COMMISSION OF THE EUROPEAN COMMUNITIES 
COM(92) 193 final 
Brussels, 5 May 1992 
Amended proposal for a 
COUNCIL RECOMMENDATION 
concerning the promotion of 
employee participation in profits and enterprise results (including 
equity participation) 
(presented by the Commission pursuant to Article 149(3) 
of the EEC-Treaty) 
--1-
Amended proposal for a Council Recommendation concerning the promotion of 
employee participation in profits and enterprise results (including 
equity participation) 
EXPLANATORY MEMORANDUM 
The European Parliament and the Economic and Social Committee have 
delivered opinions on the proposal for a Council Recommendation 
concerning the promotion of employee participation in profits and 
enterprise results (including equity participation) - C0M(91) 259. 
The amended proposal, which the Commission now submits to the Council 
under Article 149(3) of the EEC Treaty, takes account of Parliament's 
amendments adopted on 9 April 1992 and the Economic and Social 
Committee's opinion adopted on 27 February 1992. A number of technical 
improvements have been added in the interests of clarity and consistency. 
Sect ion II 
Paragraph 2 
Parliament wished to indicate that schemes with certain characteristics 
deserve particular support, for example those which suit the needs of 
small and medium-sized enterprises. 
Paragraph 2. new subparagraph 
The Economic and Social Committee asked the Commission to include wording 
recommending Member States to encourage the issue of voting rather than 
non-voting shares to employees. Parliament, against the background of 
some recent financial scandals, stressed the importance of preventing 
misuse of shares owned by employees, when these are held in a fund or 
trust . 
Sect ion III 
Paragraph 10 
A number of modifications were proposed with regard to the working party 
to be set up by the Commission. In addition a clearer formulation of its 
objectives was asked for. 
Parliament wants the social partners to be represented on this working 
party and also added a fourth type of scheme to the non-exhaustive list 
of schemes with which the working party would deal. 
Annex 
P-ai-agraph 7 
The Economic and Social Committee is in favour of the inclusion of some 
kind of "health warning" in all offers made to employees under financial 
participation schemes. Parliament adopted an amended text for paragraph 7 
which makes a clearer distinction between risks to income and capital 
and which sets out separate possibilities for containment of these risks. 
- s\ vvo — 
Amended proposal for a 
employee participation 
part icipat ion) Council Recommendation concerning the promotion of 
in profits and enterprise results (including equity 
ORIGINAL TEXT PROPOSED AMENDMENTS 
Proposal for a Council 
Recommendation concerning the 
promotion of employee 
participation in profits and 
enterprise results (including 
equity participation) Amended ProoosaI for a Counc iI 
Recommendation concerning the 
promotion of employee 
participation in profits and 
enterprise results (including 
equity participation) 
THE COUNCIL 
COMMUNITIES OF THE EUROPEAN Unchanged 
Having regard to the Treaty Unchanged 
establishing the European 
Economic Community, and in 
particular Article 235 thereof. 
