The Use of Employee Financial Participation in Lithuanian Companies

Introduction

Employee financial participation (in two forms - sharing profits or property with employees) is a noticeable social phenomenon in a large number of Western European companies (Kim, Patel, 2017). In Lithuania, this phenomenon is not so bright, especially if it is associated with long-term employee share programs (Civinskas, Dvorak, 2017; Civinskas, Dvorak, 2019). In Lithuania, this phenomenon is usually related to one scheme - a stock option or an employee option transaction. This is due to one of the main issues in the labor market over the last five years, i. e. the desire to retain qualified and experienced employees in the companies, to motivate them to work productively, to achieve good results and to remain loyal to the company.

In general, academics, business experts and policy makers agree that this form of employee participation in corporate governance benefits not only employees but also companies. The concept of employee ownership is based on the idea of the employee owner (Aubert, Kern, et al. 2017; Whitfield, Pendleton, et al. 2017). Employees, as owners, can receive higher dividend income at a time when the company is profitable. Thus, the income received by employees motivates them depending on the company's performance (Lowitzsch, Dunsch, et. al. 2017). True, there are internal factors and organizational circumstances that lead to these schemes not being effective.

The issue of employee financial participation has received considerable attention over the last few decades. In essence, it has become the basis for interdisciplinary approaches. Employee financial participation is examined not only by economists (Bryson, Freeman, Lucifora et al. 2013; Miller, 2012; Ugarkovic, 2008; Wolff, 2012) human resource management specialists (Poutsma, Kaarsemaker, 2015; Poutsma, Ligthart, Kaarsemaker, 2017; Elouadi, 2020; Uribetxebarria et. al., 2020), but also by researchers in the field of public policy (Lowitzsch, 2009; Case, Quarrey, 2019; Weltmann, 2019) and business ethics (Kruse, Freeman, Blasi, 2010; Reynolds, 2014). One of the most noticeable directions of research is related to the involvement of employees in order to motivate, ensure loyalty or likewise. Perhaps most prominent in the academic field is approach to labor relations. Interoperability between employees and employers is understood as involvement in decision-making related to a company’s financial performance. More specifically, employee involvement schemes, usually set up by employers, anticipate that the company's performance will be relevant to them. In addition, employees can combine personal and company performance.

In the academic field, there is a popular research topic, which establishes the relationship between employee ownership and the efficiency of the company's operations (Kim, Patel, 2017). Part of the empirical studies found out the links (they are not necessarily strong in all variables) between firm performance (employee productivity, financial performance, personnel management stability) and employee financial participation (Whitfield, Pendleton, et al. 2017; Kurtulus, Kruse, 2018; Richter, Schrader, 2017; Kang, Kim, 2019). According to other research, companies are negatively affected for a number of reasons: employee shareholders are guided by narrow interests and the pursuit of benefits, investment in research and development is reduced, risks are not properly managed, and etc. (Faleye, Mehrotra, Morck, 2006; Aubert, Kern, Hollandts, 2017). The “dark part” of employee ownership is usually seen at a time when employees are pursuing purely personal interests for personal gain (Guedri, Hollandts, 2008; Srivastava, Bhatia, 2020). In addition, research findings often emphasize that application of enabling the share to employee is a very complex phenomenon, making it really difficult to distinguish the unambiguous benefits.

A specific research direction is the interaction of employee ownership with investment attraction (this is usually relevant for so-called start-ups). Venture capital investors are often interested in effective employee incentives (Geczy, Jeffers, Musto, et al. 2016).