What is Corporate Social Responsibility? - InnoTrain CSR

managed in the practice: The development of a relevant capital stock from
employees takes years rather than months or mere weeks. Consequently, equity
participation is a long-term financing concept. It is not suitable to remove short-term
liquidity bottlenecks. In fact, its purpose is to make sure that such bottlenecks do not
materialise. On the other hand, the financial participation of employees is
"temporary": The employee's equity or parts thereof are paid out over time and at the
end of the employment relationship at the latest. In view of the employees' financial
benefits, possibilities for national tax-related financial support may also be included in
the considerations.
In its annual estimate of companies with employee equity participation for 2009, the
Partnership in the Economy Working Group (Arbeitsgemeinschaft Partnerschaft in
der Wirtschaft - AGP) concludes that close to 4,300 companies with approximately
2.3 million employees are practicing equity participation in Germany. At present, the
prevalence of employee equity participation in Germany is below average in the
European comparison. According to a study conducted by the Institute for Labour
Market and Occupational Research (IAB), just 2 percent of German companies offer
equity participation to their employees. This figure is close to 7 percent in France and
close to 23 percent in Great Britain. However, in these countries the provision of
employee equity participation is required by law for certain companies. In Hungary,
tangible employee participations were especially important during the privatisation
phase. However, after the end of the privatisation wave, only 1 % of corporate assets
(except for the financial sector) were in the hands of employees. In Portugal, profit
sharing is generally used more often than equity participation. Almost 6 % of
Portuguese companies offer profit sharing models. The corresponding share among
major companies is estimated to be 25 %. Equity participations in small and mediumsized
enterprises are rather unusual in Portugal. Such a model is in place in almost 5
% of major enterprises.
Employee participation can also play an important role for companies and employees
in connection with Corporate Social Responsibility (CSR). Because employees with a
fair stake in the equity and success of the company will identify more closely with
their employer's CSR interests. The commitment and solidarity are directed at the
"own" company for which a higher cost awareness and more attention to operating
procedures are developed. Employees as co-entrepreneurs will assume greater
responsibility in the day-to-day business. In short: Employee participation strengthens
the idea of partnership between employees and employers. With respect to CSR, this
promotes the transparency for employees about the economic development and the
company's goals. "Eye to eye" communication and mutual trust between the
company management and the workforce are signs of a partnership-based corporate
culture.
As voluntary partners on a financial basis, employees have the opportunity to invest
into their own company through models of employee equity participation. However,
they also share the equity risk in case the company looses value or becomes
insolvent. Improved liquidity as a result of employee equity participation and a higher
The project "InnoTrain CSR" is organized by GILDE GmbH and has been funded with support from the European Commission. This publication reflects the
views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein. 12/2010
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