Having regard to the proposal Unchanged 
from the Commiss ionS ) t 
Having regard to the opinion of Unchanged 
the European Parliaments2^, 
Having regard to the opinion of Unchanged 
the Economic and Social 
Comm i 11 ee ^ *, 
Whereas in its Communication Unchanged 
concerning the Action Programme 
relating to the Implementation 
of the Community Charter of the 
Fundamental Social Rights of 
Workers the Commission announced 
Its Intention to present a 
Community instrument on equity 
sharing and financial 
participation by workers; 
(1) O.J. C-245 of 20.09.1991 
(2) Adopted on 09.04.1992 
(3) Adopted on 27.02.1992 
- 2 -
Whereas a report on the promotion 
of employee participation in 
profits and enterprise results in 
the Member States of the European 
Community has been prepared and 
whereas this report has 
established that there is a great 
variety in the types of scheme 
encountered in the Community, 
Including cash payments, share-
based and deferred profit-sharing 
schemes and various types of 
particular employee share-
ownership schemes; Unchanged 
Whereas 
Commun i t y 
f inaneiaI 
employees 
means of 
d istr ibut ion 
generated by encouragement at 
level of schemes of 
part ic ipat ion by 
is to be seen as a 
achieving a better 
of the wealth 
enterpr i ses, wh ile Unchanged 
encouraging a greater involvement 
of employees in the progress of 
their companies; 
Whereas while the body of 
empirical research about the 
effects of such schemes in 
practice does not yet provide 
overwhelming evidence of strong 
overall advantages, there are 
sufficient indications that such 
schemes contribute to a number of 
positive effects, including 
improvements in employee 
motivation and productivity and 
in the competitiveness of 
enterpr ises, Unchanged 
Whereas it is appropriate to 
promote a larger diffusion of 
financial participation schemes 
within the European Community, 
without seeking an active 
harmonization or a reduction in 
the existing wide range of 
ava ilable schemes; Unchanged 
Whereas, because it is not 
feasible for employees to 
participate in the equity of some 
businesses and enterprises, there 
is a need to develop models for 
participation outside the 
bus iness; 
- 3 -
Whereas the ultimate success of 
this Community initiative wiI I to 
a large extent depend on the 
active interest and involvement 
of the social partners 
themseIves; 
Whereas in the context of the 
completion of the internal market 
it is necessary to study the 
possibilities for the development 
of transnational formulae for 
employee participation in profits 
and enterprise results; 
Whereas the present action 
appears necessary to attain, in 
the course of the operation of 
the common market, one of the 
objectives of the Community, Whereas, while in some cases 
shares issued to employees are of 
a type that do not carry votes, it 
is desirable to reduce or 
eliminate restrictions on employee 
shareholders' voting rights; 
Whereas, when employees' shares 
are held in a fund or trust, there 
is a need to prevent any misuse of 
the shares; 
Unchanged 
Unchanged 
Unchanged 
Recalls that with regard to pay 
Community Law prohibits 
discrimination on the grounds of 
sex<4) or nationality; 
(4) In part icular: 
Article 119 of the Treaty EEC; 
Directive 75/117/EEC on equal pay for men and women; 
Directive 76/207/EEC on equal treatment between men and women with 
regard to access to employment; 
Directive 79/7/79 on equal treatment between men and women with 
regard to social security. 
- 4 
HEREBY 
STATES: INVITES THE MEMBER 
To acknowledge the potential 
benefits of a wider use of a 
broad variety of schemes to 
increase the participation by 
employees in profits and 
enterprise results either by 
means of profit-sharing, or 
through employee share-ownership 
or by a combination of both. Unchanged 
Unchanged 
I I. HEREBY RECOMMENDS THE MEMBER 
STATES: 
1. To ensure that legal 
structures are adequate to 
allow the introduction of the 
forms of financial 
participation referred to in 
this Recommendation; Unchanged 
Unchanged 
- 5 -
To consider the possibility 
of according incentives such 
as fiscal or other financial 
advantages to encourage the 
introduction of certain 
schemes; To consider the possibility of 
according incentives such as 
fiscal or other financial 
advantages to encourage the 
introduction of certain schemes; 
in this connection particular 
attention could be given to 
support for schemes with one or 
more of the following 
character 1st ics: 
- schemes which will facilitate a 
more equitable distribution of 
income and wealth; 
schemes which encourage 
employees to obtain and retain a 
stake in the company in which they 
work and which enhance the 
involvement of employees in 
company decisions; 
- schemes which create conditions 
for indirect participation in 
capital, in particular in cases 
where business and enterprise-
related participation is not 
possible; 
