European Economic and Social Committee Endorses Employee Ownership

On February 26, 2003, the European Economic and Social Committee of the European Union strongly endorsed employee share ownership and profit sharing as a means to improve corporate performance, increase financial transparency in corporations, improve corporate governance, and improve the competitive standing of small and medium-sized enterprises. The Committee concluded that employee share ownership is the most comprehensive, if riskiest, form of financial participation. Share ownership in Europe, it said, it mostly limited to highly skilled or managerial employees, but should be broadened to all employees. The committee urged that companies using financial participation establish open-book management approaches and provide a governance role for employee shareholders. Rules for financial participation plans should be non-discriminatory and inclusive. Exemptions from cumbersome securities law prospectus requirements should be provided for employee plans. The committee pledged to undertake a series of studies to analyze how to encourage broader financial participation.