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Financial Participation

Employee financial participation in Bulgaria is largely a result of the privatization process started in 1990 and its development thereafter. The most important forms of employee financial participation emerged in the course of the mass privatization and the so-called ‘MEBO privatization’ processes. Profit-sharing schemes, as one form of financial participation, are quite rare in practice. Cooperatives, traditionally very strong in Bulgaria, currently represent just 1% of all registered companies.

The most important form of employee financial participation in Bulgaria is employee ownership. This concept has been present in the Bulgarian economy since the beginning of the 1980s, when a new concept of ownership and management of socialist property slowly developed.

In 1989, the privatization of state-owned enterprises started and employee share ownership was expanded in Bulgaria.1 It had two main components: privatization by MEBO, which took place from 1994 to 2002, when it was abandoned, and the mass privatization, conducted between 1996 and 2002, when the last privatization vouchers lost their validity.2

These various forms of privatization determined the different opportunities for financial participation. In most cases of privatization, employees and workers in an enterprise were entitled to buy up to 20% of the enterprise’s shares at preferential prices (including former workers). In all cases, the employees and workers proved to be minority shareholders. During the mass privatisation, workers bought shares in the enterprises for which they worked by means of vouchers acquired for an insignificant sum. Employees came out of the privatisation process as minority shareholders.3 The trade unions participated prominently in the privatization process; in quite a lot of cases they acted as investors and enterprise managers. At the end of the privatization process, however, the trade unions’ power and influence decreased drastically.4

Today share participation in Bulgaria is not widespread. The main practitioners of participation models are international companies.5 Shares are given mainly to company executives. Generally, however, widespread forms of workers’ participation are unknown or not applied in the Bulgarian economy.6

Cooperatives, as special form of employee ownership, have a long tradition in Bulgaria. Starting with the end of the communist period, cooperatives experienced difficult times. Only agricultural cooperatives followed a different evolution pattern – they are today the most important business form in this sector.

Profit-sharing plays no major role in the Bulgarian economy. This is due to the lack of tax incentives, as well as to organisational aspects. Instead, both private and public companies started to introduce other monetary incentive schemes, such as monthly and annually bonuses7 .

Wilke, Maack and Partner (2014) Country reports on Financial Participation in Europe. Prepared for www.worker-participation.eu. Reports first published in 2007 and fully updated in 2014.