- schemes which suit the needs of 
small and medium-sized 
enterpr ises; 
- schemes which include both part-
time and full-time employees; 
2.b To encourage the issue of 
voting rather than non-voting 
shares to employees and to ensure 
that where employees' shares are 
held in a fund or trust, any 
misuse of the shares is prevented; 
To encourage the use of such 
schemes by 
supply 
informat ion 
part ies; faciIi tat ing the 
of adequate 
to a I I re levant To encourage the use of such 
schemes by facilitating the supply 
of adequate information to all 
relevant parties including the 
European Commission; 
To take account of 
experiences acquired 
elsewhere in the European 
Community when considering 
giving preferential treatment 
to particular types of 
financial participation 
schemes; Unchanged 
- 6 -
To ensure that the social 
partners have the opportunity 
to choose from a sufficiently 
wide range of options on the 
basis of consultations 
between employers and 
employees or their 
representat ives; To ensure that the social partners 
have the opportunity to choose 
from a wide range of options on 
the basis of consultations between 
employers and employees or their 
representat ives; 
To ensure that this choice 
can be made at a level which, 
taking account of the 
national practice in this 
regard, is as close as 
possible to the employee and 
to the enterpr i se ; Unchanged 
To encourage consideration of 
the key issues sot out in the 
Annex when new financial 
participation schemes are 
being prepared or when 
existing schemes are being 
rev iewed; Unchanged 
To examine, after a period of 
three years following the 
adopt ion of this 
Recommendation, the data 
available at a national level 
on the development of 
financial participation by 
employees and to communicate 
the results to the 
Commi ss ion; Unchanged 
9. To enhance social partners' 
awareness of the above 
mat ters. Unchanged 
- 7 -
III. TAKES NOTE OF THE 
COMMISSION'S INTENTION Unchanged 
10. To set up a working party to 
examine possibilities for the 
creation at a Community level 
of formulae of financial 
participation schemes by 
employees , in order to 
improve the opportunities for 
the application under 
comparable conditions 
throughout the Community of 
such schemes; these would 
include the following three 
types: 
a) a profit-sharing scheme; 
b) an employee share 
ownership scheme; 
c) a stock options scheme. To set up a working party, on 
which the social partners will be 
represented, to study the 
practical problems and obstacles 
facing enterprises at the present 
time if they wish to extend access 
to a financial participation 
scheme to their employees in 
another Member State under 
comparable conditions or If they 
wish to set up a similar scheme 
for them. In order to make such 
extension across the Community 
easier the Working Party will 
examine ways of simplifying the 
procedures which have to be 
followed by incoming enterprises 
or employees in order to qualify 
for any form of benefit or 
preferential treatment accorded to 
indigenous enterprises or 
employees in respect of financial 
participation schemes; this 
examination would in particular, 
but not exclusively, deal with the 
following types of scheme: 
a) profit-sharing; 
b) employee share ownership 
schemes; 
c) stock option schemes; 
d) investment wage schemes. 
11. To submit a report to the 
Council on the application of 
this Recommendation within 
four years of its adoption on 
the basis of the information 
supplied to it by the Member 
States. To submit a report to the Council 
and the European Parliament on the 
application of this Recommendation 
within four years of its adoption 
on the basis of the information 
supplied to it by the Member 
States. 
Done at Brussels, 
For the CouncI I 
The President Unchanged 
- 8 -
ANNEX 
Key issues to be considered when 
new financial participation 
schemes are being prepared or 
when existing schemes are being 
reviewed Unchanged 
Regular i ty: schemes benefit 
from application on a regular 
basis and from awarding any 
"bonus" at least once a year 
or over shorter periods. Unchanged 
Pre-determined formula: the 
formula setting employee 
benefits should be determined 
unequivocally before the 
beginning of each reference 
per iod. Pre-determined formu la : the 
formula setting employee benefits 
should be determined unequivocally 
and explained to the employees 
concerned before the beginning of 
each reference period. 
No subst i tute for wage 
neoot iat ions: 
of f inane i a I 
schemes is 
considered a the ex i stence 
par t i c ipat ion 
not to be 
subst i tute for 
normal negotiations dealing 
with wages and other 
conditions of employment. Maintaining wage negotiations: the 
existence of financial 
participation schemes should not 
stand in the way of normal 
negotiations dealing with wages 
and conditions of employment or of 
setting wages and working 
conditions through such 
negot iat ions. 
