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Does Employee Ownership Benefit Value Creation? The Case of France (2001–2005)

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Abstract

The focus of this paper is employee ownership, specifically the role of employee ownership in value creation. Based on a sample of 163 French companies, we have measured the impact of employee share ownership on value creation for both shareholders and stakeholders. Only companies with a sustained employee ownership policy over a 5-year period (from 2001 to 2005), as defined by the French Federation of Employee and Former Employee Shareholders (FAS), have been considered. The results indicate that employee share ownership plans have no effect on shareholders’ or stakeholders’ value creation.

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Notes

  1. According to a study performed by the Research Unit for Employee Share Ownership in Europe (Observatoire de l’actionnariat salarié en Europe) (2001), in collaboration with Euronext and the AFG-ASFFI, nearly one-third of French companies listed on a regulated market, i.e. 251 of the 791 companies observed, have employee shareholders, with 50% of the companies making up the Société des Bourses Françaises 250 Index (SBF 250 index) concerned. The survey reveals that companies with employee shareholders represent 87% of the stock-market capitalisation of regulated markets, and the value of shares owned by employees amounts to around 40 billion euros, i.e. 2.6% of the stock-market capitalisation of the 791 companies listed.

  2. According to Blasi et al. (2003), 24 million employees were participating in an employee share ownership arrangement in 2002.

  3. See Shleifer and Vishny (1997) and Tirole (2001).

  4. FAS represents the two million employees and former employees who are shareholders in France. It groups together the associations that have been created within companies over the past 20 years. On 22 October 1999, FAS launched an index of employee share ownership schemes (IAS), made up of listed companies developing a particularly active employee share ownership policy, which is published at weekly intervals. Following a suspension in May 2002, it resumed its weekly publications on 7 June 2004, recreating the listings. The conditions that companies must meet in order to belong to this index are set out in this article.

  5. See further in this article.

  6. On the by-nature income statement format, value added is equivalent to the sum of gross trading profit and profit on raw materials used, less other goods and services purchased from third parties by-nature. For the by-function income statement format, value added is equivalent to the sum of EBIT (earnings before interest, taxes, depreciation), depreciation, amortisation and impairment losses on fixed assets, personnel expenses and taxes other than corporate income tax. Value added is a useful measure for understanding the sector and constitutes a measure of the integration of the company in the sector.

  7. See, for example, Article L233-16 of the Commercial Code: “A significant influence on the management and financial policy of a business is assumed to be exercised where a company owns, either directly or indirectly, a share equal to at least one-fifth of the voting rights of this business”.

  8. Grouping companies into two categories, according to their sector of activity, may appear simplistic, but can seemingly be justified insofar as the sector of activity is a simple control variable.

  9. In relation to the 37 companies making up the IAS at the end of 2005, with the difference being explained by removing companies from the financial and insurance sectors.

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Authors and Affiliations

  1. PUSG, Institute of Research into Management of Organisations (IRGO), University of Bordeaux, 35, Avenue Abadie, 33072, Bordeaux Cedex, France

    Thierry Poulain-Rehm & Xavier Lepers

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  1. Thierry Poulain-Rehm
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Correspondence to Thierry Poulain-Rehm.

Appendix

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See Table 8.

Table 8 Composition of the sample
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Poulain-Rehm, T., Lepers, X. Does Employee Ownership Benefit Value Creation? The Case of France (2001–2005). J Bus Ethics 112, 325–340 (2013). https://doi.org/10.1007/s10551-012-1255-0

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