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Financial Participation

The most important form of employee financial participation in Portugal is profit-sharing. Share ownership is less widespread. Basically, employee financial participation can be traced back to the privatization process, especially between the late 1980s and the mid-1990s. One of the policy objectives of the privatization process was to allow a wide participation of Portuguese citizens in the ownership of privatized firms.Today, employee financial participation no longer seems to be very important in the public debate.

The origin of employee financial participation schemes was the privatization process started in Portugal in 1988. One of the objectives was to create employee ownership schemes. Therefore, the design of the privatization included important incentives for employees and small subscribers to acquire shares in the privatized firms. Before the start of the privatization process, Portugal had no tradition of financial participation. Only profit-sharing schemes have a longer history, as they were first introduced into legislation in 1969. On the one hand, the predomination of small or very small enterprises (75% of the enterprises employ less than 10 employees, and the remaining 25% less than 100 employees, 1.6% of which are joint-stock companies) can be seen as one of the reasons for the low level of employee share ownership.1 On the other hand, family-based companies, under continued ownership and management predominance in the Portuguese economy, show little tendency to participate their employees in the company capital. Tradition, a rather weakly developed financial market and employee attitudes can also be seen as significant factors for the low level of financial participation incidence.

During the privatization process some of the company shares to be privatized were reserved for small subscribers and for employees, who also benefited from preferential prices. In some cases, employee shares were also included in remuneration policy.2

Despite this support in the context of the privatization process, share ownership in Portugal has not yet become a major instrument in employee financial participation.

Profit-sharing schemes are more common. This is mainly due to the positive status of profit-sharing in tax law, as companies can deduct shared profits from their taxable income. Over and above this favourable tax provision for companies, there are no further beneficial conditions for profit-sharing schemes in Portugal. Neither the government nor trade unions are pursuing active strategies to encourage profit-sharing.

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.