EXTENDED ABSTRACT

Employee financial participation and industrial relations impact of

participative management
A research framework
Anni Weiler, AWWW GmbH ArbeitsWelt Working World, Gttingen, Germany,
anni.weiler@awww.de
Introduction
Employee financial participation is an instrument used in restructuring of companies.
Key motives of the companies are to reinforce employee commitment, motivation, or
to foster innovation. Employee financial participation is a subject of various European
policy documents. The European Commission aims at a broader dissemination of
employee financial participation. The European Economic and Social Committee and
the European Parliament stress the importance of such schemes. Various reports for
the European Commission deal with the diffusion and obstacles of employee financial
participation. Nonetheless, EU policy documents tend to separate employee financial
participation from other forms of employee participation and fail to consider employee
participation as an important component of the European Social Model.
Financial participation schemes are not widespread across the European countries
but at the same time an increased interest in a broader diffusion of such schemes is
articulated by politicians and governments in the old EU Members States while the
interest is diminishing in new EU Member States. The positions regarding employee
financial participation differ between trade unions and employers associations as
well as across the organisations. The diffusion of financial participation schemes is
strongly effected by national cultures, national legislation and tax provisions in
relation to various schemes, the company size structure and the legal form of the
companies.
Beyond these more technical legal and taxation aspects of employee financial
participation, this paper focuses on the relationship between employee financial
participation and participative management and the industrial relations impact.
Financial participation as such does not increase employees influence on decision
making in the company. A fundamental pre-condition is the integration with other
forms of employee participation. The paper develops a more general research
framework for financial participation within the European Union and explores both a
range of forms of financial participation and their interrelation with various types of
wider employee participation at the company level. The entire debate on financial
participation and related research approaches are characterised by an Anglo-Saxon
bias. Forms of financial participation other than profit-sharing or share schemes are
often faded out as for example employee shares in limited liability companies or silent
partnerships.
From an industrial relations and a human resource management perspective financial
participation schemes can be implemented differently at the company level. The
focus can be:
exclusively on the schemes;
on the schemes and extended indirect or direct participation rights; and
on the schemes and employee participation in company decision making.
The key research interest is in company cases in which financial participation is
embedded in stronger involvement of workers in economic and strategic decisions for
the company and extended indirect or direct participation rights at the workplace and
in human resource management approaches which integrate employee financial
participation in a wider concept of participative management and of innovative work
organisation.
The working hypothesis is that determined and far-reaching employee financial
participation is embedded in participative management approaches and/or has the
potential to develop in a process from more simple initial implementation to more far-
reaching structures of employee participation.
Research method
A first step will be the definition of employee participation and wider participation. In
order to determine a more comprehensive approach towards financial participation a
distinction between profit-sharing schemes and capital sharing schemes will be
developed. Concept of employee participation and participative management will be
investigated and linked to employee financial participation.
The paper will discuss employee financial participation in a broader context of
industrial democracy and employee participation in company decision-making and
human resource management strategies. Based on a review of academic literature,
EU policy documents and qualitative research on financial participation the paper
attempts to develop a research framework for employee financial participation and
participative management.
The focus of the research is on companies which have implemented broad-based
result-related employee financial participation schemes which are open to the entire
workforce as only these schemes can be regarded as a potential component of
participative management.
In the understanding of employee (financial) participation as a process (Strauss
2006) and with the focus on the potential actual influence of employees on company
decision making and the industrial relation impact, the concept for future research
and potential in-depth case studies covers the analysis of the company context in
which the schemes were developed, the process of initiation and implementation, the
actors and their interactions, the policys impact, and the industrial relations culture in
the company. Such in-depth case studies do not only investigate the scheme as such
but the way it is implemented, monitored and further developed as well as potential
conflicts and solutions. The key focus is on the question how financial participation is
embedded in a wider approach of indirect and direct participation and on the actual
influence on decision-making.
