Am Donnerstag, den 12. 12. 2017, stellten Wirtschaftswissenschaftler aus zahlreichen Ländern in Paris einen globalen Bericht über die weltweit dramatisch zunehmende Ungleichverteilung von Einkommen und Vermögen/Eigentum vor.

Den Länderbericht Deutschland erstellte Charlotte Bartels, Mitarbeiterin des Deutschen Instituts für Wirtschaftswissenschaft (DIW) Berlin. Für Frankreich wirkte der bekannte Ökonom Thomas Piketty, Autor des auch ins Deutsche übersetzten Weltbestsellers "Das Kapital im 21. Jahrhundert", an dieser umfassenden Analyse mit.

Diese neue Untersuchung bestätigt die in zhlreichen vorangegangenen nationalen und internationalen wissenschaftlichen und empirischen Untersuchungen, Berichten, Sammelbänden und Einzeldarstellungen nachgewiesene und ausführlich belegte Tatsache, daß die Ungleichverteilung von Einkommen und Eigentum, insbesondere von neues Eigentum schaffendem Wirtschaftseigentum, im vergangenen Vierteljahrhundert, beschleunigt seit dem Ende und Zerfall der staatssozialistischen Regierungssysteme in Mittel- Ost- und Südosteuropa, in einem Maße zunimmt, das den sozialen und demokratischen Konsens der Gesellschaften und Staaten bedroht. 

Diese zunehmende Ungleichentwicklung ist unvereinbar mit fundamentalen Rechtsgrundsätzen der Menschenwürde, des allgemeinen Persönlichkeitsrechts, der Chancengleichheit, der Freiheit der Berufswahl, der Sozialbindung des Privateigentums und der sozialen Gerechtigkeit im Rahmen sozialstaatlicher Marktwirtschaft, wie sie in zahlreichen geltenden europäischen und außereuropäischen Verfassungen verankert sind. Diese Ungleichentwicklung widerspricht dem Menschenbild einer solidarischen Gesellschaft im geltenden EU-Vertrag von Lissabon 2007 ff., in der Europäischen Sozialcharta von 1961, der Gemeinschaftscharta der sozialen Grundrechte der Arbeitnehmer von 1989 und des Internationalen Paktes über wirtschaftliche, soziale und kulturelle Rechte von 1966, in Kraft seit 1976.




Einen wirksamen Weg zur langfristigen und nachhaltigen, marktwirtschaftskonformen  Korrektur dieser ökonomischen, sozialen und damit auch politischen Fehlentwicklung bieten - neben vielfach vorgeschlagenen Reformen des Steuerrechts - die flächendeckende Einführung und der zielstrebige Ausbau der Mitarbeiterkapitalbeteiligung in Deutschland und Europa.

Die folgenden Texte zur Mitarbeiterbeteiligung verstehen sich als Diskussionsgrundlage für seit langem fällige rechtspolitische Reformmaßnahmen zur Weiterentwicklung des marktwirtschaftlichen Sozialstaats.




Simon Fietze / Wenzel Matiaske (eds.)

 Dimensions and Perspectives of Financial Participation in Europe





 (Sonderdruck, nicht im Buchhandel)




How to overcome the ‘Great Divide’ of the capitalist market society: Development, legal grounds and perspectives of employee capital participation in Germany and Europe[1]

Herwig Roggemann[2]



The breakdown of the so-called ‘financial industry’ and the crisis of the financial market system, which culminated in a global financial and economic crisis in 2008/2009, can be interpreted as a crisis of financial participation. This crisis of participation is caused by a highly asymmetric and deficient participation in the results of the economic value- creating process. One of the main factors of this negative distributive effect is the highly unequal access to and distribution of value-creating capital in its legal form of economic or entrepreneurial property (‘Wirtschaftseigentum’). Ongoing deficits in adequate financial participation of all employees who contribute to the value-creating process lead to ongoing asymmetric accumulation of productive capital as property-creating property. The answer to this dysfunctional development which may threaten the democratic social consensus is not the way of the former Socialist states - following Marx’s proposals - of abandoning private property in economic capital. Nor is it a bureaucratic system of partial redistribution of economic results via a more effective tax system (as proposed by Piketty and Stiglitz) or by means of more social subsidies (as also discussed in Germany). From our point of view, the main answer to the crisis that is compatible with a democratic market economy based on private property is to create a widespread and growing system of financial participation of all employees in capital and enterprise results. This is the approach of direct participation in distributingthe results of the wealth-creating process.

This direct distributive participation should have political priority and deserves better legal support because of its market compatibility and democratic decentralising qualities. The most sustainable social-political effect might be achieved by combining both alternatives.

1.       Introduction: Sharing in capital – way out of structural deficits in participation – necessary political support – steps of analysis

Adequate and relevant financial participation of employees in the economic success of an enterprise both in profit sharing and in sharing of capital is in Europe and in Germany in particular probably the onegreat economic and social desideratum on the way from a divided postindustrial society of owners and of non-owners to a society where freedom and solidarity are no longer seen as being inevitably antagonistic but rather can co-exist peacefully within a participative working society of coowners.

Furthermore, adequate, widespread financial participation in the form of capital participation of employees on a large scale, in relevant dimensions, and supported by both national and European legislation can give an answer to questions that have arisen and, in fact,  continue to arise from the highly dysfunctional effects of over-concentrated capital, at free disposition for whatever investment, in the irresponsible hands of a socalled ‘financial industry’. One main reason for the financial and economic crash of 2007/2008 et seq. as well as of similar future events can be found in the long-lasting

structural lack of relevant financial, i.e. capital, participation of employees with its decentralising, power-sharing and power-limiting effects[3].

Which ways and methods should be employed to reach these aims is a matter of controversy. Even the political priority is unclear as current party and coalition programmes in Germany show:

After months and even years of lively discussion on the highest political level of president[4] and chancellor[5] during the last two electoral periods, financial participation at present has been put aside once again and more or less forgotten as a political topic.

Income and property, and along with them the opportunities for life, health, education and professional success, are unequally distributed in every open market economic social order. Inequality is a component of the condition of liberty. Exactly how much inequality in the structure of income and property can be tolerated by a democratic society, or how much it should actually be tolerated as an incentive for development is a topic of much debate. Thus far agreement has been reached  only on the fact that the stability required for the existence of the political, economic and legal order requires a certain minimum of solidarity and distributive justice.

This consensus about a certain minimum of solidarity realised in the market economy by means of social policy (for this and the following, see Scholz & Tomann, 1999) is a constituent part of the German conception of ‘welfare state’. Elements of it are also contained in the European Union (EU) law[6] and can even refer back to universal legal standards[7].

But how can this minimum in concreto be defined and even be realised? In light of the fact that growing inequality in income and property produces growing dysfunctional social (mortality rate, health, wealth, rate of delinquency, standard of education and professional opportunities) and structural economic effects (Kelso & Kelso, 1991; Lowitzsch, 2008)[8], this is no longer only an academic discussion, but should lead to political and law-making consequences.

This conclusion had already been drawn years ago in the German jurisprudential debate on how to overcome the negative effects of ongoing capital and property concentration: ‘The prevention of a dysfunctional concentration of private property possibly not only requires legislation against concentration of economic property, but also an active public promotion of asset formation’ (Papier, 2008).

Whether or not the European principle of solidarity and coherence and the German model of ‘welfare state’ (‘Sozialstaatsprinzip’)[9] give everyone who is willing and able the right to live on the financial result of his or her own working contribution is is still an unresolved question. It is a fact that an increasing number of the working population in Germany is no longer able to live on the financial result of their work. Whether this structural deficit in financial participation can be compensated by additional alimentation from the state budget is doubtful. However, there is no doubt that effective financial participation on a large scale could lead to a way out of this dilemma.

More than half a century ago, the American lawyer and economist Louis Kelso showed a way out of this structural dilemma and developed a successful model to solve the problem of highly dysfunctional property distribution by giving employees the opportunity to participate in the success of their firm not only as wage-earners or profit sharers but also as shareholders (Kelso & Adler, 1958). Supported by a remarkable tax allowance in the US-based on the Employee Stock Ownership Plan (ESOP) model of Louis Kelso a banking system was created. At present (2014) about 14.9 million employees enjoy financial participation in the form of ESOP capital participation within 6,908 plans, the total assets of which amounted to $1.1 trillion in 2014.

In Germany, the legislative results after years of debate led to the Law on Participation in Capital of 2009 (the German abbreviation of which is MKBG), which was obviously not well-constructed in comparison with other European countries and also with the US as it providedmuch too little governmental support through tax allowance. The macroeconomic effects of this and other legislative attempts in Germany are not at all satisfying. In fact, this legislation has produced  nearly no measureable effect. The situation has not essentially changed during the last two-and-a-half decades, i.e. neither since the German reunification nor after the law of 2009. Not more than two to three per cent of all German enterprises offer sharing in capital to their employees. Where they do,it is the same percentage of employees who make use of the financial participation schemes for sharing in capital offered. The following text

  • Gives a survey of the recent political debate in Germany and the European framework (2.), arguments for and against the sharing of capital (3.), the legal compatibility of traditional German labour law and new regulations to be introduced on participation in capital (4.), the development in Germany 1918-2014: From the revolution in 1918 to the law on minimum wages in 2014 (5.),
  • Understands the ongoing functional change of property rights as a condition for a future binding law on enlargement of financial participation by share ownership (6.),
  • Finds German society breaking down into a small society of owners and a large society of non-owners (7.1),
  • Takes into consideration recent fundamental critical analysis by European (Piketty, 2014a) and American (Stiglitz, 2012) authors (7.2),
  • Points out deficits and practice of participation in capital in Germany (7.3),
  • Gives an overview of legal sources concerning financial participation (8.),
  • mentions a number of different models and examples of financial participation through the sharing of capital in practice (9.),
  • examines the Law on Participation in Capital of 2009 and comes to the conclusion that a new law-making attempt is needed in Germany (10.).


  1. 2.       Political and European framework

2.1     Financial participation – alternative or in addition to minimum wage system – political and legal-political implications

The aim seems to be clear: To close what is called ‘The Gap of Justice’[10] with regard to income and property distribution or at least to stop this negative development, which, if nothing changes, will sooner or later threaten the social consensus. Several additional instruments have been discussed in Germany by the political parties both before and during the coalition treaty negotiations in 2013 to come closer to this aim without weakening the competitiveness of the German export industry:

  • Labor market incentives,
  • Minimum wages,
  • Higher taxation of wealth (‘Reichensteuer’).

These additional political instruments are expected to complement the conventional instrument: union agreements aiming at higher wages.

However, regular collective bargaining over the years did not usually result in agreements on an increase in remuneration much higher than the annual inflation rate.

There was always general political consensus with regard to the first point. The third point appeared from time to time in political party programmes[11], but without any concrete results. The second point was controversial at the beginning, was debated intensely and ended with a historicnew law: the Law on Minimum Wages (‘Mindestlohngesetz’) of 2014[12].

