Financial Participation: Does the Risk Transfer Story Hold in France?

Abstract

Several articles report a positive effect of financial participation (profit sharing (PS) and employee share ownership) on firms' economic performance. This increase can be obtained in two main ways: by increasing the effort (extrinsic, intrinsic or commitment) of workers, directly or indirectly through worker selection; or by transferring more risk to the workers. The question is, of course, not neutral. Indeed, if the risk transfer story is true then it means that the increase of economic performance is obtained at the expense of workers, who take on the burden of more risks. The question is especially important in France where financial participation is associated with tax exemption for firms and where it is forbidden by law to substitute base wage and PS. The purpose of our article is to use an employer–employee dataset to answer the question of whether financial participation schemes are mainly designed as a risk transfer (from firms to workers) device.

Buying into Capitalism? Employee Ownership in a Disconnected Era

“…Higher wages also linked to employee ownership, which is thought to contribute to ‘the construction of a trust culture inside firms’ (Baghdadi et al . : 15). Overall, most studies have highlighted both extrinsic motivational factors, such as higher wages, which derive from employee ownership (Klein ), and intrinsic motivation, such as recognition, security and fair treatment within the context of employee‐owned firms, as factors driving organizational commitment and performance (Kuvaas ).…”

“…However, this goes against the vast body of literature on employee ownership accumulated over the last three decades indicating that these firms perform differently to more conventionally structured firms on a number of metrics such as firm survival, job security, levels of employee participation, human capital development and wage levels (Baghdadi et al . ; Kramer ; O'Boyle et al . ; Pendleton and Robinson ; Richter and Schrader ); even during recessionary periods (Kurtulus and Kruse ; Lampel et al .…”

Financial Participation in Europe: Opportunities and Risks for Employees

“…The evidence suggests that it usually complements rather than substitutes for wages. Recent French studies find that establishments with financial participation have higher base and total wages (Baghdadi et al 2013;Floquet et al 2016). It is difficult to use share ownership schemes for wage substitution because they nearly always operate independently of wages and salaries.…”

Captains of Industry? Value Allocation and the Partnering Effect of Managerial Discretion

“…For instance, some legislation requires companies to negotiate agreements in relation to profit sharing. In France, when profits allow for an increase in equity, big companies must allocate a portion of the newly created shares to their employees, who have made this increase in equity possible (Baghdadi, Bellakhal & Diaye, 2016). However, these are exceptions, and most of the time there is no solidarity regarding the "general" impact of managerial decisions.…”