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Financial Participation

Employee share ownership in the form of employee funds have been the subject of controversial debate since the 1970s. It all started with the trade unions’ solidarity wage policy. Other European countries adopted the ideas behind the Swedish fund schemes for similar proposals.

 

Employee share ownership has been debated since the 1970’s. It all started with the Swedish trade unions’ solidarity wage policy, whereby wages were linked to average productivity rises on a macroeconomic level. This however created the effect of high-profit companies paying only relatively low wages, and trade unions came under legitimation pressure from employees in such companies. The Swedish Trade Union Confederation (LO) set up a working group that came up with the proposal for “collective share ownership for employees” as a solution to this problem in 1975. It was proposed that every Swedish joint-stock company should transfer 20% of its profit as share issues into employee funds. The intention was that the funds’ proceeds should be made available for local trade union activities and for training, research and counselling purposes. Over and above its function as an extension of the joint wages policy, this form of employee share ownership was intended to have a balancing effect on wealth distribution and promote industrial democracy.

 

 

Employee funds were finally implemented in 1984. However they had acquired the totally different objective of strengthening the pension system. Companies were not required to contribute profits in the form of shares as foreseen but as cash. Employees were also required to contribute to approx. one-third of financing through an increase in their pension contributions. In addition a 7-year retention period was set.1

Trade unions are critical of present demands by the employers’ associations to introduce greater flexibility in wage structures. Up to now there has been no great focus on employee financial participation in wage negotiations. The trade unions regard employee financial participation solely as an additional wage component, but by no means as a wage substitute.

 

 

 

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.