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Financial Participation

In Estonia profit-sharing is relatively widespread by European comparison. At the beginning of the privatisation process many workers became shareholders in their company. Today the incidence of employee share ownership schemes is below average in Estonia.

According to recent data evaluated by the fifth European Working Conditions Survey (EWCS), the incidence of profit-sharing in Estonia is about 11% and of employee share ownership schemes about 0.8%.1 According to the results of the “European Company Survey“, a survey of more than 27,000 HR managers in Europe conducted in 2009, 18% of private-sector Estonian companies with 10 or more employees offer their employees a profit-sharing scheme. Compared with other European countries, this is an above-average figure (the 30-country European average is 14%). The incidence of employee profit-sharing schemes in Estonia varies according to company size. 17% of companies with 10-49 employees, 22% with 50-199 employees, and 18% of companies with more than 200 employees have a profit-sharing scheme.2 According to the results of the “European Company Survey“, a mere 3% of Estonian private-sector companies offer their employees share ownership schemes. This puts Estonia below the European average of 5%.3 The results of the Cranet Report 2011 also indicate below average dissemination of employee share ownership schemes in Estonia (companies with 100 employees or over).4

Many Estonian companies were at first in majority employee ownership after privatisation and then taken over by management. The next step was that these companies in many cases were taken over by large investors.5

Before the change in policy in 1993, about 80% of 450 small enterprises were taken over by insiders. It has been estimated that about 29% of all employees were also owners in 1995. After 1993, as the Estonian Privatization Agency started to put large enterprises up for open tender, employees had less and less opportunity to acquire majority shares in companies they were employed with. A study of a sample 666 Estonian companies shows that employee ownership made up the largest share of privatized enterprises in the early privatization period up to 1992 (38% of the enterprises in the sample). Manager ownership then took the leading position from 1992 to 1993. From 1994 onwards, domestic outsider-owned firms dominated privatization. In January 2005 only 14 or 2% of companies had majority ownership by employees. In 78% of the companies there was no employee ownership, while 20% of the enterprises had a minority employee share. Most often these minority shares were less than 10% of total shares, although, in 7% of the enterprises, employees owned 20-49.9%. Another survey from 2005 shows that companies in majority employee ownership were primarily small enterprises with little capital per employee.6

A large number of cooperatives evolved out of former collectives in the agricultural sector. By January 1990, there were more than 2,000 cooperatives in operation, representing 7% of total employment. The highest number of cooperatives – 2,943 - was registered in 1993. Since then many cooperatives have been converted into other legal forms and in July 1998 there were 2,124 cooperatives in the company register, but only 769 of them were registered as profit-earning cooperatives. In 2003, there were 19,369 non-profit associations (including former housing cooperatives) and 855 commercial associations. The employee ownership share in cooperatives was at its highest in 1995, with 78% of employees being owners. In 39% of all agricultural enterprises the employees were the majority owners. This number decreased over time, but majority-employee-owned firms have been prevailing over a long period of time.

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.