EFESOPINION

The term we use is "employee share ownership and participation", rather than "financial participation". This distinction is significant. Indeed, the concept of "financial participation" had its origin and its relevance at the end of the 80’s. Since then, practices as well as research have demonstrated the need for greater precision of terms. Among the different practices gathered under the concept of "financial participation", some have been shown to be beneficial and others negative ones. What we have seen though through the last decade is how practices of employee share ownership joined with participative management were characterized by their positive impact on economic and social dynamics. Share ownership and participation are simply two independent organizational variables. Neither the one or the other do in themselves necessarily lead to any significant improvements of company performance although they both may be appreciated for their own sake. It is first when joined that the potential of both are really released.

Actions should be taken in the European Union, and also in the candidate countries.

It is necessary to lay down general principles at the European level to encourage greater and more efficient recourse to employee share ownership and participation schemes.

The general principles and the actions which the Commission should include in its next Communication and its Action Plan are those defined in the "European Action Programme" of the European Federation of Employee Share Ownership.

This programme is based on the Resolution of the European Parliament of January 1998 and it was written as the conclusion of a workshop which had gathered together, within the European Parliament in Brussels, all European institutions, as well as the social partners and the organizations of employee share ownership.

This action programme calls on the European Commission particularly:

· to set up a permanent working party;

· to implement a programme with adequate funding;

· to set up a European institute for employee share ownership and participation.

This action programme is attached in its entirety to the present opinion, of which it forms an integral part.

The present opinion of EFES was discussed and concerted with CECOP – the European Confederation of Workers’ Co-operatives, Social Co-operatives and Participative Enterprises; let us recall that CECOP is member of EFES, and reciprocally, EFES is a member partner of CECOP.

EFES – the European Federation of Employee Share Ownership was constituted following the decision taken in May 1998 in Brussels, by a conference which brought together 250 participants from 28 countries. The Federation was quickly organized, under the statute of a not-for-profit international organization approved by the Belgian Government.

EFES’ objective is to act as the umbrella organization of employee owners and all persons, companies, trade unions, experts, researchers, institutions looking to promote employee share ownership and participation in Europe.

This ambition is being carried out. EFES counts members in the majority of the European countries, in the candidate countries as well as in the European Union. Among the members of EFES, there are individuals, companies, associations, trade unions, experts, researchers and national federations. The Board of Directors of EFES counts 22 representatives of 14 countries, and its Executive Office 7 people, who meet monthly.

3. METHOD AND OPINIONS COLLECTED

To prepare its opinion, EFES met and consulted a broad range of people and organizations: representatives of governments, members of the European Parliament, trade-union representatives at European level, employers’ organizations, organizations promoting employee share ownership, etc.

EFES also organized a web forum on the topic of the consultation organized by the Commission. Some characteristic collected opinions are reproduced in appendix.

The reactions which we collected from a broad range of actors have the same general tone:

One can only be delighted by the will affirmed by the Commission staff "to relaunch the debate on financial participation at European level, associating all the players concerned".

There are many positive aspects in the document, but one omission in the general principles and – perhaps understandably - a glaring lack of proposals for action.

The good points are:

The Commission staff precisely affirms the preference for all-employee schemes.

The Commission staff highlight the fact that financial participation boosts productivity. This is the argument with the widest appeal, as productivity is associated with competitiveness, profitability and higher salaries and/or more leisure time. Yet is does not mention which degree of ownership is necessary, nor whether the increase in contingent on other factors as well.

The Commission staff shows that financial participation is being recognized widely as important.

The Commission staff also shows why it is necessary to take initiatives at the European level, not just the national level. This is important.

The general principles stated by the Commission staff contain a major omission. In fact, many studies show conclusively that financial participation only really works strongly when it is situated in a regime of participative management. The document emphasises clarity and transparency, which are aspects of communication by managers, but not involvement and consultation of employees in the management process of the business.

However with this argument we can win over trade union support, which is generally lacking, and which is necessary if we are to make progress in Europe in this field.

