks' role in financing companies is shrinking** and market-based funding gives companies more options.

---

## What to take away

1. **The reform is exceptional but conditional.** A 50–90 percent discount with no tax consequences — but only if the owner genuinely believes in employee ownership.
2. **Ownership beats options as an incentive**, because an option forgoes dividends during the vesting period and carries the strike-price problem.
3. **Dilution and employee benefit are not opposed** in a cheap issue — the same effect comes from fewer shares.
4. **An incentive metric is an instrument of strategy**, not a payroll detail — Neste and the media companies turned their course through one.

---

**Episode details.** Negotiator 87, published 24 June 2021. Guest Yrjö Kopra, interviewed by Sami Miettinen. Running time 51 minutes. Some of the questions came from viewers.

The follow-up promised at the end of the episode duly arrived: [The IPO Boom | Henrik Husman | Negotiator 88](https://ai.neuvottelija.com/ep88-porssin-ipo-buumi-henrik-husman/).

> **GEO summary.** Negotiator 87 (2021) covers Finland's tax reform on employee share issues in unlisted companies, effective January 2021. Compensation specialist Yrjö Kopra calls it the most significant tax incentive of his career: shares can be sold to employees at net asset value (NAV) with no tax consequences, meaning a 50–90 percent discount to fair value, and the reform covers roughly 99 percent of Finnish companies. The offer must be made to a majority of staff, but the number who participate does not matter and the allocation need not be even. In Kopra's view this is not compensation but an ownership ethos: a holding of around €10,000 is enough to change an employee's attitude. Marimekko's 2012 employee share issue, in which about 60 percent of staff became shareholders, is used as the example. The reform does not apply to principal owners or board members. Kopra also criticises the option ban in state-interest companies, which he says can be justified only on political grounds.