EXTENDED ABSTRACT

Employee financial participation and industrial relations impact of participative managementA research framework

Anni Weiler, AWWW GmbH ArbeitsWelt – Working World, Göttingen, Germany, anni.weiler@awww.de

IntroductionEmployee 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 financialparticipation 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 methodA 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, theactors and their interactions, the policy’s 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/ConclusionCompany 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 debateBroad-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 generalaim 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.