Theories and Evidence on the Growth and Distribution of Profit Sharing and Employee Shareholding Schemes

Abstract

In this paper, theories and evidence on profit-sharing and employee share-ownership schemes are presented. Various theories and explanations are first assessed. The analysis of general patterns of historical movement are based on three main theoretical approaches (evolutionary, cyclical and favourable conjunctures). In cross-sectional analysis, the range of specific explanatory variables include: industry characteristics, management “styles”, labour force characteristics, and various industrial relations patterns. These theories are examined in relation to recent time-series evidence from the UK and data from the third British Workplace Industrial Relations Survey (WIRS 3). It is found that the explanatory variables typically used in employment research predict the incidence of most types of employee shareholding scheme (but not the relative incidence of profit-related payments or bonuses). Moreover, it is shown that the financial performance of firms and the absence of industrial action are linked with the presence of schemes in the firm. This also suggests a theory of the application of employee financial participation that would help organisations survive and be successful in the very competitive world we are facing.