This result, laid down in the current coalition treaty of 2013 between Christian Democrats and Social Democrats (CDU Deutschland, CSU Landesleitung & SPD, 2013), is not at all a convincing step forward because all these political and lawmaking activities may be able to alleviate the symptoms but they do not address the root cause: the dramatically growth of asymmetric participation in income and property.

Everyone who cooperates in the value-creating process has a right to adequate profit sharing as well as sharing of capital beyond what is specified by union agreements or legal minimum wages.

This is still not at all the case in Germany. At present, under what might be characterised as the current (2015) ‘trade union labour and income policy’, this is not even part of the political programme for the future social economic development in Germany – at least during the present electoral period from 2013 to 2017.

Final and sustainable effects can be realised neither by improving labour market incentives nor through a system of minimum wages with a new bureaucratic control mechanism. Nor  can they be brought about by increasing the tax rates for the rich (‘Reichensteuer’). Sustainable effects in a long run can only be achieved by issuing a legally-binding framework for profit and capital sharing models, to be offered by enterprises on a large scale.

This does not mean guaranteed payment ‘on top’ of remuneration laid out in union agreements but the opportunity for additional flexible income linked to the profit and success of the enterprise. This effect of both profit and capital sharing makes the total remuneration more flexible and thus can also help to reduce the risk of unemployment in periods of recession and promote greater employment stability (Lowitzsch, 2008; Vanek, 1965).

This aim, ‘to let employees participate adequately and well-balanced in the production of wealth’ (see also Lowitzsch, 2008; Vanek, 1965) is not new nor was it new during the lawmaking process before 2009. Ten years ago, the German Federal Government of a previous so-called ‘grand coalition’ (‘Große Koalition’) of Christian Democrats and Social Democrats during the electoral period from 2005 to 2009 made this political aim part of their governmental programme. The result was the inadequate law of 2009.

Now (2015), the legal-political situation is even worse. During the electoral campaign for the parliamentary elections of 2013, the Christian Democrats’ electoral programme stated: ‘Participation of employees in profit and in capital is a central topic for us.’ (CDU-Bundesgeschäftsstelle, 2013). The Social Democrats’ electoral programme underlined this aim with nearly the same words: ‘Participation of employees in capital is a key to allowing them to participate in the economic success of the enterprise. We want to increase this participation.’ (SPD-Parteivorstand, 2013). In the draft of their pre-election governmental programme (‘Regierungsprogramm’), the Social Democrats no longer linked ‘adequate participation of employees in the success of the enterprise’ to the sharing of capital but to ‘strengthening the collective bargaining system’ obviously to avoid using the term ‘sharing of capital’ as a legalpolitical goal further on.

At the end of the same election year,(2013),in their joint coalition programme for the current legislative period (2013 – 2017), comprising about 185 pages, there is no mention at all of the financial participation of employees through sharing capital. In short: Both governing political parties in Germany denied their pre-election announcements and promises in this central point of future social economic policy in Germany. They simply ‘forgot’ their own proposal which they had duly elaborated in a joint party commission in 2008 (CDU, CSU, & SPD, 2008). This happened very likely due to traditional and still prevailing objections of the German trade unions against effective forms of financial participation.

In their statement concerning the governmental draft of the Law on Tax Allowance to support financial participation of employees which was issued in 2009, the German trade unions stated: ‘Sharing in capital is for employees no alternative to collective bargaining policy. The decreasing portion of remuneration in relation to employees’ overall gross income demands an active collective bargaining policy right now. Only a combination of active collective bargaining policy, social tax policy and additional profit and capital sharing can lead to sustainable improvement of the distributive situation in Germany.’ (Hexel, 2008; Waas, 2014).

This traditional sceptical or antagonistic attitude of trade unions is mostly to be found in Germany and less in the rest of Europe – instead of unreserved and powerful support of financial participation combined with structural reform of labour and

company law – it is probably thus far one of the decisive obstacles for more substantial participation in share ownership in Germany.

In addition to the other arguments mentioned above and contrary to to the present coalition programme and the trade union statement cited above, financial participation means much more in Germany: It is the half of the German model of immaterial co-determination or co-decision (the famous ‘Mitbestimmung’) that has been missing to date.

With its integrative and conflict-managing capacity, this legal institution within the framework of collective German labour law contributed remarkably to the economic success of Germany after the catastrophe of the Nazi regime and Second

World War (Gamillscheg, 1997).[13] On the other hand, it could not really help to avert the increasingly asymmetrical development of income and property structure in Germany, especially during the last two-and-a-half decades since reunification. Furthermore, a growing number of labour conflicts and strikes make it obvious that this traditional German model has lost some of its integrative capacity.

Instead, there is now a growing burden on employees as taxpayers who are bearing the major part of the steadily increasing costs for social insurance, whereas the employer’s contribution to these insurance funds has been frozen by law at its current level and must not rise any further. Wages increasing not at all or at a rate only a little higher than the annual inflation rate cannot essentially change this situation. Otherwise, Germany’s competitiveness and position as an industrial country with relatively high wages would be weakened.

2.2     Employee participation and European legal and political activities on the way to a new European social order

Financial participation and employee co-ownership correspond to the basic social principles of the EU (see also section 1). One of the main goals therefore should be the incorporation of financial participation into the legal framework of a developing new European social order.

On the level of the European Commission and the European Parliament, the growing political, economic and social relevance of financial participation both in profit sharing and in sharing of capital has been noted over the course of more than 35 years and with growing intensity during the last two decades. A number of initiatives, proposals and decisions have recently taken place.

From a German point of view, one might hopeto see a stimulus to German legal policy and, as a consequence, alsoto the future lawmaking process to promote financial participation in Germany.

The development within the EU has been analysed, summarised and extended by the PEPPER[14] reports (Commission of the European Communities, 1996; Lowitzsch, Hashi & Woddward, 2009; Lowitzsch, 2006; Uvalic, 1991). Basic activities of the organs of the EU elaborated and recommended further comparative European research and supporting measures to promote financial participation:

  • One of the starting points has been the Council recommendation of 1992 ‘On the promotion of participation by employed persons in profits and enterprise results including equity participation in member states’ (The Council of the European Communities, 1992).
  • The European Commission issued a communication in 2002: ‘On a framework for the promotion of financial participation’ (European Economic and Social Committee, 2003).
  • The Economic and Social Committee of the EU presented an opinion on further supporting activities in 2003 (European Economic and Social Committee, 2003).
  • The European Parliament issued a resolution in 2003 on conditions for promoting financial participation of employees (European Parliament, 2003; Menrad, 2005).
  • The Economic and Social Committee of the EU issued a new initiative on financial participation in the EU member states in 2010  (European Economic and Social Committee, 2010).
  • A new attempt was made in 2014 by the EU conference in Brussels ‘Taking action: promotion of employee share ownership’. This EU conference published five key points in 2014:
  • The need to establish a legal framework,
  • Exchange of best practice schemes and experiences,
  • Tax incentives and transparency of tax policy and fiscal treatment,
  • Joint labour market and economic policy,
  • Incorporation of employee share ownership into corporate government and investment strategies.

These and other activities show that financial participation now gains more attention in European social, labour and economic policy (Lowitzsch & Hashi, 2014). However, on the other hand, in the nearly two-and-a-half decades since the beginning of the PEPPER reports, a framework law or a legal source with binding validity could not be developed – neither on the European nor on the level of the majority of the member states – except France. The criticism of the second PEPPER

Report of 1996 is still valid: ‘Cash-based profit sharing still remains without incentives or legislation’ (Commission of the European Communities, 1996). The 2009 PEPPER report  reiterates this: ‘Most urgent [is] the lack of a European legal framework for financial participation’ (Lowitzsch, Hashi & Woodward, 2009, p. 4).

During the last two decades, the number of enterprises offering financial participation schemes for all employees grew in the EU-27 by about five per cent from 13 per cent to 18 per cent regarding shareholding schemes and about six per cent from 29 per cent to 35 per cent regarding profit-sharing schemes. This can be deemed to be remarkable progress (Lowitzsch & Roggemann, 2014).

Germany unfortunately does not participate adequately in this development. Leading European countries in financial participation are France and the UK. In both countries, immaterial participation (codetermination) is much less developed than in Germany. Financial participation, therefore, in these countries could be interpreted partly as a compensation of this deficit. On the other hand, it is obvious that the German model of immaterial participation (‘Mitbestimmung’) only in decisionmaking during the last century did not give employees a real opportunity to participate in their firms’ increasing substantial values and profits.

This fact should be taken into consideration by the German trade unions as an argument to no longer oppose but to support immaterial as well as material participation: both are of equal relevance.

The total amount of enterprise capital held by employees via participation schemes does not yet reach an economically relevant level. In Germany, its amount is in total not more than about €11 billion (Beyer, 2014).

This – from a German point of view – rather poor result is confirmed by findings on the European level and by recent research projects (Boeri, Lucifora & Murphy, 2013; O’Kelly, 2013).

As the situation on the European level is not yet ripe for the drafting of a binding legal framework for financial participation in the form of a directive, other steps have been taken to intensify research and exchange of information and to prove the positive impact of financial participation on employment and productivity:

  • A virtual centre for employee financial participation,
  • A comparative tax rate calculator and
  • An optional ‘Common European regime on employee financial participation’ has been developed (Lowitzsch & Iraji, 2014).


3.Arguments in favour of and against financial participation through employee share ownership

3.1      Arguments in favour of financial participation

Advantages of effective financial participation through the sharing of capital are proved by facts and examples of best practice of various enterprises in Europe and USA (Boeri et al., 2013; O’Kelly, 2013). The key arguments can be summarised as follows (Bellmann & Leber, 2007; Blasi, Kruse, Bernstein & Aaron, 2000; Leuner, 2009; Roggemann, 2010; Rosen, Case & Staubus, 2005; Schanz, 2000; Uvalić, 2008; Wagner, 2003, 2008, p. 138):

  1. Legal and ethical arguments concerning the Law of Property

(principle of social justice, justification of private property by labour, ‘labour theory’ (Gierke, 1889; Hecker, 1990; Holzhey, 1983; Roggemann, 2010; von Gierke, 1959),

  1. Religious arguments (social doctrine of the Christian churches) (Kamp, 2010; Menrad, 2005),
  2. Humanitarian and constitutional arguments (basic rights of equal opportunities, immaterial and material participation, articles 1 II, 2 I, 3 I, 12 I, 14 I 2 and II, 20 I with the principle of the welfare state as outlined in the German constitution; see also section 1),
  3. Arguments under civil law (entitlement for co-ownership as the coproducer in the production process, § 950 BGB [German civil law code]; for this relationship between labour and property rights as a forgotten topic of German Civil Law, see Roggemann, 2010),
  4. Arguments concerning industrial law (entitlement for [economic] codetermination (Däubler, 1991; a different view by Gamillscheg, 1997 and ‘fair wages’),
  5. Socio-ethical and socio-juridical arguments (basic right for a humane existence and ‘distributional justice’[15]),
  6. Economic arguments:
    1. Market stabilisation via more flexible reaction to market conditions and business cycles,
    2. increasing purchasing power through additional money, thereby promoting economic growth,
    3. Complementing the standard wage system with a certain part of flexible wages (‘Entgeltflexibilisierung’) (European Commission, 2007; Lowitzsch, 2010),
    4. Maintaining current employment levels and creating new jobs by flexibilisation of a limited percentage of income (Sinn, 1998),
    5. Compensation of previous financial contributions of the employees Compensation of employees’ financial contributions in case of crisis of the enterprise (temporary pay freeze or renunciation of a percentage of wages or of holiday pay) by share of capital,
    6.     Increasing productivity by three to five per cent or even more

(Rosen et al., 2005)16,

  1. Increasing income through additional profit as co-owner and higher standard of living,
  2. Increasing motivation, identification (corporate identity),
  3.     Advantages for the enterprise in competition for skilled workers,
  4.     Strengthening of the capital basis and credibility of the enterprise and therefore better access to loans,
  5. More independence of the enterprise from profit interests of external creditors (banks, international investment funds).
  6. Socio-political arguments (reduction of social conflicts), and
  7. Stabilisation of the ideological and legal basis of private property after transformation by (re-)privatisation (Roggemann, 1996).