Besides the positive aspects, in a general way, the reactions and the comments express perplexity to the intentions and the steps taken by the Commission, an impression of inexplicable timidity, and disappointment, this expressing itself sometimes even in a sharp tone (cf opinion reproduced in appendix: "consultation or funeral?”)

Within the European Federation of Employee Share Ownership itself, the impression which prevails is that of a disappointment with the past action of the Commission and the expectation of a firmer and stronger action in the future.

Indeed, EFES observes that the Summit of Lisbon raised the point in the European social agenda. EFES has uncovered a listening and growing support from the governments. As regards the European Parliament also, the supports for employee share ownership and participation has been strengthened. From the European Commission too, better support is awaited.

Among the questions and the reactions collected, let us note particularly:

Why wait until the 1^st of August to launch this consultation? A worse date would be difficult to find, given that it was a universal holiday. Why such a short deadline for replying (until October 30)? All that rather discourages the reactions and hinders a real consultation. Furthermore, it is not clear from the document, what could have prevented it from being diffused 6 months or even a year before.

Of the Resolution of the European Parliament of January 1998, the working paper of the Commission staff retains only a general sentence, observing that "…the Parliament... made a number of calls on the Commission... It requested the Commission in particular to promote the exchange of information and best practice at transnational level, to study the impact of financial participation schemes on employment and wage flexibility, and develop pilot projects for financial participation in public undertakings in the CEECs in connection with privatisation". However, the Parliament’s Resolution addressed to the Commission a whole of concrete, precise, practical requests. Not only were these requests not met by the Commission since 1998, but the document of consultation of the Commission omits them.

Lastly, it is strange that the document of consultation does not make mention anywhere of trade-unions. It is difficult to understand such major omission.

4. EMPLOYEE SHARE OWNERSHIP AND PARTICIPATION, KEY ELEMENTS OF A EUROPEAN STRATEGY FOR EMPLOYMENT

Employee share ownership and participation should be highly placed in a European strategy for employment. This is still not the case. There is an awakening which still has not reached the political decision makers.

Indeed the development of employee share ownership and participation positively influences economic and social dynamics and employment. This is not negligible, since it is estimated at 1% a year additional growth of the GDP. In terms of employment in Europe, that potentially represents a million additional jobs after a few years.

In the consultation document of the Commission, this factor is precisely highlighted (pages 8 and 9).

In the opinion of EFES, this is a key point of the question.

Much remains to be done to carry the conviction of governments and European decision makers in this direction. The document of the Commission indicates rightly that the general principles set forth in the PEPPER Reports have not yet been adequately incorporated into national policies.

However, during these last years, EFES has developed its relations with many governments and those show more and more interest in employee share ownership and participation.

In Belgium, the Belgian section of EFES was, at the sides of the Belgian Government, an active craftsman of a step which appears exemplary to us. Indeed, under the terms of a dialogue which fully associated the social partners, good new legislation was adopted, directly inspired by PEPPER principles.

With the support of the Belgian Presidency of the European Union, EFES is organizing an international conference on November 23 2001 in Brussels. The aim is to encourage the European Union and the European States to promote employee share ownership and participation.

We hope well that the European Commission will join the organization and the holding of this event.

5. THE CONCEPT OF FINANCIAL PARTICIPATION IS OBSOLETE; IT IS ADVISABLE TO SUBSTITUTE FOR IT EMPLOYEE SHARE OWNERSHIP AND PARTICIPATION

EFES thinks that it is employee share ownership and participation which should be the subject of a Community initiative, rather than "financial participation".

The concept of financial participation is too general: many studies, among which some supported by the Commission or the Dublin Foundation, have shown that financial participation can have all its social and economic benefits only if it is associated with a participative management. It is thus necessary to speak, as EFES suggests, of employee share ownership and participation, rather than just of financial participation.

This difference is very significant. Indeed, the concept of "financial participation" had its originality and its relevance at the end of the 80’s. Since then however, practices and research have shown that the concept of financial participation, covering even contradictory multiple practices, is now largely obsolete.

Indeed, the concept of financial participation used by the Commission covers three categories of practices:

· employee share ownership;

Among the practices covered by the concept of "financial participation", some have been shown to be beneficial and others negative. The practices of employee share ownership joined to participative management were characterized by their positive impact on productivity and economic and social dynamics.

