Profit-sharing plans in a political arena

Press, 24 June 1983, Page 16

Profit-sharing plans in a political arena

Changing economic conditions, such as a general slowing down in growth, have prompted a marked increase over the past decade in legislation on employee financial participation as authorities in market economy countries move to find new methods of financing investment, motivating workers and altering income distribution patterns. Moreover, there is a tendency to legislate in fields formerly the province of undertakings or the social partners, according to a study recently published by the International Labour Organisation (“Financial Participation of Employees,” by J. Remus). Legislation rather than independent initiatives, has been the force behind the reality of financial participation of workers in Western Europe, where it emerged in the 1960 s after specific measures were adopted — notably in France and West Germany — first to promote, and then to regulate, employee profit-sharing and savings. In the United States, however, where the first experiments were carried out just before the outbreak of the Second World War, financial participation of workers was not legislated into existence but started when several companies, hoping to improve economic efficiency by increasing staff motivation, introduced profit-shar-ing schemes for their employees.

Since the end of the war, financial participation — mainly through profit-sharing plans, stock bonus plans, and employee stock ownership plans — has grown

dramatically in the United States. By 1978 there were 250,000 deferred profit-sharing plans covering 15 million employees and involving $50,000 million. Similar schemes were adopted in the United Kingdom, and the study cites a survey carried out in 1980 which shows that among the 187 British firms covered 137 — employing almost one million workers — had profit-sharing programmes; 31 had save-as-you-earn plans with a share acquisition option; 59 had option plans for management personnel; 18 had simple shareholding plans, and 11 had employee shareholding trusts covering the entire staff.

In West Germany, 800,000 employees are now shareholders in their firms and 200,000 more have access to other financial participation systems. By the end of 1981 in France, five million employees in 11,500 undertakings were covered by 10,000 participation agreements, and by the end of 1979 in the Netherlands, almost one million employees were involved in savings schemes operating in 4700 undertakings. In Scandinavia financial participation is still the subject of debate but practical implementation is gaining momentum in banks and major enterprises. The study lists four types of legal situations which cover financial participation of workers in most market economy countries:

• Absence of a legal and fiscal framework, as in Japan and Switzerland;

• A flexible and optional legal framework which provides tax incentives to encourage both employers and employees, as in the United Kingdom and the United States;

• An obligatory or semi-obliga-tory framework containing options and usually linked with a savings obligation, as in France and Germany,

• A strict legal framework, as found in the Netherlands. More radical trends in the whole concept of financial participation have recently become apparent. Trade unions — particularly in Western Europe — are moving into territory they once implicity recognised as management preserve. They are promoting schemes to establish a “social market economy” by setting up collective employee funds financed by compulsory deductions from undertakings’ profits or by payroll levies, to be administered wholly or in part by the trade unions themselves for the benefit of all wage earners.

Such schemes have definite political overtones and increasingly a liaison with the political authorities. Indeed, discussions concerning financial participation have assumed a decidely political flavour in Western Europe. There, the study points out, financial participation is more and more an issue during electoral campaigns — an indication, perhaps, of where the fate of such schemes will be decided in the future.