Recent research findings confirm this essential point. New studies found positive effects of two to three per cent higher productivity in France and other countries; in the Italian metal engineering industry even a rate of five to six per cent and more; overall in 20 countries in general either positive or non-negative effects (Boeri, Lucifora & Murphy, 2013). In the US the best workplaces have better financial performance and are far more likely to pay workers through incentive pay and financial participation than other firms (Boeri et al., 2013). Pendleton (2014) points out that the participation rate had a positive effect on productivity outcomes, i.e. a long-run productivity effect of 2.5 per cent in the UK (Oxera, 2007) and 2.5 per cent in the US (Kurse, Blasi & Freeman, 2011; Blasi, Conte & Kruse, 1996; Blasi & Kruse 1996).

10. Development of a ‘new social market economy’ in a ‘new European social order’ (‘New Social Europe’) (CDU-Bundesvorstand, 2006; Lowitzsch, 2008).

The justification for the Law on Participation in Capital (MKBG) takes up several of these arguments: ‘All employees should get a fair share of the company’s success. […] It is also an act of economic sensibility and social justice to grant employees a fair and balanced share in the revenue of the national economy’ (Der Stern, 2005).

3.2     Positive effects of employee co-ownership in cases of crisis and conflict

Employee participation pays off if companies depend on the support of their employees (austerity measures, extension of working hours, employee loans) to overcome economic difficulties or to ward off pending insolvencies, compensating them by capital participation (Apitzsch, 2009; Beyer, 2010; Leuner, 2009; Menrad, 2005).

This also applies in case of pending hostile takeovers (for example Hochtief; see Der Tagesspiegel, 2010a, 2010b). Employee capital participation with coordinated exertion of voting rights can counteract takeovers by international investment companies or competing companies, which contradict the interests of the company and its employees, at least allowing them to play an active role in setting up their conditions: ‘If we had extended employee participation as early as several years ago, we would have completely different constellations in some cases.’ (impulse, 2008). In fact, the interests of an enterprise’s owners  employees often are closer to each other than they are to external creditors like banks, investment banks, hedge funds and other transnational investment companies with no interest in sustainable development of the enterprise in the long run other than the development of the shareholder value.

‘About 71,000 owners of family-owned companies are looking for a successor each year’ (Wagner, 2008, p. 138). In such cases, solutions can be developed with the help of participation models, which better meet the interests of former owners and their employees than a takeover by investors not familiar with the company (Lowitzsch, 2007).


3.3      Arguments against financial participation


3.3.1 Counter-argument ‘double risk’

The main counter-argument is the so-called ‘double risk’ of losing shares and jobs in case of the company’s insolvency.[16]

Other counter-arguments concerning problems such as

  • Evaluation of the capital engagement of the share owner,
  • His or her (frozen) right of participation in decisionmaking by company law,
  • Holding period,
  • Transferability in case of death or end of employment contract or
  • Sale because of other personal reasons of the employee,
  • The right of the company to acquire its own shares with the intention to advance funds or sell the shares to its employees within the framework of a participation scheme have already been intensively discussed (Lowitzsch & Roggemann, 2014; Lowitzsch, 2008) and not treated here.

The double risk argument does apply, but it can mostly, or sometimes nearly completely, be overcome by an appropriate arrangement of the participation and by means of a suitable insurance model, combined with financing the starting capital for share ownership not by the employees themselves but by external loans. In particular, the ESOP model permits participation in capital without investing the employee’s own money.

However, there is no advantage without any risk. Private property combines the right and the risk of economic usage and power of disposition. Thus, the economic and legal function of property guarantees the freedom of the owner only in combination with bearing risks (Kirchhof, 2009). Property without risks would end in a faulty construction, as it had been attempted - unsuccessfully - by the legal and economic orders created by socialist states under different circumstances (Kirchhof, 2010; Roggemann, 1996). However, this does not at all justify setting up obstacles for the majorityof employees in Germany, i.e. 97 per cent, to participating in the economic property with its high profitability and to marginalise them, as had been the case so far.

The legislatures of some German state governments (‘Bundesländer’), such as in Berlin, Thuringia, Rhineland-Palatinate, Hesse have used their state banks (‘Landesbanken’) to set up risk-relief programmes for employee capital participation (Althaus, 2007).

A new programme is offered by the Guarantee Bank of Thuringia (‘Thüringer Bürgschaftsbank – BBT’) to minimise the insolvency risk for capital shared by employees of small and medium enterprises. In case of insolvency, 80 per cent of the employee-owned capital up to a maximum amount of €250,000 is granted by the bank for a one-time fee of 0.75 per cent of the guaranteed capital  plus an annual fee of 1.5 per cent.

In comparison with interest rates of eight per cent or more which are normally paid for employee loans or employee capital in special accounts or other saving schemes, this seems to be relatively attractive.[17]

A similar insolvency insurance programme is offered by the Guarantee Bank of Hesse (‘Hessische Bürgschaftsbank’) (Menrad, 2005). This programme allows loans for financing employee participation in capital investment to be insured up to 80 per cent of the invested amount and to a maximum of €750,000.

The state government of Rhineland-Palatinate created a programme called ‘Financial participation of employees RLPlus’ (Beck, 2010) and the Investment and Structure Bank of Rhineland-Palatinate (‘Investitions- und Strukturbank Rheinland-Pfalz – ISB’) established a fund, financed by the state budget and additional contributions of employees. Their contributions are guaranteed in the beginning up to 100 per cent and after two years up to 90 per cent by the bank. The created capital is at the disposition of small and mid-sized enterprises in the state but not as external credit but rather as additional enterprise capital. Throughout the ten-year working period of the fund, the employees receive annual interest and bonus payments of nine to 14 per cent of their invested contribution, depending on the economic success of the enterprise. Additionally, and independently of this funds model, the state bank also runs an insolvency guarantee programme for all other capital held by employees as share owners. The guarantee covers 90 per cent of the employee’s capital up to €200,000.

Even more convincing is the participation scheme of the firm Emsa Werke, which offers its employees a share-based profit sharing model (‘Genußschein Modell’), the capital of which is guaranteed by an insurance company to 100 per cent in case of insolvency. The insurance premium is paid by the employer.

These and other examples show that the ‘double risk’ argument which is often emphasised especially by opponents of participation in capital can be overcome by suitable legal and financial models and is not at all a definite obstacle to more financial participation. Useful insolvency insurance mechanisms for employee shares and other legal forms of direct sharing of capital with a minimum holding period can be and should be developed to a large extent. Further support by insolvency legislation is needed to promote the development of substantial financial participation.

The question remains: Why do not all of the 16 German states use their banking systems to develop and offer such risk relief programmes in order to promote employee capital participation on a large scale? Furthermore, why does the biggest German investment and development bank (‘Kreditanstalt für Wiederaufbau – KfW’) not develop corresponding guarantee programmes – in line with EU competition law and in cooperation with the European Development Bank (EIB)?

The Law on Participation in Capital 2009 (MKBG) and the German Insolvency Code do not lay down any rules for a solution of this core problem but have remained silent about any relief of the insolvency risk of participating employees (Wagner, 2008). This shortcoming needs to be rectified by a future reform of the law of 2009. The above and other examples show that the insolvency risk is not an insurmountable obstacle but can, in fact, be managed.

3.3.2 Structural counter-argument: Lack of institutionalised representation of different interests of labour and capital – traditional thinking of German trade unions

The first comprehensive empirical studies in Germany on financial participation were published in 1878 (Böhmert, 1878) and again in 1901. Following the publication, there was a debate on the thesis of its author, who held that the main purpose of financial participation is ‘to maintain or restore the social peace between employer and employee’ (Böhmert, 1878). Earlier, Karl Marx had severely criticised trade unions because of their aim to improve the financial and social situation of employees within the capitalist system by reforming it instead of destroying and replacing it by eliminating private industrial property and ‘definitely abandoning the wage system’ (Marx, 1898 cited after Ahrens, 1982).

The conflict of interest between capital and labour and employer and employee in traditional socialist, social democrat and trade union thinking and theory was, and partly still is, viewed as a structural principle inherent to every capitalist society. Hence class consciousness and class conflict (‘Klassenbewußtsein und Klassenkampf’) and the permanent struggle for strengthening trade unionist competence in collective bargaining for better wages and working conditions dominated the socialist, social democratic and trade unionist attitude towards financial and especially participation in capital ownership for decades (Brentano, 1898 cited after Steinhaus, 2011).

From this point of view, these new tendencies were criticised as ‘corruptive’ and a wrong attempt ‘to create a compensation for the trade unionist conception of co-determination and transfer of basic industries into collective property’ (Deutscher Gewerkschaftsbund (DBG), 1954 cited after Gundelach, 1982). This traditional thinking of the German trade unions being rather in favour of ‘redistributive conceptions’ and ‘expansive wage policy’ than of new forms of more flexible financial

participation ‘has essentially contributed to the fact that the distribution of wealth in the Federal Republic is still not regulated in favour of the employees’ (Gundelach, 1982; see also Otto, 2009).[18]

More than half a century later, things seem to have changed. Financial participation and sharing of capital are now part of the trade unionist social economic development programme (Hexel, 2007; Lowitzsch & Hanisch 2014, p. 47), although they still have no priority. Furthermore, schemes for capital sharing without participation of trade unions and the organs of immaterial co-determination are not taken into consideration at all. This is consistent insofar as immaterial co-determination and sharing in capital are two sides of the same coin: participation. However, it is narrow-sighted insofar as participation in political and in entrepreneurial decisionmaking and also in entrepreneurial capital and risk is part of the role of citizens as co-owners in an economic market democracy based on private property. Therefore, it seems doubtful whether participation of trade unions should be made a conditio sine qua non in all cases and under all circumstances of possible financial participation in capital.

