Financial Participation of Employees in the EU-27

In every political system based on a market economy, the concept of property, and especially the legal institution of private property, plays a determining role. However, privatisation, increasing concentration, unequal distribution and internationalisation of property have created economic, political and social problems, which so far have defied solution. The creation of a ‘New Social Europe’ and the recent inclusion of no less than ten Eastern European states make the property question even more urgent. Financial participation (in the form of employee ownership as well as profit-sharing) based on an appropriate legal framework addresses these problems at their source. Instead of eliminating private property and thereby destroying the market economy, wage-dependent employees can be enabled to acquire productive property as shareholders in successful business corporations.

At the dawn of the eastward enlargement of the European Union, once again it becomes obvious that ‘ownership is a historical, not a logical category’.¹ The Western model of the welfare state is in a severe crisis² and can no longer be maintained in its present form. At the same time, the Central and East European countries are trying various ways to integrate ]private ownership into the legal framework of a new post-socialist welfare state,³ or are at least trying to lighten the social burden of transition to a market economy.⁴ In this context, the role of property goes beyond the mere functional control of men over legal objects and nature; it assumes another dimension of property rights, that of social integration as an element of social stability, democracy, and economic justice.⁵

The diverse traditional national approaches to both participation in decision making and financial participation are a major impediment to change, as the controversy over European workers’ councils has impressively demonstrated for more than 30 years. The same factors make it very difficult to reach a unanimous supranational compromise either in the Commission or in the Council.

There are two kinds of property rights inherent in employee participation: control, which is participation in decision making and returns, which is financial participation.¹ Whether a given scheme embraces participation in decision making depends on the prerogatives and rights that it confers upon employees. In employee share ownership, these rights are determined by whether ownership is direct or indirect, whether stock is held through an employee trust or co-operative, and whether voting rights and other forms of immaterial participation accompany ownership. In profit-sharing, there is no necessary link to any form of employee input into company decisions at any level. In practice, however, these schemes are often part of a package of participatory measures, including information and participation in control.

For the first 100 years after the founding of the American republic, the USA was in fact a ‘society of owners’. Ownership of a farm, ranch or small business was the norm rather than the exception. During the next 100 years, however, this situation changed radically with the coming of the industrial revolution and the eventual emergence and success of big business.

The PEPPER IV Report is an interdisciplinary legal and economic comparative study. It provides a comparative assessment of financial participation in the EU-27 and in the candidate countries. It is based on coherent and thus, for the first time, comparable indicators.

Some forms of employee financial participation began to emerge at the end of the nineteenth century; the number of plans, however, remained very small, especially between 1945 and 1990. The Belgian government introduced its first incentives for employee share ownership in King’s Arrest ‘Monory-De Clerq’ on 9 March 1982. These provisions were primarily intended to support the stock exchange in the wake of a financial crisis; among them was employee share ownership, submitted in a proposal by the Liberal Party. Still applicable, these provisions have proved efficient. Additional incentives were introduced in 1991 by the Law on Equity Capital Incentives. The Law on Incentives for Stock Options of 26 March 1999 and the Law on Promotion of Employee Financial Participation of 22 May 2001 followed. These last two laws introduced tax incentives for profit-sharing and employee share ownership schemes; however, the number of plans continues to be relatively small.¹ Approximately 10 per cent of large, primarily multinational companies in the financial sector had employee share ownership plans in 1999.² Stock option plans have become relatively widespread. More than 40 per cent of enterprises with more than 50 employees offered stock option plans in 2002.³ Many of these, however, are limited to management.