Employees Financial Participation

This chapter focuses on the potential opportunities and challenges given to firms that implement broad-based employee financial participation (EFP) arrangements. The primary rationale for such arrangements is to improve firm performance through the aligning of employee objectives with those of the firm. Little evidence exists to support the case for a direct relationship with firm financial performance, although there is evidence of a relationship with softer outcomes associated with employee attitudes and behaviour. Research findings highlight the importance of not viewing EFP in isolation and points to the role of magnitude of returns, involvement in decision-making, and corporate culture in influencing outcomes. This chapter also discusses the development of EFP in the European context, with particular focus on its development in the transition economies of Central and Eastern Europe.