Within the octagon of interests, power and acteurs:

of  (1) employers and entrepreneurs and their unions ↔ (2) shareholders ↔ (3) banks and investors ↔ (4) managers ↔ (5) employees sharing ownership ↔ (6) employees without participation in ownership ↔ (7) trade unions ↔ (8) social and economic policymakers’,the interests and approaches of these stakeholders and their representatives, agents and lobbyists are often not identical (Steinhaus, 2011). More often, it may be the case that within that complex constellation of balance of interests, influence and power the interests of entrepreneurs/employers/owners on the one side and of employees/workers on the other side are closer to each other than those of the other participants of that multi-dimensional fabric of interests.

Nevertheless, trade unions understand or should understand both now: promotion of participation in decision-making and of material participation in capital as a basic part of their programme (Hexel, 2007).[19]

Objections of that kind, that trade unions might loose influence and power over workers and enterprises with ongoing financial participation through the sharing of capital have not been sustained by empirical studies (Harbaugh, 1993, 2005; Mehrens, Stracke & Wilke, 2011; Ognedal, 1992; Pendleton, Robinson & Wilson, 1995). On the contrary: Studies found that a communicative or even cooperative structure of an enterprise with functioning immaterial participation (‘Mitbestimmung’) through the legal organs of co-determination, i.e. the work council, organised with the help of the trade unions, is a precondition for better functioning of participation through the sharing of capital (Menrad, 2005). The traditional role of trade unions themselves also has to be part of this transformation process towards more economically relevant co-ownership.

Employees as co-owners and co-entrepreneurs (‘Mitunternehmer’) lose their former traditional position as opponents of the employer and probably thereby their independence (‘Gegnerunabhängigkeit’) (Müller, 2000) in relation to the employer, to ‘their’ enterprise and also to the trade unions as their former agent. Their position within the system of collective bargaining, including labour disputes and strikes, will also change as they are influenced by a new constellation of interests where they are no longer only owners of labour but also owners of capital. This is true. However, on the other hand, this loss of power will be overcompensated because the trade unions will gain new and relevant influence as they have to play a new additional role and need new expertise as financial advisers and even co-administrators of employees, re-investing a part of their income with additional contributions of the employer in their own enterprise. The fight for better working conditions and wages is not at all obsolete under these new conditions but will remain a genuine function of the trade unions.


4.       Legal compatibility of traditional German labour law and new regulations on participation in capital

Labour law and labour constitution in Germany offer a favourable opportunity for the legal introduction of mandatory financial participation also in the form of sharing of capital. In contrast to most other European countries, Germany had already established participation as a functioning system of immaterial co-determination nearly a century ago. Furthermore, the collective bargaining competence (‘Tarifautonomie’) of trade unions is constitutionally guaranteed and concretised by law.[20]

The legal development started after the revolution of 1918 with the first Law on Work Councils of 1920 (RGBl. 1920, 147). After the Second World War, the legal reconstruction and consolidation of co-determination went on as follows:

  • Law on Co-determination of Employees in Coal, Iron and Steel Industries (Montan-MitbestimmungsG) 1950 (BGBl. I, 347),
  • Law on the Constitution of Enterprise (BetriebsverfassungsG) 1952 (BGBl. I, 681),
  • New Law on the Constitution of Enterprise (BetriebsverfassungsG) 1972 (BGBl. I, 13),
  • Law on Co-Determination of Employees in Supervisory Boards and Executive Boards of Enterprises in the Mining, Iron and Steel Producing Industry (MitbestimmungsG) 1976 (BGBL I, 1153), • Law on Committees of Speakers of Leading Employees

(SprecherausschußG) 1988 (BGBl. I, 2312).

Quality and intensity of the constant conflict of interests and struggle for power between capital and labour and the trade unions as traditional agents of labour in Germany have changed and the conflict management capacity has been improved by this legal framework.

The big and still unanswered question is: To what extent are the legal structure and existing organs, functions and function holders of codetermination and the social partners’ right of collective bargaining compatible or can be successfully combined with new organs and their competencies representing the specific interests of employees as owners sharing capital of their enterprise?

The German Law on Participation in Capital of 2009 does not provide an answer; nor do any of the other aforementioned basic labour laws on immaterial participation by co-determination (‘Mitbestimmung’) in amended versions of the previous laws issued after the law of 2009.

This situation is, alongside the law of 2009, another vast field where legal-political and lawmaking attempts are needed in Germany. In view of the current legislative and political priorities (of 2015) (see section 2.2), scepticism seems to be the appropriate attitude at present.

In this situation, a successful way to move ahead might be:

  1. To produce a draft of building blocks for a legal framework, based on existing European recommendations and implementable by German enterprises and employers who want to offer participation schemes (Lowitzsch, 2008),
  2. To produce a draft of a new law on financial participation including the necessary modification or completion of the other aforementioned collective labour laws and also company laws related to financial participation.

With regard to labour law, the following problems and options are under discussion:

  • The existing, legally required work councils could act as organs with expanded competencies to also represent the special interests of employees as shared owners. This solution is already practised in enterprises (see, for example, Menrad, 2005). It seems to be preferred also by the trade unions (Hexel, 2007). Nevertheless, it could lead to conflicts of interestbecause the same organ would decide on obviously different interests of owners and non-owners among employees. On the other hand, it could be argued that German company and labour law already knows and accepts this sort of conflict of interests because leading employees and managers, who often but not always own shares or other capital of their enterprise, have a special organ of representation of their interests which was established in the law of 1988 (BGBl. I, 2312).
  • In enterprises that practice sharing of capital, a special additional organ or at least a procedure to represent the special interests of the owner-employees must be installed. Enterprises that practice participation in Germany have created a number of different models and procedures of interest representation in enterprises with capital sharing schemes. The coordination of both organs can be defined in a collective agreement (‘Betriebsvereinbarung’). However, any agreement is limited by the legally-binding rights of information and participation in decision-making of the work councils (§ 87 I no. 8 and 10 BetrVG; see Waas, 2014).
  • In case of employees as normal shareholders, company law provides them with the legal rights to information and participation in decision- making. These rights can be and in practice are often modified without problems by different participation schemes. Shareholders and other co-owners of capital can renounce or transfer these rights to management, to their representative in the work council or by other legal means.
  • The work council has, according to § 87 I no. 8 BetrVG, a right to detailed information and co-determination with regard to the concrete design, financial dimension, who receives the offered capital transfer by the employer and organisation of financial participation schemes. However, the work council has no right to agree or disagree with the basic decision of
  • the employer as to whether or not he or she wants to offer and adopt such schemes in the enterprise (Waas, 2014). This basic decision is excluded from co-determination.

The employer is also free to define the criteria for the potential receiver of additional payment for capital investment to be invested by the employee in the enterprise. The basic principle of equal treatment in German labour law derived from Art. 3 GG and the general obligation of fair treatment according § 75 I BetrVG (Hanau & Adomeit, 2000; Junker, 2009; Mengel, 2008; Preis, 2009; Waas, 2014) exclude arbitrary and obviously unjustified acts on the part of the employer and can be rejected by the work council.

The German Law on Participation in Capital 2009 (§ 3 Nr. 39 EStG in its version of MKBG 2010) limits the employer’s free discretion insofar as further differentiation (age, personal skill, duration of cooperation) now seems to be excluded from tax allowance. It is doubtful whether this is an adequate and useful legal reduction because it curtails the employers’ competence for reasonable differentiation. This is one of the legislative decisions that should be changed by a future reform of the law of 2009 (Roggemann, 2010).

Nevertheless, the above arguments show that there is a broad spectrum of interpretation and discretional options for the functional incorporation of necessary new rules on financial participation into the existing collective German labour law even without and before its renewal by legislation. This is one of the reasons why hundreds or meanwhile even thousands of decisions of courts on all levels in Germany deal with problems of financial participation in practice and find adequate solutions.

5.       Development in Germany 1918-2014: From revolution in 1918 to law on minimum wages in 2014

Participation in decision-making without financial participation


The revolutionary demand for collectivising productive property was rejected in Germany in 1918. The social democratic majority within the revolutionary movement in Germany of 1918/1919 was not in favour of leading Germany into a political model similar to the Soviet-Russian model of soldiers, workers and peasants councils after the revolution of 1917. Such revolutionary initiatives for collectivisation of all relevant industrial capacity did not succeed. The German revolution of 1918 therefore has been characterised as an ‘incomplete revolution’ because the traditional private property system was left more or less untouched.[21]

Even a legal initiative on an alternative conception of financial participation of workers instead of total collectivisation failed in 1919 (Otto, 2009). German Social Democrats and trade unions advocated for power not by material financial participation but by participation in decision-making. Hence a law on work councils was passed and thus the German model of co-determination was founded in 1920 (RGBI 1920, 147; Gamillscheg, 1997). The legal concept of co-determination developed into a successful factor of the communicative, conflictresolving abilities of labour constitution in Germany (Gamillscheg, 1997).

On the other hand, it is a fact that approximately one century of codetermination has not brought about any major changes in the structural deficit of immaterial participation, and this deficit does not allow employees to participate adequately in the companies’ jointly-generated value increases and profits.

The total military, political, economic, social and even moral breakdown of Germany in 1945 can be characterised again as a revolutionary situation. The revolutionary demand for collectivising productive property arose again  this time not only in the Soviet-Russian Zone but also in the Western Zone of occupied and divided Germany. Once more, this revolutionary initiative for nationalisation of all relevant industrial capacity did not succeed; but this time only in the Western part of Germany occupied by Allied forces, whereas in the Eastern Zone after 1945 and in the later in German Democratic Republic (GDR) it did, in fact, succeed.

In contrast to the GDR, the repeated demand for collectivising the industry of the Federal Republic of Germany (Zonenausschuss der CDU, 1947) was quickly abandoned in favour of concepts for the integration of dependent employees into the social market economy by other means. This aim was pursued with the help of subsidising saving programmes and ‘creating equity in the hands of the employees’. The ‘people’s share’ was introduced in the context of privatisation of state-owned companies to help make their purchasers ‘economic citizens of a real economic democracy’ (Frankfurter Allgemeine Zeitung, 2009). The subsidy programmes[22] did their part to raise the average income approximately four-fold (Erhard, 1964).

The subsequent development, especially after the unification of the two German states in 1990, started to challenge the basis of the current financial balance of the welfare state (Bontrup, 2009; Rosinus, 2009) because the traditional trade union wage policy based on collective bargaining, together with this redistributive German welfare state concept, obviously could not and cannot prevent the dramatically growing inequality of income and property as described below (see section 6.2). Moreover, this conception will hardly be affordable in future without substantial reform – and without structural support by means of enlarging financial participation.

6.       Functional change of property rights and participation by share ownership

Property rights and ownership are fundamental legal institutions in every developed economy and legal community (Roggemann & Lowitzsch, 2008; Roggemann, 1997a, 1999, 2010). Ownership has legal, economic, social and political dimensions (Roggemann, 2010).

Four basic functions of the multi-functional institution of property/ownership are to be distinguished:

(1)    The (primary) property rights allotment function (‘Zuordnungsfunktion’) from which follows a quadrilateral legal competence of the owner:

•    the positive authority to possess,

  • to use and exploit,
  • to dispose and transfer,
  • the negative authority to exclude all others of lesser legal position from exercising these legal authorities with regard to this property object.

