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Financial Participation

Unlike many other eastern European countries, employee ownership as a form of employee financial participation enjoyed no special treatment in the privatization process and consequently plays no significant role in the ownership structure of the Czech economy. Profit-sharing schemes are somewhat more common.

 

Very few concessions were made to insiders in the privatization process in the Czech Republic. As a consequence, unlike other eastern European countries, the share of employee ownership resulting from the large-scale privatization programmes in 1991–1995 was quite low.

 

The privatization program started in the Czech Republic in the early 1990s and involved three main schemes: restitution, small-scale privatization and large-scale privatization.1 The large-scale privatization programme was the most important of these schemes and had the largest influence on the structure of employee ownership. It used several privatization techniques, the most important of them being voucher privatization. This applied for most large and some medium-sized companies, which were first transformed into joint-stock companies. Their shares were then distributed through voucher privatization, issued to municipalities or sold in public auctions and to strategic partners.2 Voucher privatization took place in two waves (1992-1993 and 1993-1994), involving almost half of the total number of all shares of all joint-stock companies.

 

The management of each company to be privatized and/or any other interested parties were required to submit a privatization plan, which could contain any or a combination of the available privatization schemes. No special incentives or facilities were provided for privatization via employee ownership and only about 28% of all privatized companies offered employee shares. The average employee stake in these companies was about 4.4%. There were only 3 companies where employees had a stake of over 50%.3

In the companies where employee ownership was one of the methods proposed in the privatization plan, the implementation of these approved projects proved to be difficult.4 This was mainly due to the fact that employees had to buy the shares at a guaranteed nominal price, which was in many cases too high due to an erroneous evaluation of company assets. There was a significant difference between the real and nominal value of company assets, giving companies little incentive to buy their overvalued employee shares from the Fund of National Property. The legislation on voucher privatisation provided no incentives for employees to acquire shares from their own companies. As a result of the asset overvaluation, almost no shares went to employees.

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.