Research shows that employee share ownership and participation have a positive impact on productivity, on economic and social dynamics in general and on the volume of activity and employment:

· When all-employees share ownership schemes are connected to participative management, the impact is particularly positive.

· When share ownership is just targeted at certain categories only (as is often the case in stock options schemes), the impact is positive but by far lower than when all employees are included.

· Lastly, profit-sharing may certainly have some impact, but a little or even a negative one.

Consequently, the conclusion should be drawn: one cannot any more, as at the end of the 80’s, to include in the same plan these various or contradictory practices.

It is indeed "employee share ownership and participation" which should be the purpose of a specific support, rather than the former obsolete concept of merely "financial participation". This difference was already the subject of several deepened debates, in particular within the framework of the European Workshop of April 1999.

In addition, the working paper of the Commission staff understates the effects of employee share ownership, when it states that "employee share ownership provides for employee participation in enterprise results in an indirect way, i.e. on the basis of participation in ownership, either by receiving dividends or the appreciation of employee-owned capital after the selling of the shares... ".

Here still, the practice differed from concepts of the late 80’s. Employee share ownership has been shown to be effective and significant, not only as participation in the financial results, but especially as a factor of commitment in ownership, motivation, company decision and management. This is also why the connection with participative forms of management has been shown to be a key element.

Let us repeat, it is the combination of employee share ownership and participation which has proved particularly beneficial. It is that which the Community actions should encourage.

We observed on this point a great convergence between our organizations of employee share ownership and the analysis made by trade unions.

In addition, convergence is full with the movement of workers’ co-operatives represented at the European level by CECOP – the European Confederation of Workers’ Co-operatives, Social Co-operatives and Participative Enterprises. Let us recall that CECOP is member of EFES, and reciprocally, EFES is a member partner of CECOP. The present opinion of EFES was discussed and concerted with CECOP.

In this connection, it is advisable to specify that, with the term "employee share ownership" (in French “actionnariat salarié”), we cover any situation where the employee is at the same time owner of a share of the capital of the company which employs him, in the form of shares (stocks), of shares of capital, social shares, shares of co-operators or other schemes, such as workers’ co-operatives.

6. THE PROGRAM OF THE EUROPEAN COMMISSION

In its Resolution of January 1998, the European Parliament requested from the Commission "an adequately financed programme".

That the actions of the Commission fulfil a programme, appears indeed to us a significant condition of transparency and effectiveness.

It also appears very significant to us that the results of the actions taken or supported by the Commission would be published and made available.

The Commission precisely stresses through its various actions the importance of the exchanges of information in Europe. It would be desirable that the Commission itself takes a fully part in these exchanges and supports the communication between the actors. The Commission itself has information which should be accessible to these actors, in particular on the studies, conferences and other initiatives that it finances or causes, including through the European Foundation for the improvement of living and working conditions.

The purpose of this communication and this information on behalf of the Commission on financed actions, will be in particular:

· To support the exchanges and co-operation between actors, implementing projects.

· To establish criteria and correct, equitable and transparent procedures of selection.

· To encourage projects to complement each other.

In addition, in practice, the Commission finances currently only conferences, whereas the budgetary heading B3-4000 intended to finance actions aiming at the promotion of financial participation says " to support actions of promotion of good examples and networks as well as studies and measures of occupational qualification ".

The means are not adequate, but also, the Commission did not propose a true programme. This one should support:

· Research, surveys, case-studies, cross-comparative including across-country analyses.

· Training (this concept being much broader than that of "measures of occupational qualification").

· Conferences, seminars, meetings (as it is currently the case).

· Actions of information and communication supplementing the preceding: publications, periodicals, web sites, reports and any action intended to disseminate the results of the studies and surveys and to make known to the public and the actors various aspects of employee share ownership and participation in Europe (stakes, obstacles, experiments and practices...)

· Web portals, catalogues... allowing to have an overall picture of the state of research and current debates, not only in the EU, but also in other countries. Currently, it is the web portal opened by EFES (www.efesonline.org ) which answers this function best, but with too limited means.