This is the classical liberal definition of ownership in civil law which is embodied in § 903 of the German Civil Code, in force since 1900: ‘The owner of a thing may, as long as the law and the rights of third parties do not oppose it, do with the thing whatever he desires and exclude others from any influence.’ According to this traditional liberal conception, property/ownership had no inherent but only external legal limitations.

(2) The individual function (‘Individualfunktion’) from which follows the constitutional guarantee of personal rights and freedom of the owner, enabled by his legal position as owner.

This function of ownership is guaranteed by article 14 of the German Constitution (Basic Law) of 1949 and had already been guaranteed so by article 153 of the post-revolutionary Weimar Constitution of 1919.

This constitutional protection of ownership is on the one hand much broader than under civil law because it also entails obligations and all legitimate positions of economic interest, in other words, the legal and economic status quo of wealth of an owner.

The Federal Constitutional Court of Germany – similar to the U.S. Supreme Court – derived from the nature of ownership as a fundamental and human right that ownership serves as a foundation for the personal protection of existence and the unfolding of individual freedom: ‘The guarantee of ownership shall preserve – in the fields of property rights – a free sphere for the bearer of fundamental rights, and thus it shall enable the individual the unfolding and the self-responsible leading of his life.’[23]

On the other hand, the social impact of ownership, its inherent limitations and legal restrictions are defined more clearly by the constitution and have been elaborated during the last four decades by the Federal Constitutional Court of Germany (see for example BVerfG NJW 2000, 798).

(3) The social and integrational function of property (‘Sozial- und Integrationsfunktion’) is laid down in the constitutional principle of welfare state (art. 20 I of the German Constitution – GG) and in the social and public interest or public wealth clauses (art. 14 II 1, 2 of the German Constitution – GG).

The Federal Constitutional Court developed – different from traditional civil law jurisdiction – a new theory of differentiating balance of the conflicts of interests arising from the different function of private property in the context of a welfare state: ‘The legislature, while defining contents and limits of property, does not enjoy unlimited freedom of discretion

(see BVerfGE 101, 239. 259). When performing the constitutional mandate of art. 14 I 2 GG, the constitutionally guaranteed position of the owner as well as the obligation of a socially just property order of art. 14 II GG has to be taken into consideration and, therefore, a just balance and adequate proportion of the legitimate interests of the parties must be found. A onesided preference or discrimination is not in line with the constitutional conception of socially-limited private property.’[24]

The application of this new conception of constitutionally guaranteed and at the same time limited private property produced a number of decisions finding compromises between individual and social interests (for an overview, see Wendt, 2009).

This approach also opens the door for further decisive legislative enlargement of financial participation. The Constitutional Court found the introduction of mandatory co-determination through elected representatives of workers and employees in the organs of companies in line with the new constitutional balance of the social and the individual function of private property owners and shareholders of an enterprise.[25] This argument would also be valid for future legislative support of material participation by introducing a mandatory procedure for offering participation schemes to employees.

The Federal Constitutional Court in its decision on co-determination also developed from this functional context of private property in the welfare state a ranking system concerning the increasing or decreasing intensity of personal relationship between owner and property. Decreasing individual and increasing social function legitimates more intensive interference of the legislation by defining limitations to private property and its application. Economic property of the owner of an enterprise or of a shareholder is at the disposition of the lawmaker for further-reaching restriction than, for example, a family-owned house. This is an additional legal argument in favour of the constitutionality of a future binding law on financial participation in capital (Roggemann, 2010; in detail, see Thormann, 1996).

Neither art. 14 I GG (guarantee of private property) nor art. 9 I GG (guarantee of freedom of profession) are decisive constitutional obstacles for such a new legislation (see also Waas, 2014).

(4) The economic function of property (‘Ökonomische Funktion’) arises from the fact that property and ownership constitute the only fundamental right which at the same time appears as both a legal and an economic category. Property law not only provides the legal basis of a market economy and competition, it also defines other economic categories: ‘Property does not exist outside the economy, but rather it gives relevance to all the terms which are meaningless in non-ownership economies. This applies especially to interest, money and credit, but also to value, price, profit and market.’ (Heinsohn & Steiger, 1994, 1996).

This is the basis and legitimation for the owner of an enterprise as well as the share owner, the employee as co-owner, but also for the worker and employee as non-owner, not only to receive – according to his or her contribution to the joint value-creating process – an adequate part of the yield but also to assume the liability and the economic risk as the owner of capital or as the owner of labour capacity (‘Arbeitskraft’), both as productive factors.

  1. 7.              Distribution of property and wealth and financial participation in Germany today

7.1    The society of owners and the society of non-owners

In Germany, the distribution of wealth as well as the financial participation of employees and sharing of capital are still a long way from an overall satisfying development.

Several recent national (see for this statement and the following facts and conclusions, Bach, Corneo & Steiner, 2009, 2011; Bach, 2013; Biewen & Juhasz, 2012; Bundesministerium für Arbeit und Soziales, 2013; Grabka & Westermeier, 2014; Institut für AngewandteWirtschaftsforschung e.V. & Universität Tübingen, 2011) and international (OECD, 2014) research projects and reports on poverty and wealth and the structure of income and property arrive at similar results:

Since the reunification of the two German States, i.e. in the last twoand-a-half decades, the net income of workers and employees has stagnated or even dropped. The net income of owners, stakeholders, shareholders and other participants in co-ownership of enterprises and productive capital and, respectively, also their proportional participation in wealth and property, especially in productive property, grew rapidly.

This development did not take place continuously. The strongest growth of income and property inequality could be seen from 1992 until 2005. Since then, this trend could nearly be stopped but by no means corrected.

In its annual report 2009/2010 (Sachverständigenrat, 2008), the Council of Experts of the Federal Government underlined that the gap between higher and the lower incomes in Germany reached its peak in 2005 and that the Gini coefficient was higher than the average across all OECD countries. The experts held that this inequality effect would be relatively equalised by the re-distributing effect of German tax legislation and social transfer systems (Sachverständigenrat, 2009). This is indeed the case, but on the other hand illuminates the basic structural deficit of original participation in value creating. In any case, the result is alarming: The inequality of distribution of wealth and property in Germany according to the Gini coefficient is currently the highest in the Euro-zone of the EU.[26]

Therefore, the general statement made earlier still stands: In Germany, in the last two-and-a-half decades since the political turnaround in Eastern Europe and the reunification of the two German states, the inequality of the development of incomes (Der Spiegel, 2007a, 2007b), which has been criticised as a ‘gap of fairness’, combined with an extraordinary concentration of wealth and property, has significantly increased and continues to do so (Frick, Grabka & Hauser, 2010; Grabka & Frick, 2007; Rosinus, 2009). Between 1991 and 2006, the income from paid labour dropped from 70 per cent to 59 per cent, the wage rate decreased from 73 per cent in 1993 to 65 per cent in 2007, while income from equity and entrepreneurial activities decreased nine-fold just in the period between 2003 and 2007 (MKGB, dated 07/03/2009, BGBl I 2009, 451; Deutscher Bundestag, 2008; Statistisches Bundesamt, 2009). Thus, the overall net income of employees has dropped in the last two and a half decades (Bontrup, 2009).

The disproportions between the structure of incomes and of property are closely related (Rosinus, 2009) but not identical. Concentration of wealth, which can also be defined as concentration of property, is twice as high or even higher than the

concentration of income (Geissler, 2014; Schlomann, 1993). For several reasons, the discrepancy within the structure of property is significantly larger than within the structure of income.

The first reason is the fact that the inequality of primary market income is much larger than that of net income (‘Nettoeinkommen’) per household after tax deduction and addition of social transfers. However, as the largest portion of these social benefits – and therefore of the difference of 0.5 to 0.29 according to the Gini coefficient – are not substantial benefits but are partially financed by earlier contributions made by the later recipients. This is, in fact, ‘no redistribution between individuals or generations over time’ (Bach, Grabka & Tomasch, 2015). This transfer system of the welfare state therefore cannot change growing inequality basically, but only mitigate it temporarily.

The second reason which causes the inequality of the property structure to grow faster is the property-producing quality of productive property and the already unequally-distributed opportunities to obtain and to participate in productive property. As early as in the 60s of the last century, about 74 per cent of the domestic productive assets (excluding state- or foreignownedproperty) were in the hands of 1.7 per cent of (West) German private households (Krelle, Schunk & Siebke, 1968; Roggemann, 2010). It is presumed that this high concentration of productive property has remained stable or even increased (Krelle, 1993).

According to recent research (Frick et al., 2010; Grabka & Frick, 2007; Rosinus, 2009), about ten percent of the adult German population owned more than 60 per cent of the entire net equity worth €6.6 trillion in 2007. Even if methodological grounds of these statistical conclusions are disputed and somewhat uncertain, the general statement and tendency can be assumed to be true.

Findings attained by adjusting the method and combining the income and tax statistics with the Socio-Economic Panel (SOEP) (Bach, Beznoska & Steiner, 2011; Westermeier & Grabka, 2015) reach the conclusion that the concentration of wealth and property, especially in financial and productive property, is actually much higher over a longer period of time. Controversial figures indicated that one-tenth of the population owned half of overall assets as early as 1983. In this group, one per cent of households owned 23 per cent of overall assets (Geissler, 2014). The share of the richest ten per cent of the population according to this research is between 64 and 74 per cent, while the richest one per cent owns 36 per cent of the net wealth, and 0.1 per cent of the population possesses 23 per cent of the wealth. The richest 20 per cent of the population own about 80 per cent of the equity, which means that 80 per cent of the German population share 20 per cent of the equity and 25 per cent have no equity at all but rather debts.[27]

Such an extent of uneven distribution of property is not a ‘natural law’ of the social market economy but a result of its increasingly insufficient or, to be more precise, unjust legal conditions and hence a key problem of the reform of the legal framework of the welfare state and its legal policy (Merz, 2009).

7.2     From the divided society of owners and of non-owners towards a new society of co-owners?

The flip side of the society of owners is the society of non-owners. The property of an owner is at the same time the non-property of all other nonowners with regard to this owned object of property (Luhmann, 1994; Roggemann, 2010).

Wealth and property concentration on such a scale as reported above has several undesirable social, political and economic effects and may weaken the basic social consensus of a democratic society. On the one hand, it creates more ‘security, independence and also economic and social influence’ (Bach, 2013, p. 3) and personal freedom for the ‘lucky owners’. On the other hand, the resulting lack of participation threatens democracy.[28]

 These negative tendencies of growing capital concentration have recently been described and analysed by well-known authors in Europe (Piketty, 2014a, 2014b) and theUSA (Stiglitz, 2012, 2014). Both fundamental analyses arrive at critical results. Stieglitz confirms: ‘The American political system is overrun by money. Economic inequality translates into political inequality, and political inequality yields increasing economic inequality. In fact, as he recognises, Mr. Piketty’s argument rests on the ability of wealth-holders to keep their after-tax rate of return high relative to economic growth. How do they do this? By designing the rules of the game to ensure this outcome; that is, through politics. [...] The problem of inequality is not so much a matter of technical economics. It’s really a problem of practical politics. Ensuring that those at the top pay their fair share of taxes – ending the special privileges of speculators, corporations and the rich – is both pragmatic and fair’ (Stiglitz, 2014). Piketty finds: ‘The ideal solution for this problem would be a world-wide progressive tax on individual wealth. Those who are just beginning  to accumulate wealth would not pay anything whereas those who own billions would have to pay a lot. This would keep inequality under control and at the same time make it easier for individuals to come up. It would also put the dynamic of global wealth under public control. Missing financial transparency and reliable wealth statistics are a main challenge for modern democracies’ (Piketty, 2014b).

