Employee financial participation in businesses: Is it worth discussing?

During the systemic transformation of the Polish economy in the late 980s and early 990s, a keen interest arose in various forms of participation of employees in the profits and ownership of the enterprises employing them. (For convenience we can refer to these various forms of participation as employee ownership.) This was linked to ongoing discussions about how to privatize the country’s state-owned companies on a large scale. The author of this paper, prof. Barbara Blaszczyk, took part in these discussions, trying to popularize employee share ownership, which was well-known in Western countries. In her view then, this kind of institution could be used to build a new business model for certain groups of enterprises created as a result of privatization. At that time, however, neither the Polish intellectual elite nor the working class was prepared for, or understood, the long-term advantagesof the forms of employee ownership implemented in some companies in the most developed Western countries. Even in these countries, however, these forms were not very common at that time. They were mainly perceived as marginal and, thus, were not taken into account as an option to be widely disseminated in the market economy (as opposed to the fairly widespread and partly mandatory use of employee participation in the management of companies in Europe). Nevertheless, the idea of employee financial participation (including profit sharing and employee shareholding), which since then has gone through various ups and downs, has survived and evolved into new forms, gaining ever wider acceptance and a firm legal grounding in some of the Western European countries and the United States. An international and European institutionalized movement has also been established to promotethese solutions.

In view of the events in recent years that have revived certain doubts about the basic principles and durability of the traditional forms of capitalism, we again notice a growing interest in employee financial participation, including widespread employee ownership. We observe its growing popularity in Europe and a strong commitment of the European Commission (EC) to popularize it. Much empirical material has been gathered, new instruments have been designed, and their implementation is being advocated by the most important bodies within the EU. This article is intended, first, to remind us about the relevant legacies of the past and, second, to present new concepts of financial participation, examining the opportunities for their implementation and the conditions necessary for this to be successful, and providing a critical evaluation of their relevance in Poland and elsewhere.
 

The first part of this article starts by making a clear distinction between employee financial participation and employee participation in management (non-financial participation). After presenting the theoretical justification for financial participation, addressing its main values and objectives, it outlines the classical concepts and types of employee financial participation, The second part of the paper briefly reports on the evolution of the most important forms of financial participation, such as the American and English Employee Stock Ownership Programs (ESOPs), German Kapitalbeteiligung or French participation, and includes a brief discussion of the legal and financial instruments in the business environment fostering their implementation. This part also includes an outline of the extent to which these solutions are being used in the most advanced countries and a short summary of conclusions drawn from the latter’s experiences. The third part of this report discusses the efforts to disseminate  financial participation, supported by the EU and presented in subsequent reports on the subject prepared for the European Parliament, the EC and its bodies. The final part discusses the potential relevance of these solutions for the emerging new economic order. It also considers opportunities for disseminating these solutions on a wider scale, in particular in Poland. In the conclusion, a number of new questions for further research on financial participation are considered.
 

The analysis, prepared by prof. Barbara Blaszczyk, can be downloaded here.