7. ADEQUATE FUNDING

It appears significant to us that a policy of promotion of employee share ownership and participation should have a properly dedicated budgetary heading.

It is in this direction that the European Parliament in its Resolution of January 1998 went, by requesting from the Commission adequate financing.

When EFES was constituted, the first PEPPER Report went already back some 10 years and many participants were astonished to note that the Commission still did not have any dedicated budgetary means.

How indeed could we speak about policy or actions, if no means are allocated to it?

After the Resolution of the European Parliament of January 1998 and after the European Workshop organized by EFES at the European Parliament in April 1999 (workshop in which the Commission took part), one was still more astonished to see that no initiative seemed to be taken to assign means to the budget for 1999.

The astonishment was even larger, seeing the draft budget for 2000, which did not provide for anything either. Fortunately, EFES was able to discuss this with a number of Members of Parliament, and the draft budget was amended, by dedicating a share from the B3-4000 line "social dialogue" to assign it to the promotion of financial participation (and the situation was<reproduced for the budgets for 2001 and 2002, since again, no initiative came from the Commission).

It must be noted that the assignment of a fraction of the B3-4000 line to financial participation is a lame solution, which still does not give "adequate” financing for a program aiming at the promotion of employee share ownership and participation.

Indeed, to reduce the promotion of employee share ownership and participation in a simple facet of social dialogue is to give it insufficient recognition.

Secondly, to equate actions promoting employee share ownership with the promotion of social dialogue, is to cause unnecessary arbitrations.

Lastly, it is still not to recognize the specific value of the promotion of employee share ownership and participation.

8. TO SET UP A "PERMANENT WORKING PARTY" AND A EUROPEAN INSTITUTE FOR EMPLOYEE SHARE OWNERSHIP AND PARTICIPATION

The points expounded here are still in line with the Resolution of the European Parliament of January 1998 and the European Action Programme of EFES, namely:

To develop indeed actions or a policy, one needs not only "an adequately financed programme", as the Parliament asked. It is also necessary to indicate bodies of execution and persons in charge. Without that, nothing organized will be done and, at best, things will remain as they are.

To take in hands the execution of a Community action or a policy, the European Parliament suggested the setting-up of a "permanent working party" associating all main interested parties: representatives of both sides of industry, of employee share ownership organizations, Members of the European Parliament and Commission experts.

In the prolongation of this working party, what is wished is the installation of a European institute for the promotion of employee share ownership and participation.

At the time of the European Workshop of April 1999, all interested parties decided in favour of the creation of such a working party (with the notable exception of the Commission representatives, who gave a report giving reasons to hold back).

In fact, the Parliament’s Resolution did not receive any continuation and the lack of a body of execution explains certainly to a great extent, the lack of progress observed these last few years.

9. CONCLUSION - EFES’ OPINION

As a conclusion, EFES’ opinion is as follows:

1. Yes, the European Commission should plan for a Community initiative aimed at employee share ownership and participation.

We use the term "employee share ownership and participation", rather than "financial participation. Among the practices gathered under the concept of "financial participation", some have been shown to be beneficial and others negative. The practices of employee share ownership joined to participative management were characterized by their positive impact on economic and social dynamics.

2. Yes, actions should be taken in the European Union, and also in the candidate countries.

3. Yes, it is necessary to lay down general principles at European level to encourage greater and more efficient recourse to employee share ownership and participation schemes.

4. The general principles and the actions which the Commission should include in its next Communication and its Action Plan are those defined in the "European Action Programme" of the European Federation of Employee Share Ownership.

5. This action programme expects the European Commission particularly:

· to set up a permanent working party;

· to implement a programme with adequate funding;

· to set up a European institute for employee share ownership and participation.

This action programme is joined in its entirety to the present opinion, of which it forms integral part.

Marc Mathieu
Secretary General

Appendix 1: « European Action Programme » of EFES, adopted as the conclusion of the European Workshop of 30 April 1999 at the European Parliament in Brussels ; the programme gives an appendix reproducing the Resolution of the European Parliament of January 1998 and other reference documents.