Economic and Industrial Democracy

The present article summarizes the recent experiences in workers' financial participation in the member countries of the European Community, as contained in the PEPPER Report prepared for the Commission of the European Community in 1990-91 as part of its Action Programme for the implementation of the Social Charter. Within the category of financial participation, two broad categories of schemes were included: profit-sharing and employee share-ownership. An overview is given of the prevalent types of schemes applied in EC countries, diffusion of particular forms, characteristics concerning enterprise size and sectoral distribution, percentages of employees involved and effective benefits accruing to employees. With the notable exceptions of France and the UK, employee financial participation is for the moment not very diffused. Nevertheless, the Recommendation on employee participation in enterprise results, adopted by the Council of European Communities in July 1992, encourages member states to grant fiscal and other incentives to firms adopting financial participation schemes, which may lead to measures facilitating their further spread throughout Europe.

This article compares the recent developments of financial participation schemes in the West and in Central and Eastern Europe. Its first aim is to identify the different legislative experiences, forms and extent of financial participation. The promotion of financial participation intervenes in a totally different context in these two groups of countries. In the West, its main objective is to enhance workers' motivation whilst in Eastern European countries, it appears as a form of privatization. Since financial participation also varies according to the features of the national system of industrial relations, the attitudes of social partners are particularly analysed in a cross-country perspective. Finally, from company examples and a brief survey of empirical research, the author studies the economic and social potentials of these schemes.

During the 1970s several proposals to set up employee investment funds were brought to the fore in Scandinavia. In 1984, wage earner funds were introduced in Sweden. The experiment, however, was short-lived and partly a failure. In Denmark, the debate on economic democracy is almost non-existent today, and in Norway, the funds idea never gained ground at all. The hypothesis stated in this article, is that collective strategies which include all employees, or large groups of employees, are hard to realize within a highly diversified labour market. It is also argued that pension funds can prove to be significant devices for industrial purposes and employment, and that employee ownership can imply co-optation or an enlargement of employee influence. If employees enter the capital market to a greater extent, it can also imply a new role for the trade unions.

This paper describes the principal models for worker participation in property in Quebec. Four formulas are presented. First, the workers' investment funds have original characteristics, both in the scope of popular participation and in the strategic role taken on by these funds. Second, worker-shareholders' co-operatives are a controversial model which is unique to Qu6bec. Third, workers' co-operatives are examined. Fourth, the paper looks at individual worker participation in shareholding. In conclusion, the paper evaluates each formula for its potential for development and for democratizing work.

The Mondrag6n co-operatives of the Basque region of northern Spain are currently adapting to changing market conditions in Europe, pursuing a strategy of scale within priority sectors. This article outlines the strategic development of the co-operatives, then juxtaposes the experience of the co-ops with four major theoretical issues arising from the economic literature on co-operatives: (1) the potential for employment restriction; (2) underinvestment; (3) inadequate market discipline of self-financed co-ops; and (4) the danger of sell-off by members. The hypothesis is advanced that the cooperative group has developed competitive advantages via institutions that were originally designed to conserve social priorities. Institutions forming the finance system of the group are examined in more detail, and current changes to the finance system and other group institutions are discussed and questions raised as to the effects of these institutional changes on economic performance.

A wider extension of employee-managed firms in Western marketa economies is assumed to be limited by three financially related internal obstacles. Employees are: relatively poor, risk-averse and opportunistic. Thus a wider extension implies outside financing (some combination of outside equity and debt). But asymmetric information and opportunism in relation to outside financing lead to agency problems. It is concluded that a wider extension especially to capital-intensive industries implies the building up of separate financial institutions to supply outside financing, some risk-taking by employees to restore incentives and some violation of the employeemanaged firms' autonomy to protect outside financing against default.