Both authors come to similar conclusions in this point: The current development is not caused by inevitable economic reasons but by policy and politics: ‘Widening and deepening inequality is not driven by immutable economic laws, but by laws we have written ourselves.’(Stiglitz, 2014). The solution for both authors lies in a basic reform of the present tax system which privileges the small society of owners and discriminates the large society of non-owners and thus perpetuates the growing dilemma of inequality.

What might be critically observed is the fact that both authors fail to adequately take into consideration the earlier proposals of Louis O. Kelso and of the much earlier alternative European cooperative and property debate: To step-by–step, systematically strengthen a system of widespread co-ownership through participation in enterprise capital by the employees of the enterprise. Both proposals demand a fundamental change of present national and international tax policy as well as effective legal support of financial participation in capital up to relevant economic dimensions of five to ten per cent and at least about 15 to 20 per cent of the respective enterprise capital, which could bring about the necessary democratic change of a humanised capitalist civil society.

Both proposals taken singly as well as a combination of the two might at present seem to be somewhat politically utopiian,but another way out of the ongoing crisis of a market-economy-based welfare state can hardly be imagined to develop the democratic and social market economy without losing its substantial human qualities.

The social structure of non-voters at elections shows that there is a direct relationship between economic, social and political participation.

In the US, a country with an extremely high Gini coefficient of inequality of income distribution, this direct relationship between economic, social and political participation or non-participation is supported by the fact that the average turnout is extremely low.30 The most extreme expression of social non-participation is exclusion of social participation by imprisonment. The rate of incarceration in the US is also extremely high.[29]

A growing percentage of economically under-privileged citizens in Germany do not participate as voters in the democratic political process. Results of political elections can therefore ‘no longer be viewed as socially representative’[30]. In Germany, the Euro-zone country with the highest Gini coefficient of inequality of income and property – not considering governmental social re-distributive measures – this percentage of non-voters is growing comparatively faster than in other developed democratic countries.[31]

  In the recent mid-term elections of 04.11.2014, the national overall turnout was 36.3 per cent, which was commented thus by the The Editorial Board (2014) of the New York Times): ‘The abysmally low turnout in last week’s mid-term elections - the lowest in more than seven decades – was bad for the Democrats, but it was even worse for democracy.’

From an economic point of view, the US economist and lawyer Louis O. Kelso and his co-author Patricia Hetter Kelso had pointed out the negative long-term effects of an unequal distribution policy on the economic circulation process by weakening the purchasing power of the masses, the disposition of investment capital , the social security of the majority of non-owners as well as thedemocratic consensus more than half a century ago (Kelso & Kelso, 1967, 1991). Analysing this situation, he developed a successful system of employee participation in the form of ESOP (Menke & Hanisch, 2008; Wagner, 2008) which is still the current model for German and European companies as well (Lowitzsch, 2008).

One of the most relevant but not yet sufficiently discussed consequences is the fact that severe, ongoing unequal distribution structures of private property inevitably lead to a latent challenge of the constitutionally and legally guaranteed institution of private ownership as such.

The specific social but also legal relevance of private property and wealth as a condition for the unfolding of personal freedom, in other words, the essential connection of property and freedom as elaborated by the US Supreme Court and later also by German jurisprudence as well as by the jurisdiction of the Constitutional Court (see section 7.1) is to be questioned: ‘The equivalent of property in things and in money is one of the basic functional elements of art. 14 GG. Money is coined freedom; it can be changed into things.’ (BVerfG NJW 1998, 1937).

What about the opportunity for freedom or at least for equal opportunity for participation among the growing society of non-owners with  little or no money? And of the 25 or more per cent of the population who own negative property, i.e. only debts?

This is the point of re-thinking the future balance of capital and labour in the welfare state. As pointed out above, neither the traditional trade union income policy nor the enormous re-distributive attempts of the welfare state by means of tax and social insurance transfers in Germany can – because of their inherent limits (competitiveness of the ‘German export machine’, bureaucratic overkill of the ‘social transfer state’) – avert the ongoing asymmetric development of income and property and, in the long run, the breakdown of society.

The ‘new social property’ of claims to social funds by non-owners does not provide real compensation and, for many reasons, cannot make them real owners (Roggemann, 2010). The main reason is that this form of property substitution  is far more at the disposition of the legislature for restrictions or reductions than other forms of property or even money.

Different consequences for legal theory and policy have been debated without any satisfying results. Future problems of the stable social consensus are obvious and have also been the subject of discussion (Papier, 2008; Rittstieg, 1975).

The most adequate and sustainable economic and social solution can be achieved through the development of a broad system of direct financial participation of all employees taking part in the value-creating process.

This approach to gaining and stabilising the new society of co-owners needs the full support of the social partners, government and legislation.

7.3     Deficits and practice of participation in capital

The number of enterprises in Germany joining new concepts of financial participation is stagnating rather thaninstead of increasing. So far, Germany is still a developing country.

Only two to three per cent of Germany’s enterprises offer equity participation and about ten per cent offer profit-sharing models (Bellmann & Leber, 2007; Bellmann & Möller, 2006; Beyer, 2014; Boeri et al., 2013; CDU et al., 2008; O’Kelly, 2013). The number differs remarkably in relation to the number of employees. In small enterprises with one to 49 employees, profit sharing is practised by eight per cent and share ownership by two per cent; in enterprises with 50 to 500 employees, profit sharing by 25 per cent and share ownership by four per cent; in enterprises with more than 500, there is profit sharing in 34 per cent and share ownership in seven per cent. The total equity capital held by employees altogether is worth only €11.6 billion. In relation to the aforementioned privately-owned capital of €9.3 trillion, thes real amount of participative capital is of little relevance. 

According to an estimate by the economic partnership consortium ‘Arbeitsgemeinschaft Partnerschaft in der Wirtschaft (AGP)’, in 2009, these were 4,725 companies with about 2,274,000 employees. The more recent overview from 2014 (Beyer, 2014) confirms that this number stagnated or even dropped to about 2.2 million employees and 4,500 companies. A comparative study from 2011 by the European Federation of Employee Share Ownership (EFES) comprising a sample of 221 German and 2,493 European companies shows that share ownership in Germany remains far behind the average development in Europe. 37.6 per cent of the German and 53.3 per cent of the European companies analysed had ‘broad-based’ financial participation schemes; in the German companies,

17.3 per cent of the whole workforce participated as employee shareholders, in Europe 28.2 per cent of the whole workforce.

The most relevant and, at the same time, the most negative result of the reported EFES study is the answer to the basic question: How much of the enterprise’s capital  is actually held by the employees in all the different participation modelsanalysed?

In Germany, it is 1.66 per cent and in Europe 2.68 per cent (see also Beyer, 2014)34 of the companies analysed by EFES. This result and its factual and methodological basis may be questioned; however, it does correspond to other results.35 After all, there is no doubt that the total amount of productive capital held by employees is far below five per cent.

In order to bring about any structural changes in the situation of the welfare state, it should be a political and legal political aim of governments and trade unions to increase this rather poor amount in a first step to at least five per cent and in a second step to ten to 15 per cent. Otherwise, any measurable economic and social structural effects can hardly be expected.

In January 2015, EFES reported ‘a new record’: ‘Assets held by European employees in shares of their company increased to €301 billion in 2014’ (European Federation of Employee Share Ownership [EFES], 2015). However, the number of employee shareholders in Europe decreased for the third consecutive year. EFES finds this ‘clearly related to the regressive fiscal policies in many European countries’, except the UK, where double fiscal incentives recently led to the highest rate of employee shareholding ever. On the other hand, this development underlines the ongoing process of property concentration probably also among employees described above.

Compared to other European countries (Bellmann & Leber, 2007; Bellmann & Möller, 2006; Pendleton, Poutsma, Brewster & van Ommeren, 2001; Poutsma, 2001), employee participation in Germany is underdeveloped. 13 per cent of holding companies offer participation in profit and equity, among all companies in Germany this is only one per cent (Bellmann & Möller, 2006). About 12 per cent of all employees take part in profit participation programmes and three per cent take part in equity participation schemes (Bellmann & Leber, 2007). Recent findings corroborate these facts with some differentiating details (Beyer, 2014).

The statistical basis of these figures may be questioned and should be made subject of further research, developing the approach of Rosinus (2009). However, the available data, given by the AGP (total amount of capital held by employee owners: €11.7 billion) and by the DIW (total amount of capital held by private owners: €9.3 trillion) at least show the dimensions of the problem.

When the Hamburg Hafen und Logistik (HHLA), the largest German port company, was privatised in 2007, the employees were offered 1.26 per cent of the shares at half of the shareholder value (Roggemann, 2010).

Despite all political declarations of intent (Der Stern, 2005), in Germany, obviously, the conditions are so lacking or unattractive that, in contrast to other EU member states, especially to the UK, employees see only small opportunities and even smaller incentives to adequately exercise their rights for participation in the jointly generated economic outcome.

Companies in Germany which currently carry out profit and equity participation schemes are doing so on a large scale and offer profit participation for 62 per cent of their employees and equity participation for 46 per cent of their employees. Hence, the number of employees of foreign (especially of French and British) companies participating in Germany is significantly higher than in German companies (Bispinck & Brehmer, 2008).

These facts and the recent British example can be interpreted in brief: It is economically feasible and beneficial to change the unacceptable present situation in Germany as well – if government and trade unions were ready.

These enterprises that practice capital participation successfully are to a large extent examples of competitive as well as profitable enterprises in a new social market economy.

