Financial Participation and Collective Conflicts: Evidence from French Firms

• Author: Fathi Fakhfakh,Andrew Robinson,Aguibou Tall
• Date: 01 October 2019
• DOI: http://doi.org/10.1111/irel.12244
• Published date: 01 October 2019

Financial Participation and Collective Conflicts:

Evidence from French Firms

FATHI FAKHFAKH , ANDREW ROBINSON and

AGUIBOU TALL*

Studies on financial participation show positive effects across several “perfor-

mance”outcomes, yet given the potential to realign employee interests, distribute

rewards, and improve commitment little is known about the ability of financial

participation to reduce collective conflicts. Using French establishments, we

explore the impact of profit sharing and employee share ownership schemes on

various measures of conflict. Across various specifications, estimators, and time

periods, financial participation reveals an ability to reduce some but not all forms

of conflict. Employee share ownership seems especially effective in reducing a

range of conflicts including the most extensive and costly forms.

Introduction

Financial participation in its different forms—profit sharing and employee

share schemes—has been an emerging feature of remuneration packages

throughout the world. At its core is the theoretical principle that such schemes

are a means of realigning the interests of employers and employees so as to

maximize their joint welfare by encouraging employees to act in the best inter-

ests of the firm and solve the agency problems inherent in the firm. As early

writers in the field expressed (Bradley and Gelb 1983; Cable and FitzRoy

1980; Putterman 1982) in an environment of “positive collusion,”conflict

gives way to cooperation (Cable and FitzRoy 1980) with hierarchical struc-

tures of control and supervision replaced by peer pressure (Kandel and Lazear

1992) and horizontal monitoring (FitzRoy and Kraft 1987). Conflict will be

unwarranted as employees strive to share in the benefits of improved perfor-

mance (Cable and FitzRoy 1980; Kruse 1996).

*The authors’affiliations are, respectively, Universit

e Panth

eon-Assas (Paris 2), Paris, France. E-mail: fathi.-

fakhfakh@u-paris2.fr; Universit

e Panth

eon-Assas (Paris 2), Paris, France, and DARES. E-mail: agatall@

yahoo.fr; Leeds University Business School, Leeds, West Yorkshire, UK. E-mail: amr@lubs.leeds.ac.uk.

The authors would like to thank DARES and INSEE for giving them access to data. They also thank partici-

pants of the International Association for the Economics of Participation Conference, Uruguay, 2014.

INDUSTRIAL RELATIONS, DOI: 10.1111/irel.12244. Vol. 58, No. 4 (October 2019). ©2019 Regents of the

Universit y of Calif ornia. Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA,

and 9600 Garsington Road, Oxford, OX4 2DQ, UK.

674

The benefits of this strategy of “positive collusion”have been the focus of a

large body of empirical work. Most studies show that profit sharing and

employee share ownership plans improve firm-level productivity and perfor-

mance (Fakhfakh and Perotin 2000; Kraft and Lang 2016; Kruse, Freeman,

and Blasi 2010), reduce absenteeism (Brown, Fakhfakh, and Sessions 1999;

Peel and Wilson 1990) and labor turnover (Fakhfakh 2004; Wilson and Peel

1991), and provide better training (Pendleton and Robinson 2011). Given the

belief that some of these expected gains arise through the emergence of a less

adversarial climate of industrial relations it is perhaps surprising that there is

very little literature looking at this issue. If the emergence of conflict between

employers and employees arises from differences in their goals, interests, or

values (Baron 1990) then something like financial participation, which is

believed to make employees more sensitive to the firm objectives and generate

attitudinal and behavioral change (Pendleton, Wilson, and Wright 1998),

would seem a natural fit and one possible factor in alleviating the emergence

of discord within the firm.

In this article we focus for the first time on the potential of financial partici-

pation to lower collective conflicts in France. The choice of France to investi-

gate this issue is particularly salient. France has one of the most extensive

incidences of financial participation use in the developed world. Second, while

collective conflicts such as strike action are generally in decline in many Wes-

tern economies, they persist at record levels in France. In 2011, 77 days were

lost per 1000 employees to strike action (DARES 2015).

While the causes of collective conflicts have been investigated across a

number of countries, primarily the UK (Blanchflower and Cubbin 1986; Saps-

ford and Turnbull 1994), France (B

eroud, Denis, Desage, Giraud, and P

elisse

2008), and Canada (Godard 1992; Harrison and Stewart 1993), the focus has

tended to be on the role of trade unions on the most costly and disruptive

forms of collective conflict—strike action. Consequently, other forms of col-

lective conflicts such as walkouts, petitions, and overtime bans have been

neglected. Thus, in looking at the potential of financial participation to lower

collective conflicts we make a number of auxiliary contributions. We consider

the impact across the full range of collective conflicts from strike action and

walkouts to action short of a strike (overtime bans, work to rule, demonstra-

tions, and petitions). In analyzing this relationship, we investigate various mea-

sures of collective conflict, from whether conflict has occurred to its

disaggregation by type and a measure of severity. To ensure the robustness of

our findings, we also carry out a series of sensitivity checks. First, we cross-

check our results for potential selection bias by estimating a weighted treat-

ment model. Second, we consider whether the relationship between financial

participation and collective forms of conflict is conditioned by the use of

Financial Participation and Collective Conflicts / 675