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Financial Participation

Employee financial participation in Estonia is present mainly in the form of employee ownership and the activities of cooperatives. The importance of employee ownership has been in decline since the beginning of the 1990s, when for a short time employee ownership played an important role in the privatization process. Profit-sharing schemes are now relatively widespread (above the European average).

The roots of employee ownership in Estonia go back to the last reform attempt by the Soviet Union in the mid-1980s, which included the possibility to found privately-owned enterprises.1 Between 1987 and 1990, several hundreds of small state enterprises and worker co-operatives were established in Estonia.


The workforce in small state enterprises and co-operatives gained the right to take decisions on production, pricing, wage setting and investment within limits set by state authorities. They were also allowed to retain net revenues. In 1989 an even bigger step was made with the start of semi-privatization or “leasing” of large industrial enterprises. The leaseholders gained the right to control the enterprise and retain residual revenues, but had to pay rent to the government for the use of assets. They basically became private companies, lacking only the right to transfer assets to third parties.2

The most significant developments with regard to workers’ financial participation in Estonia took place within the framework of privatisation after 1990.3 After the adoption of the new law on privatization and the establishment of the Estonian privatization agency (EPA) the concept of leasings was abandoned again. From late 1992, the centralised programme of large enterprise privatization started, with the majority of enterprises being sold by tender to strategic investors. The enterprises which had been leased to employees could be bought by them. Although they had no pre-emptive right to buy the assets when the leasing contract expired, it was very rare for anyone else to buy the company. About 300 units were privatized in this way, becoming the property of their employees.


Another source of employee ownership are cooperatives. They emerged mainly from the privatization of collective farms. This was based on the principle that the property belonged to the employee collective and not the state. Employees were granted "labour shares" according to the length of their service in the collective farm, which they could invest in the enterprise assets. In the early ‘90s a large number of cooperatives had been established in this way (about 3,000 in 1995, compared to only 340 in 1989), most of them employee-owned.4

Starting with the summer of 1994 privatization also included the use of vouchers, which could be used for public offerings of shares in the 39 large companies. However they were mostly used for privatization of land and housing. After 1993 it became increasingly seldom for enterprises to be sold to their 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.