Following the local fashion
Ever since plain, rugged denim became the must-wear fashion accessory in the 1960s, the name synonymous with the blue-jean, Levi Strauss, has had a presence in Europe – since 1962 to be precise.
Like many major multinationals that have been international for a number of years, Levi Strauss has a mixture of pension plans across the region that reflect the diversity of local competitive practice to meet local needs. Regis Mulot, director, rewards and services Levi Strauss Europe, Middle East and Africa, describes it as a ‘patchwork’ mix of plans.
Levi’s currently has 4,300 employees in Europe in 23 countries with a workforce mix of approximately 50% blue-collar and 50% white-collar. A significant number of employees are in Belgium (600), where the company has its European headquarters, with the remainder spread across all the countries in western Europe, a few in esstern Europe (Turkey, Poland, Hungary, Czech Republic) and South Africa. The employee populations range from less than 20 in some countries to nearly 700/800 in those countries where the firm has its manufacturing bases.
The significance of this geographical breakdown is that it characterises, for a large part, how Levis organises its pensions arrangements. In the last five years, the company has come under increasing cost pressure and has shifted much of its production to other non-Levi owned sources. This has led to the closure of a number of factories in Europe, most recently in Scotland.
Furthermore, it has affected the overall demographics of the company in Europe, which today has a much younger average age than formerly – around the mid-30s.
In the countries where most of the company’s factories are located it is not practice to provide pension benefits to blue collar workers – as generally speaking, state sponsored arrangements are regarded as sufficient for their needs.
Mulot moves on to discuss the 2,200 strong white-collar population that in most of the countries is focussed on selling and marketing Levi Strauss products.
The range of countries where Levi operates in Europe means that its current pension arrangements reflect what has developed based on market practice over the last 40 years. Like other multinationals this ranges from fully developed defined benefit (DB) plans in Germany, UK, Belgium and the Netherlands through to the mainly insured arrangements prevalent in the Nordic countries to no company sponsored plan for all employees in France, Italy and Spain.
Contribution rates, benefits and other provisions vary by country in line with local market practice and to comply with local legal and tax regulations.
As newer operations in the former eastern bloc countries have been opened and developed, the company has sought to follow local practice. For example, in Poland a defined contribution (DC) based plan has been set up for the staff employees to match local practice.
As many countries in the region amend and change local regulations relating to pensions, and as the EU develops further pan European legislation in this area, Mulot says Levi Strauss is actively reviewing its arrangements to ensure that they keep up with these changes. Additionally, the younger demographics of the organisation and the presence of a mix of nationalities in all its operations, particularly the Brussels office – of which one third are non Belgian – means the company is actively considering its overall longer term strategy in the pensions area.
Consequently, in recent years the firm revitalised its Netherlands plan to create a hybrid mix of DB and DC to reflect local needs.
Other changes will develop gradually as opportunities arise to create pension arrangements that are more meaningful to a younger more mobile workforce. Clearly, however without a ‘clean sheet of paper’ in most of the countries, any changes provide a significant challenge, reflects Mulot.
He concedes, however, that if the company were today introducing new pension plans in Western Europe it would be unlikely to opt for DB plans in those few countries where they currently exist – but for a more balanced defined contribution or cash balance arrangement.
“Saying that though we do not automatically share the view of some companies similar to us that it is right to opt outright for 100% DC pensions,” Mulot adds.
While policy may be geared towards the local market, with pension funds administered on a domestic basis, Levi Strauss is not without a global hub that oversees its HR, pensions and investment operations, as Mulot explains: “Belinda Hansford, our international compensation and benefit director in San Francisco, is responsible for defining Levi Strauss’ international benefit strategy and co-ordinating and approving any significant changes to our pension plans. We cannot change major aspects of any pension plan without her involvement, so there is centralisation in the process and with the increased interest of US multinationals in their pension liabilities it is only likely that this will increase.”
The company’s overall investment committee also meets quarterly to review all its plans and is regularly updated on the position of non-US plans.
For a number of years too, the company’s treasury group has provided support in the area of pension governance from San Francisco. This involves consulting on the setting of investment strategy and the selection of investment managers and other providers both for DB and DC arrangements. Historically, Levi has also sought to use consistent investment managers around the world (at one time having an arrangement with one manager that covered the UK, Belgium, Canada and Australia) – but this has only continued as long as those managers have performed for the local plan according to locally accepted criteria.
The treasury group and international compensation and benefits director work in partnership with each other and with Mulot and the local businesses to ensure that both local and company needs are appropriately met.
Mulot notes that he sits as a trustee of the UK pension plan and chairs the Belgian trustee group and is therefore highly involved in all aspects of managing the plans and regularly reviewing investment performance. In Belgium investments are carried out through a balanced mandate arrangement with Schroders in London – originally one of the firm’s global investment managers. For the UK plan, following an asset liability study conducted in the mid to late 1990s, a passive strategy through Barclays Global Indexing is followed. On the question of the future pooling of assets, Mulot notes that while this has not been a feasible option to date, it could change: “We are currently reviewing all the provisions and we would of course look at this because we want take advantage of new legislation.”
A key issued for Levi Strauss, on account of its highly mobile workforce – more than one third of the 600 employees in Belgium are non Belgium – is the possibility of taking advantage of any new legislation to create some pan-European options. However, despite the recent progress in Europe, the reality of operating this is still some way off in the future in Mulot’s view.
“Of course, like any other major company, we are constantly looking at these kinds of opportunities to see how they will shape our approach in the future.”
With a large number of countries and a range of provision, the key challenge for Mulot’s role is to keep on top of the many changes both external and internal.
At the same time, he says he must provide pension arrangements that align with local competitive practice and provide reasonable pension cover for employees.
“My clients are the internal workforce and I need them to be satisfied and ensure that Levi Strauss provides the appropriate pension arrangement to them.
“Whilst in many cases it is not seen as the most critical part of a job offer by most candidates; there is always a level of expectation that we must be in line with the local competitive market practice.”