8.       Legal grounds of financial participation - overview

In addition to the aforementioned laws on labour and co-determination (see section 3.2.3),the following legal grounds are relevant for financial participation:

  • Law on Participation in Capital (Mitarbeiterkapitalbeteiligungsgesetz [MKBG]) dated 07/03/2009, in force since 01/04/2009,
  • Law on the Implementation of EU Tax Requirements and the Change in Tax Provisions (Gesetz zur Umsetzung steuerlicher EU-Vorgaben sowie zur Änderung steuerlicher Vorschriften [UmsetzungsG]) dated 08/04/2010, in force since 02/04/2009,
  • Income Tax Law (EinkommenssteuerG) in the version publicly announced in 2002 in the version released 2008, as amended by

MKBG 2009 and by UmsetzungsG released 2010,

  • Fifth Capital Accumulation Law (Fünftes VermögensbildungG) in the version publicly announcedin 1994 in the version released 2008, as amended by MKBG in 2009,
  • Investment Law (InvestmentG) dated 2003 in the version released 2008, as amended by MKBG in 2009,
  • Investment Tax Law (InvestmentsteuerG) dated 2003 in the version released 2008, as amended by MKBG in 2009 and by UmsetzungsG in 2010,
  • German Securities Prospectus Law (Wertpapierprospektgesetz) in the version released 22/06/2005, as amended by law to transpose the directive 2010/73/EU and by modification of the Stock Exchange Law dated 26/06/2012 (BGBl. I Nr. 28 dated 26/09/2012) – extension of the scope of prospect-free employee participation programmes,
  • Development of the implementation law of the directive 2011/61/EU on Alternative Investment Fund Managers (AIFM), approved by the federal government cabinet on 12/12/2012,
  • Collective Investment Schemes Law (Kapitalanlagengesetzbuch [KAGB]), in force since 22/07/2013 – replacement of the Investment Act dated 2003 and annulment of employee share programme special fund (Employee Investment Funds [Arbeitnehmer-Investitionsfonds]) in MKBG dated 2009.
  • On the agenda, there is also further improvement of tax legislation for making the partial conversion of employees’ remuneration into shares of the capital of the enterprise (Lohnumwandlung). Examples: Case Opel (still pending), Case Schlecker (eliminated after insolvency), general rules for temporary conversion of part of the remuneration into employee contributions to the capital of the enterprise in order to prevent job losses  or total insolvency,
  • Research project of the Federal Ministry of Economy: ‘Future aim of property and wealth policy to be supported by the state and evaluation of the 5th law on wealth formation in Germany’,
  • Desideratum: Evaluation of the current Law on Participation in Capital of 2009 and its renewal in 2010 with regard to the legal aim and the governmental motives of that law.

This short overview, leaving out a number of additional legal problems, already leads to the conclusion that this legislative approach is neither understandable by the ‘normal reader’ and addressee of such a law, nor is it adequate to achieve the official aims of the law (Deutscher Bundestag, 2008).


9.       Models and examples of financial participation by sharing  capital in practice


The situation in practice in Germany seems to be paradox and in opposition to the legal situation. Legal grounds of employee participation are – as it has been pointed out – missing, incomplete or ineffective. This is one of the reasons why Germany, in spite of being the leading economic power in Europe in this field, is far behind many other EU countries.

However, the relatively small number of 4,700, i.e. two to three per cent of all enterprises that offer participation schemes, have developed many different and flexible models for employee participation in capital that work remarkably well. Many of them have joined the economic partnership consortium ‘Arbeitsgemeinschaft Partnerschaft in der Wirtschaft (AGP)’, the newsletter and reports of which can be read as an impressive success story. What is lacking is a relevant dimension of these attempts to bring about measurable economic and social results.

Participation in capital can be practiced in different legal forms

   by contribution to external capital (‘Fremdkapitalbeteiligung’) (Lowitzsch & Roggemann, 2014):

  • Employee loan to the enterprise (‘Mitarbeiterdarlehen’),
  • Bonds, promissory note (‘Schuldverschreibung’),

by contribution in mixed forms (‘mezzanine Beteiligungen’):

  • Dormant equity holding (‘Stille Beteiligung’),
  • Convertible bond (‘Wandelanleihe’),
  • Profit participation rights (‘Genußrecht’),
  • Stock options (‘Aktienoptionen’),

by sharing of capital (‘Eigenkapitalbeteiligung’):

  • Employee shares (‘Belegschaftsaktie’),
  • Share of limited liability company (‘GmbH-Anteil’),
  • Share of cooperative society (‘Genossenschaftsanteil’),
  • Share of Employee Stock Ownership Plan.

These ten different legal frameworks grant either different rights or no rights at all to participate in information and decision-making provided by labour law and, with regard to the last four cases mentioned, also by company law.

In all cases, conflicts can arise between the legal organs of co-determination (‘Betriebsrat’, ‘Sprecherausschuß’) whereas in the last four alternatives, additionally to the level of labour law, decision-making organs on the level of company law also exist. Both have to be coordinated with optional organs representing the interests of employees as co-investors or co-owners by the participation schemes. The different legal forms of capital investment by the employees also grant different degrees of participation in shareholder value and dividends or, instead of this, give only the right to annual provision or interest rates which also can be and normally are modified by the different participation schemes.

With regard to the aforementioned risk of loss of capital (see section 3.3.1) held by the employee, the most relevant difference exists between these legal forms of participation in capital. The risk of loss in case of insolvency can be excluded in all cases from the employee’s contribution to external capital or mixed forms through insurance and special agreements. In the four last forms of direct participation in capital mentioned above, the normal risk of an owner of capital can be and should be limited or even marginalised by additional guarantee agreements (see section 3.3.1). This is one of the points where additional support by the legislature is needed in insolvency legislation.

In spite of or even because of its deficits, this broad and flexible legal framework gives room for the development of numerous contract-based participation schemes in practice. Capital share ownership in Germany is mostly practiced in stock companies (according to AGP report 2010; Lowitzsch & Neusel, 2014). In 720 of these companies, about 1.5 million employees hold about €7.5 billion. In 1,330 enterprises, about 350,000 employees hold capital of about €1.7 billion as partners (‘Stiller Gesellschafter’). In 310 companies with limited liability, about 10,000 employees hold about €160 million.

Of the overall capital of about €11 billion held by 2.3 million employees in Germany, three-quarters of that capital is held by 1.8 million employees in these three forms of companies. This, along with the unsatisfying dimensions in comparison with other European states and the fact that most jobs in Germany are created by smaller enterprises, means that improvement cannot be expected without legislative initiative. 

The list of names of enterprises with participation schemes is long and not to be laid out here. It contains small and medium- sized firms as well as global players in all industries (Lowitzsch & Hanisch, 2014; Menrad, 2005; newsletters and annual reports of Arbeitsgemeinschaft Partnerschaft in der Wirtschaft [AGP]). Worthy of mention because of their wellconstructed or special schemes are, for example: Pieroth (wine agriculture and delivery), Homag-AG (wood machines, establishment of a participation limited liability company [BeteiligungsGmbH] for employee participation), Stihl (saws), Meissner (tools), Diestelhäuser (breweries), Loewe (electronics), Flachglas Wernberg GmbH (BeteiligungsGmbH), Pfalz Flugzeug Werke PFW Aerospace AG (employee buyout), Varitec AG (loans to employees for taxation reasons), Emsa Werke Wulf GmbH &

Co. KG. (goods manufacturer, profit participation right for employees with an annual interest rate of five per cent to nine per cent and  100 per cent insolvency insurance), Grünberg AG (water treatment).

10. The Law on Participation in Capital of 2009 – contents and critical remarks

10.1 Not a new act of substantial legislation but only an enumerative act

The MKBG does not conform to its name (Mengel, 2008). It is not a new act of legislation, but, apart from the totally failed fund concept, it is the continuation of tax-relieving prescriptions of the Income Tax Law (EStG), the Capital Formation Law, the Investment Law and the Investment Tax Law in the form of an article law, which is barely comprehensible for the common reader. A law of such acknowledged significance (impulse, 2008; Menrad, 2005) is lacking in formulated legal targets[32], definition norms, conditions of application and clarifications relating to labour law (for example, BEtrVG, MitbestG, TVG; see Waas, 2014), corporate law and insolvency law.

The Law on Participation in Capital of 2009 is not a substantial law but only an enumerative law referring to other laws. Therefore, this 2009 law has no special legislative relevance on its own. It does not define any legislative aims or put existing normative rules into a context. Thus, it can hardly serve as argument for interpretative attempts to improve or develop the juridical basis of capital sharing of employees by jurisdiction.

Differences between the socio-political necessity for regulation, juridical-political declarations of intent and legislative measures do occur very often, but rarely have they been greater than in the case of this 2009 law, which barely deserves to be called a law: the Law on Participation in Capital (MKBG).

The following critical remarks try to clarify why this law, which could have been of far-reaching significance for the further development of the market-economic structure of welfare state and property, is not at all adequate to reach the targets set by the lawmaker, and which reform measures are required (see also the comprehensive evaluation by Lowitzsch, Spitsa, Roggemann & Waas, 2009).


10.2 Limitation of supporting legal measures

The restriction to one participation model was eliminated in the implementation law of 2010 (Beyer, AGP press statement dated 10/03/2010). Now the negotiating parties are not prevented from agreeingon basic obligations when offering different participation models with the help of a collective bargaining agreement to solve the ‘transfixed’ and very unsatisfying situation, ‘that there is still a major lack of regulations under collective bargaining law to help employees participate’ (Waas, 2014; Wagner, 2008, p. 138).

In promoting capital participation, the lawmaker has actually hit the key structural problem, i.e. the question of ownership. However, at the same time  leaving out the most frequent profit-sharing model hardly contributes to the extension of participation making salaries more


10.3 Elimination of the principle of voluntariness – binding effects for enterprise and employees

The requirement for voluntariness has been left out, but in many cases it is argued for, and it also meets European recommendations (European Commission, 2002; European Economic and Social Committee, 2010; Menrad, 2005; The Council of the European Communities, 1992). This does not keep national lawmakers from implementing the requirement anyway. Since 1967, for instance, French lawmakers have been forcing companies with more than 50 employees to offer participation plans (Körner, 2009). In Germany, progress can also only be expected if material participation as well as immaterial co-determination is given a compulsory framework. A legal obligation for companies to offer appropriate

participation models is to be considered a significant and crucial part of the welfare state in the property guarantee given in art. 14 I GG as is the corporate participation.

Specific restrictions are immanent to economic capital property (BVerfGE 50, 290). Among those are deadlines for the duration of participation and other restrictions on utilisation and disposition. Without an appropriate limit on time and content, major mutual participation targets will never be achieved. In the current regulations, the holding periods vary between two and ten or more years.[34] Setting timelines and further appropriations of participation capital (on the Pieroth participation model see Menrad, 2005) would add to the legal clarity.

Opponents of the introduction of a legally.binding framework which obliges the enterprise to offer its employees at least one adequate model for capital sharing sometimes argue that such a legal obligation would not be in line with the constitutional guarantee of private property (art. 14 I GG).

However, taking into consideration the legal obligation to organise codetermination by means of representation of workers or employees in the organs of all enterprises including corporations stipulated in the law on codetermination in enterprises of 1976[35] and also the legal obligation of enterprises to pay a minimum remuneration of €8.50 arising from the law on minimum wages of 2014,[36] this argumentation cannot be considered convincing because the restrictive effect of these laws on the property right of free disposition is comparable to that of a binding law on financial participation. The German Federal Constitutional Court ruled the law of 1976 and its effects on the owner’s right of making use of the property constitutional[37]. With regard to the law on minimum wages of 2014, the property question was left out of the discussion on whether or not the law was constitutional (Barczak, 2014; Zeising & Weigert, 2015).[38]


10.4 Tax allowance no longer only for payment on top of standard wages

Applicability of tax allowance is no longer limited only to forms of financial participation that an enterprise offers ‘on top’, i. e. in addition to normal wages based on contract or union agreements. This restrictive regulation would have excluded many other offered and accepted forms of capital sharing. The new regulation creates space for collective agreements, especially in case of financial problems or even insolvency of the enterprise. Employees now may contribute by way of loans or temporary renunciation of parts of their wages or holiday pay to be compensated by shares in capital.

