Financial Participation in Europe

France has a pattern that consists of more state regulated (mandatory) broad based deferred profit-sharing with the aim of enhancement of employee savings and wider distribution of wealth and wage flexibility. Financial participation systems are also used for income and employment policies. The corporate governance system of France provide for a limited scope of employee share ownership due to more concentration of capital and the substance of closely held family firms. The system in France has mainly promoted company profit sharing and the build-up of considerable, though very unevenly distributed, employee savings. Even though the government has offered incentives several times since the 1970s, ESO has developed relatively slowly, and the tax system has not done anything to discourage this trend. If ESO appears to be developing at a faster pace these days, it is only because of privatization procedures and stock market developments. But will the current downswing in the stock market and the impending decrease of privatizations slow down the ESO trend? And won't payroll restraints (due mostly to the reduction in work hours) encourage the use of company performance-related bonuses as a supplement to wages? In these conditions, employee saving schemes appear to be the most strategic component of the financial participation system. This is probably why it is central to the 2001 Fabius Act. By creating co-operative business savings schemes (PEI) for the small companies that are excluded from mandatory profit sharing schemes, the law aims to extend the possibility for building employee savings with preferential taxation treatment to all employees except civil servants. And by establishing PPESV schemes, it promotes long-term savings that employees can use to build their personal assets. ESO is only one approach to this saving strategy. The law aims to give ESO a role by incentivizing a minimum 3% ESO holding in company capital and employee involvement in company management. If the system continues to develop, it could energize social dynamics. But it could also remain just another component of company social and payroll policy.