Key aspects to be explored are:
features of the various models in their context;
employee involvement in the development of the model;
employee involvement in the monitoring and further development of the model;
financial participation embedded in a comprehensive structure of indirect and/or
direct employee participation;
architecture of employee participation;
employee participation in economic and strategic decision-making in relation to
financial participation;
extended participation rights;
co-ownership.
In terms of participative management both the human resource management
approaches and strategic aspects of the policies for the companies are in the centre
of research interest.
Findings/Conclusion
Company policies in terms of financial participation and participative management
are strongly effected by national cultures and remuneration traditions. Company
case study examples underline findings of earlier research that size and ownership
are determining factors for the implementation of financial participation schemes and
the differences between countries in the development and diffusion of schemes, as
well as the nature of schemes and their function in employee relations and in human
resource management approaches.
In practice, there is a variety of different models implemented in different contexts.
Most of the initiatives cannot strictly be related to profit-sharing or share ownership.
There are also other forms of capital sharing and intertwined forms are predominant.
Frequently, there is a development from a particular scheme to other forms of
financial participation which can potentially also include related extended
participation rights.
Formulas of profit-sharing illustrate a wide range of systems. The reference to the
shared profit is for example the distributable profit, profit above goals set by the
board, average profit level in the sector, percentage of the profit exceeding a fixed
reference amount, operating profit exceeding a certain percentage. Key options for
employees in share ownership schemes are a purchase of shares at a discounted
price, purchase of shares by the employee with extra shares granted by the
company, share options schemes, free distribution of a package of shares to
employees, and share-save schemes using Save-as-You-Earn accounts. Long-term
savings schemes are in particular complementary pension funds. Another example
are company-based personal employee accounts saving a part of the shared profit
for retirement age.
Relevance to debate
Broad-based financial participation tends to be embedded in more participative
concepts of industrial relations and on the other hand employee participation in
decision-making is accompanied by an increase in efficiency, productivity and
competitiveness. Interesting are particular cases, in which financial participation is
embedded in stronger involvement of workers in economic and strategic decisions for
the company and extended participation rights at the workplace.
An essential element of employee financial participation in participative management
is increased transparency on the economic situation of the company. Employees are
regularly informed about the economic situation of the company and the impact on
the scheme.
Financial participation is one element in the corporate culture and only successful, if
the policy is embedded in a wider concept of cooperative leadership and participative
management. Some indicators which can give evidence that employee financial
participation is integrated in human resource management approaches and in the
wider company philosophies are a targeted adaptation and further development of
the schemes, sustainability of the policies and a related extension of participation
rights within the company.
Broad-based schemes integrated in a participative management approach include
joint management employee committees. A widespread feature in companies with
share ownership is the establishment of a fund or foundation to administer the
employees' shares. The boards of such intermediate institution usually comprise of
management, employee, and trade union representatives. There are also various
additional forms of interest representation beyond the existing employee
representation channels. In some cases, employee or trade union representatives in
the boards of these funds or foundations also have seats in the company boards.
Industrial relations impact
The initiative for employee financial participation is usually taken by the management.
Nevertheless, in the context of participative management the schemes are developed
jointly by management and works councils or trade unions. In the case of broad-
based financial participation schemes, company level industrial relations tend to be
cooperative. Sometimes schemes are already in place for two or three decades. The
personnel strategy to integrate financial participation in a wider concept of
participative management and innovative work organisation is evident. The schemes
are embedded in the general employment policy and the high trust organisational
culture. The intention is long-term commitment and involvement, creating a
productive working atmosphere, or team conscience. Participative management and
extended participation rights and influence are considered as essential factors for
sustainable economic performance. Employees' commitment is seen as a general
aim which is to be established by means of the entire concept of personnel policy and
organisational culture. In most of the companies, the human resource management
approach includes long-term personnel development and targeted further training in
relation to the long-term strategic decisions.