Voluntary part icipat ion: both 
enterprises and individual 
employees should be able to 
choose whether or not they 
want to apply for or 
participate in schemes. Voluntary participation: both 
enterprises and individual 
employees should be able to 
choose whether or not they want to 
apply for or participate in 
schemes; schemes should be 
introduced on the basis _o_f 
agreement between employers and 
employees _or thelr 
representatives 
Caicut atiop .of employee 
benef its: bonuses should not 
be fixed in advance but 
and Unchanged 
var iable 
enterpr i se 
(expressed 
prof i ts 
enterpr i se 
certa in 
accord ing I inked to 
per formance 
in terms of 
or some other 
indicator) over a 
per iod of t ime, 
to a previously 
agreed formula; this formula 
should also specify 
unequivocally the indicator 
of enterprise performance to 
be used. 
- 9 -
Amounts: in order to produce 
the expected motivational 
effects the average size of 
bonuses should on the one 
hand be significant in 
relation to the fixed part of 
employees' wages, while on 
the other hand a ceiling (in 
amounts or in percentages) 
might be advisable in order 
to avoid wide fluctuations in 
total income. Unchanged 
R isks: apart from some income 
variability inherent to 
schemes, employees may incur 
additional risks when they 
acquire risk-bearing 
securities (e.g. shares or 
bonds); when these risks are 
heavily concentrated (e.g. 
issued by the employing firm) 
and large in relation to the 
employee's total assets the 
possibility of some form of 
insurance against too heavy 
losses in the value of these 
assets merits careful 
examinat ion. RIsks: employees should be warned 
about the risks possibly attached 
to financial participation 
schemes; a distinction can be made 
between risks to income (arising 
from reductions in profit-related 
pay or in dividends) and risks to 
capital (linked to fluctuations in 
the value of shares or bonds or 
other types of security). Risks to 
income can be contained by the 
introduction of ceilings. When 
employees' financial participation 
takes the form of capital 
investments which are hardly 
diversified or not diversified at 
all (e.g. risk-bearing securities 
issued by the employer or other 
participatory securities) careful 
consideration should be given to 
the possibility of providing for 
mechanisms to protect against the 
risk of too heavy losses in the 
value of such assets. 
Benef ic i aries: beneficiaries 
are primarily employees, i.e. 
wage-earners covered by 
employment contracts; as far 
as possible access to schemes 
shou Id be open to all 
employees of the enterprise. 
More generally, workers in 
the same objective situation 
should have equal rights with 
regard to access to 
participation schemes. Unchanged 
- 10 -
Enterpr i se type .- schemes can 
be applied by both privately-
owned firms and public 
enterprises, as long as 
suitable indicators of 
enterprise results or profits 
are, or can be, made 
ava ilable. Unchanged 
10. Enterprise size: small and 
medium-sized firms should 
have adequate opportunities 
to apply financial 
participation schemes; in 
particular it is important to 
ensure that administrative 
obligations are reasonable 
and minimum financial 
requirements, if needed at 
all , are not too high; in 
larger enterprises, 
especially multi-national 
companies, it may be useful 
to I ink all or part of 
employee benefits to the 
performance of separate 
profit units, rather than to 
overall enterprise results. Unchanged 
11. Complex i tv: schemes of a 
complex nature are to be 
avoided, as the results are 
likely to be better if the 
scheme can be easily 
understood by a I I employees; Unchanged 
12. Information and training: for 
the success of any type of 
scheme a substantial effort 
will be required to supply 
adequate information and 
training, if necessary, to 
all employees concerned. Information and training: for the 
success of any type of scheme a 
substantial effort will be 
required to supply adequate 
information and training to all 
employees concerned. 
Sl^ ISSN 0254-1475 
COM (92) 193 final 
DOCUMENTS 
EN 08 
Catalogue number: CB-CO-92-202-EN-C 
ISBN 92-77-43934-3 
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