PARTICIPATIONISM. – The various forms so far implemented of employees’ participation in the management or in the extra-profit of enterprises essentially represent an attempt to engage more fully the collaboration of the employees themselves. According to Catholic social thought, which is inspired by papal teaching on the subject, this participation, in its manifold forms, should aim to incorporate into the hiring contract of the employee’s labor capacity (the labor contract) elements of a partnership contract.
This entails that participationism should be judged as a solution to the problem of the relationship between capital and labor that lies midway between the simple labor contract and the cooperative of production, the latter being a society in the full sense of the term, with all its consequences. That is to say, whereas in a production cooperative the members, and thus the workers themselves who are part of it, fully share in the fortunes of the enterprise, in the various forms of participation employees typically acquire some advantage, in addition to their contractual wage, without thereby increasing their normal chances of losing, partially or entirely, their labor income as a result of an unfavorable business trend. Hence some simplistically conclude that certain systems of participation involve participation only in gains and not in the losses of the enterprise.
Employee participation in the life of the enterprise can take three forms: 1) collaboration in decisions concerning technical and administrative problems of the enterprise; 2) participation in profits; 3) workers’ shareholding. These three forms of participation are ideally arranged in a hierarchical scale, in relation to their lesser or greater capacity to make employees participants in the life of their enterprise.
The first of the three mentioned forms is also referred to as collaboration in the management of the enterprise. When the principle of private ownership of capital is not invalidated, this collaboration normally does not go beyond participation in mixed bodies charged with formulating general guidelines, albeit not strictly binding the freedom of action of the head of the enterprise, or simple advisory councils, with the aim of increasing the efficiency of the enterprise itself and improving the working and living conditions of the staff. The second form provides for the distribution to the staff, in addition to the wage, and according to seniority or merit, of a portion of the distributable profit.
This is possible insofar as, on the one hand, the wage is a contractual element of the cost of production, i.e., of predetermined scope, and, on the other, a margin of profit has been found to exist between the proceeds from the sale of products and their cost.
Therefore, profit-sharing is possible only when the existence of such a margin is ascertained, i.e., after the final results of the production period are known, while in a sense it represents an adjustment of the wage. Indeed, the wage is the share of the enterprise’s income due to the labor factor in relation to its (marginal) productivity, and the enterprise’s income coincides with the proceeds from the sale of production. In practice, it is not easy to determine the wage on the basis of its marginal productivity; and similarly for the remuneration of the other factors of production, including managerial activity. Hence, at the close of a favorable period, it is possible to distribute adjustments drawn from the surplus of income over production cost (which largely consists precisely of components determined in advance and in fixed amounts).
The third form resembles the second, in that the assignment of company shares to employees often relies on the availability of profits earmarked for distribution among employees but instead used to purchase shares to be registered in their names. Workers’ shareholding confers on them the status of partners pro quota.
As to the possibility and scope of recourse to the three means indicated, it is observed that the participation of employees, or rather of their representatives, in the capacity of consultants, in decisions concerning production organization but not business policy, can yield good results for the general interest, can somewhat improve workers’ conditions, while presenting no particular problems. Different is the situation if participation extends to decisions regarding the conduct of business (volume of production, selling prices, self-financing, etc.), for then problems of considerable delicacy arise, such as the unity of enterprise governance, the assumption of responsibilities, professional secrecy, and others of a similar nature.
The inclusion, instead, of employee representatives on boards of directors, while seeking to avoid the difficulties just mentioned—so that it does not exceed the limits of minority participation—proves of limited utility, having a predominantly symbolic value.
Profit-sharing raises questions of a purely economic nature, the most significant of which is the identification of the real needs for reinvestment of the distributed profits within the individual enterprise. With regard to the economy of a country, the advisability of profit-sharing can be assessed insofar as it accords or contrasts with the general need for greater capital investment or an expansion of consumption. Thus it does not seem possible to assert that this participation is always advantageous or, conversely, always counterproductive, in terms of the progress of the enterprise and the national economy.
As for workers’ shareholding, apart from the fact that the ownership of a share of the company’s assets implies that the employee-shareholder also shares in the losses of the enterprise, it confers a certain moral position on the employee-shareholder, especially when the portion of the company’s shares held by employees represents a significant percentage. One cannot overlook the difficulty connected with the transfer of shares by employees to third parties or with the very intransferability of the shares, which might remedy the other drawback. Considering the most recent experiences, it is noted that the first two forms of participation are more widespread and that profit-sharing finds wider application in economies, such as the North American one, characterized by rapidly increasing productivity, which normally requires a parallel development of consumer spending. In conclusion, the three forms of participation here illustrated, which are the most common, fit within an economic and social system based on private property (and initiative), whose excessive individualism they aim to temper.