The distribution and significance ofemployee financial participation in Europe are at first glance no more uniformand structured than in the case of codetermination. Analysis shows examples andcases of good practice concerning financial participation in all Europeancountries, even if the political and economic preconditions vary between stronglegal foundations for the active promotion of financial participation (as in Franceand the UK) on the one hand, and rather poor recognition of such practices atenterprise level by the social partners, on the other.
Historically, approaches andinstruments for financial participation have emerged for the most variedreasons. In some farsighted companies it has always been a matter ofinculcating in the employees a stronger commitment to the company. Particularlyafter 1945 there were also socio-political motives for promoting wealthcreation among employees that, in the meantime, have been found in manyEuropean countries (France, Germany, the UK). Today, these instruments are usedpartly to compensate for deficient state old age pensions. In countries such asthe UK and Ireland financial participation traditionally plays a major role inthe composition of old age insurance through pension funds (in association withsaving plans). Employees and their trade unions frequently have a seat and avote on the supervisory board of such pension funds in order to oversee properuse of the money. But there are also strong traditions in the cooperativemovement that have nurtured a tradition of financial participation (forexample, in Spain).
As with the codetermination debateanalyses of approaches to financial participation in Europe tend to emphasisethe differences in the details and so overlook the great similarities. What atfirst glance seems very diverse can be categorised in terms of a few basicschemes that are to be found in all countries. The most important differencesconcern:
the form of participation (participation in profits and/or equity);
the form of use or investment of the proceeds of participation (lump sum, accumulation of shares or feeding old age pension plans);
the determination of which employees are entitled to participation.
In all European countries distinctparticipation models have developed around these coordinates that, due tonational peculiarities in terms of taxation, state support, forms ofenterprise, and so on, can look very different in detail. As time goes on, thespread of financial participation schemes in individual countries hasnecessarily become extremely differentiated (for example, the relatively highsignificance of profit-sharing in France or employee share ownership schemes inthe UK).
The new EU member states findthemselves in a special situation in this connection: on the one hand, in allthese countries – although with different national emphases and intensity –financial participation has formed an essential component of privatisations inthe post-socialist transformation process. This led at least temporarily to adramatic leap in the proportion of company assets in the hands of theemployees. The current incidence of employee share ownership schemes in mostnew EU Member States is relatively low compared with the rest of Europe. Morerecent studies and surveys on the incididence of various participation modelsin the new Member States point to profit sharing schemes playing a much moreimportant role than employee share ownership schemes.
Differences notwithstanding, mostEuropean countries are pursuing a national policy promoting financialparticipation – mostly deliberately linked to political goals of strengtheningparticipation and wealth creation among employees.
These national policies are basedmainly on two fundamental rules:
on the one hand, the principle of a far-reaching twofold voluntariness: as a rule, neither employees nor employers are forced to implement financial participation (only in a few countries are there legal provisions that prescribe financial participation, for example, partly in France);
on the other hand, separation of financial participation from employees’ and employee organisations’ collective bargaining autonomy (trade unions): financial participation schemes are predominantly not regulated by collective bargaining.
It is difficult to clearly separatethe basic types of financial participation empirically according to form ofparticipation and scope. Basically, we can say that profit-sharing is morecommon in European companies (especially in the form of ‘cash-basedprofit-sharing’) than equity participation, and more companies haveparticipation systems for managers and executives than for employees as awhole.
A number of studies in past yearshave attempted an overall assessment of EU countries. According to a recentsurvey of the European Foundation for the Improvement of Living and WorkingConditions (the 2009 European Company Survey)[1], 5% of companies in the EU with 10 or more employees offeremployee share ownership schemes, with 14% offering profit sharing schemes.Denmark takes pole position in employee share ownership with a figure of 13%,closely followed by Belgium, Romania and Sweden, each at 11%. It should howeverbe noted that the schemes practised in Sweden and Romania are designed totarget specific groups (managers and professionals) and not so much the wholeworkforce. The study, based on a survey of more than 27,000 HR managersthroughout Europe, also looked at the incidence of profit sharing schemes.France came out top with an incidence of 35%, followed by the Netherlands(27%), Sweden (24%) and Finland (23%). Generally speaking, the schemes areoffered to the whole workforce. The countries with the lowest incidence ofprofit sharing are Italy (3%) and Greece (4%). The profit sharing schemes inthese countries are generally tailored to specific groups of employees. Onegeneral finding is that the incidence of profit sharing schemes increases inline with company size. Whereas only 13% of companies with 10-49 employees havesuch, schemes, the figure rises to 22% for companies with 50-199 employees andto 28% for ones with 200 or more employees. A further finding of the study isthat there is a connection between the existence of a employee representationbody and the introduction or existence of a profit sharing scheme, irrespectiveof the size of the company. Employee financial participation schemes exist in21% of private-sector companies with an official employee representation body,whereas this is only the case in 10% of companies without such a body.
[1]European Foundation for the Improvement of Living and Working Conditions (Publ.)(2010): European Company Survey 2009. Overview. Luxembourg: Office for OfficialPublications of the European Communities