Added Value of Employee Financial Participation

Abstract

This chapter broadens our understanding of the added value of employee financial participation. Financial participation is a generic term for the participation of employees in profit and enterprise results including equity of their employing firm. In general, there are two forms of employee financial participation: profit-sharing and employee share ownership (including options). While profit sharing is considered as an incentive for employees with positive individual and organizational level outcomes, employee share ownership adds to that a share holding element where employees may consider themselves as co-owners of the firm, including the possibility of voice and control. In this chapter we review the current literature on the impact of financial participation and show that in most cases the literature shows positive effects on outcomes. However, the literature also shows that financial participation is not a HR instrument that produces the results mainly in a generic way, but that the best results can be achieved when embedded in a configuration of HR policies and practices, which we call ‘high performance ownership system’.