Profit sharing and employee share ownership schemes have experienced a dramatic increase in popularity in Western industrialized countries since the 1970s, and numerous countries have introduced supportive legislation.

The prime motives for profit-sharing plans are to improve employee and company performance, to serve as a pension plan and to provide a more attractive benefits package, as well as for philosophical reasons. The importance of each motive varies across countries, largely depending on the legislative context. Research indicates that profit sharing is generally associated with improved company performance, but this varies with the nature of the plan and numerous other factors.

The prime motives for employee share ownership are improvement of employee and company performance, the provision of a tax supported employee benefit plan, the transferral of ownership from retiring owners of private corporations and the development of cooperative employee-management relations. As with profit sharing, these motives vary across countries depending on the legislative context. Evidence indicates that, when combined with employee participation in decision making, employee ownership is usually associated with a substantial improvement in company performance.

Richard Long