Development of employee financial participation schemes in EU member states and their impact on firm performance: new evidence using European Company Surveys

Employee Financial Participation (EFP) in the form of Profit Sharing (PS) and Employee Share Ownership (ESO) are now widespread in European countries. EFP is expected to have a positive effect on the employees’ engagement with, and commitment to, their firm which may result in higher productivity and better firm performance. It may also advance other public policy objectives such as employment, economic democracy and improved income redistribution. The paper focuses on two aspects: firstly, the spread of EFP schemes across European companies in the last 20 years; and secondly, the impact of EFP on the performance of firms expressed in terms of productivity and employment. We show that, firstly, the number of companies offering EFP schemes to their employees, the proportion of employees to whom EFP schemes are offered, and the proportion of employees that have taken up the offer has all increased in the majority of EU countries. Secondly, under all conditions and in all EU countries, the presence of EFP schemes increases the likelihood of a company exhibiting improvement in both labour productivity and employment. This is an important conclusion and explains the recent interest in EFP by the European Parliament and the European Commission.