Only the substantial savings achieved by payment in some sort of shares in the employing company can be considered to be an ‘allocation of equity shares’, which are exempt from tax and social charges.[39]

10.5 Limitation of tax allowance – limited effect of the law

The major failing of the law of 2009 is the small size of the tax allowance of €360 per year. This is among the lowest rates in comparable EU member states and can hardly be expected to show any impact (Rosinus, 2009). This also applies for the case of utilising the possible combinations emerging from property and participation subsidies according to the Income Tax Law (EStG) and the Law on Capital Formation (Lingemann, Gotham & Marchal, 2010). Raising the allowance ten-foldto €3,600 would offer a far better chance  of success. Austria offers tax privileges for capital transfers from enterprise to employee which are to be re-invested in the enterprise are four times higher than in Germany.

The German Stock Institute (‘Deutsches Aktieninstitut’) and the Arbeitsgemeinschaft Partnerschaft in der Wirtschaft (AGP) recently recommended a minimum tax allowance up to an annual limit of €1,000 (Kuhn, 2015). The tax allowance in other comparable EU member states for annual transfer and investment in participation in capital is much higher than in Germany: UK €3,500, Italy €2,066, Austria €1,460.

The major influence of taxation laws on the development of employee participation is proved by the examples from the US (Rosen et al., 2005) and the UK (Otto, 2009; Steinhaus, 2011). The recent support of the British legislature in the form of raising the tax allowance considerably to encourageparticipation in capital through double fiscal incentives recently led to the highest rate of employee shareholding ever in the UK (European Federation of Employee Share Ownership [EFES], 2015).

10.6 Socio-economic correlation of privatisation and employee capital participation

Employee participation fulfils a balancing function in the case of transferring state- or community-owned property, i.e. actual ‘state-owned property’ owned by all state citizens, into private property owned by single legal entities. The economic policy was well aware of this correlation in the beginning years of social market economy, when about half a century ago, (partial) privatisation of large state-owned companies[40] began. This welfare-state context of privatisation has been abandoned. The MKGB lacks the obligation of state and community owners to offer their employees a minimum capital share (five per cent for instance in France) at a preferential price in case of privatisation. This lack of obligation, for instance in case of the privatisation of the GDR’s former state economy (Geissler, 1992; Offermanns, 1994; Priewe, 1994; Roggemann, 1995) and the subsequent privatisation campaigns in the old German federal states, falls short of the constitutional mandate.

10.7 The law of 2009 – a way out or a failure?

The extension of employee participation could pave the way to an achievement-oriented society of co-owners in a market-economic welfare state whose burden is increasingly relieved by flexible participation of the employees. Neither the current legal instruments nor the MKBG 2009 can actually achieve this. This law has met criticism in many points, and it was called ‘half-hearted at most’[41] and a ‘flop’46. Its offerings were not accepted [42]to the extent expected (Rosinus, 2009) and soon had to be adjusted, first in 2010[43], and then againin 2013 (see section 8).

The only new feature of the MKBG, i.e. the fund model of the ‘special employee participation equity’, is one of the law’s regulations subject to the harshest criticism[44] and in fact has never been applied. Therefore, the legislature decided to abandon[45] this collective form of financial participation which was introduced mainly at the request of the Social Democrats and the German trade unions but completely failed.

10.8. Conclusion: Need for evaluation and further basic reform of the law of 2009

‘Taking as given the proposition that economic development depends on political support’ (Scholz & Tomann, 1999, p. 97; for this institutionalist approach recently, see also Piketty, 2014a & Stiglitz, 2012; see section 7.2) the importance of an effective law on financial participation should be clear. Experiences from the US and recently again from the UK but also from France, Austria and other countries confirm a direct positive effect of supporting tax and other legislation on the development of financial participation, especially of sharing of capital (Steinhaus, 2011). To summarise the critical remarks on the Law on Participation in Capital of 2009: With regard to other comparable EU member states, this law has discriminatory effects. Rather than supporting German employees in  developing adequate share ownership, it actually prevents them from doing so and is therefore no longer in line with the reform program of the German model of welfare state and of a ‘New Social Europe’ moving towards a society of co-owners.


Ahrens, K.-H. (1982). Gewerkschaftliches Geschichtsverständnis. In T. Walter (Ed.), Gewerkschaften und Demokratie: Analysen zum DGB-Grundsatzprogramm ’81. Walberberg: Institut für Gesellschaftswissenschaften Walberberg.

Althaus, D. (2007). Garantien für Arbeitnehmerbeteiligungen im FreistaatThüringen/Mitarbeiterbeteiligungsprogramm. AGP-Forum. Zeitschrift FürBetriebliche Partnerschaft, (1), 36–38.

Apitzsch, W. (2009). Mitarbeiterkapitalbeteiligung im Sanierungsfall - ein Plädoyer. Betriebs-Berater Special, 64(1), 1.

Bach, S. (2013). Einkommens- und Vermögensverteilung in Deutschland.Aus Politik und Zeitgeschichte, (10-11), 15–19.

Bach, S., Beznoska, M., & Steiner, V. (2011).A Wealth Tax on the Rich to Bring down Public Debt?: Revenue and Distributional Effects of a Capital Levy (No. 1137). Discussion Papers of DIW Berlin. DIW Berlin, German Institute for Economic Research.

Bach, S., Corneo, G., & Steiner, V. (2009). From bottom to top: The entire income distribution in Germany, 1992-2003.Review of Income and Wealth,55(2), 303– 330.

Bach, S., Corneo, G., & Steiner, V. (2011).Effective taxation of top incomes in Germany(No. Discussion Paper 2011/18). Discussion Papers. Free University Berlin, School of Business & Economics.

Bach, S., Grabka, M., & Tomasch, E. (2015). Steuer- und Transfersystem: Hohe Umverteilung vor allem über die Sozialversicherung.DIW Wochenbericht,82(8), 147–156.

Barczak, T. (2014). Mindestlohngesetz und Verfassung.Recht Der Arbeit, 290–298.

Beck, K. (2010). Rheinland-Pfalz startet ein Programm zur Förderung der Mitarbeiterbeteiligung in kleinen und mittleren Unternehmen. AGP-Forum. Zeitschrift Für Betriebliche Partnerschaft, (1), 39–40.

Bellmann, L., & Leber, U. (2007). Materielle Mitarbeiterbeteiligung. Geringe Verbreitung, aber hohe Intensität.IAB Kurzbericht, (13).

Bellmann, L., & Möller, I. (2006). Die Betriebe in Deutschland haben Nachholbedarf. IAB Kurzbericht, (13).

Beyer, H. (2010). Belegschaftskapital als Baustein einer Krisenlösung? Überlegungen des DGB zur Kapitalbeteiligung.AGP-Mitteilungen, (1), 3.

Beyer, H. (2014). Employee financial participation in Germany - Current developments and challenges.

Biewen, M., & Juhasz, A. (2012). Understanding Rising Income Inequality in Germany, 1999/2000-2005/2006.Review of Income and Wealth, 58(4), 622–647.

Bispinck, R., & Brehmer, W. (2008). Kapitalbeteiligung und Bezahlung nach Gewinn.

WSI-Mitteilungen, (6), 312–320.

Blasi, J., Conte, M., & Kruse, D. (1996). Employee Stock Ownership and Corporate Performance Among Public Companies. Industrial and Labor Relations Review, 50(1), 60-79.

Blasi, J., Kruse, D., Bernstein, & Aaron. (2000).In the company of owners: The truth about stock options (and why every employee should have them). New York: Basic Books.

Boeri, T., Lucifora, C., & Murphy, K. J. (2013).Executive remuneration and employee performance-related pay: A transatlantic perspective. Oxford: Oxford University Press.

Bontrup,    H.-J.     (2009).    Der     Vorschlag     der     Bundesregierung     für “MehrMitarbeiterkapitalbeteiligung in Deutschland.”Betriebs-Berater Special, 64(1), 2.

Borchert, J. (2010). Freiheit und Verantwortung gehören zusammen - Das Hartz-IVUrteil ist in wichtigen Teilen richtungweisend.Zeitschrift Für Rechtspolitik, (3), 101–102.

Brentano, L. (1898). Arbeitseinstellungen und Fortbildung des Arbeitsvertrags. Leipzig: Duncker & Humblot.

Bundesministerium für Arbeit und Soziales (2013).Lebenslagen in Deutschland. Der vierte Armuts- und Reichtumsbericht der Bundesregierung. Bundesministerium für Arbeit und Soziales.

Böhmert, V. (1878).Die Gewinnbetheiligung. Untersuchungen über Arbeitslohn und Unternehmergewinn. Leipzig.

Cavadino, M., & Dignan, J. (2012).Penal systems: A comparative approach. London: SAGE Publications.

CDU, CSU, & SPD (2008).Vorschlag der gemeinsamen Arbeitsgruppe von CDU, CSU und SPD für mehr Mitarbeiterkapitalbeteiligung in Deutschland. CDU, CSU, SPD.

CDU Deutschland, CSU Landesleitung, & SPD (2013). Deutschlands Zukunft gestalten. Koalitionsvertrag zwischen CDU, CSU und SPD. 18. Legislaturperiode. CDU Deutschland, CSU Landesleitung, SPD.

CDU-Bundesgeschäftsstelle     (2013).    Gemeinsam     erfolgreich     für    Deutschland.

Regierungsprogramm 2013-2017. Retrieved from https://www.cdu.de/system/tdf/media/dokumente/regierungsprogramm-2013-2017langfassung-20130911.pdf?file=1&type=field_collection_item&id=631 [Accessed 15/10/2015]

CDU-Bundesvorstand (2006). Beschluss des 20. Parteitages der CDU Deutschlands “Soziale Kapitalpartnerschaft - für mehr Arbeitnehmerbeteiligung an Gewinn und Kapital.” Retrieved from http://www.cdu.de/doc/pdfc/061128_beschluss_c_end.pdf [Accessed 15/10/2015]

Commission of the European Communities (1996). Pepper II: Promotion of Participation by Employed Persons in Profits and Enterprise Results (Including Equity Participation) in Member States. Commission of the European Communities.

Der Paritätische Gesamtverband (2015). Die zerklüftete Republik. Bericht zur regionalen Armutsentwicklung in Deutschland 2014. Berlin: Der Paritätische Gesamtverband.

Der Spiegel (2007a). Arm durch Arbeit.Der Spiegel 14/2007.

Der Spiegel (2007b). Die Gerechtigkeitslücke. Deutschland zwischen Mindestlohn und Spitzeneinkommen.Der Spiegel 51/2007.

Der Stern (2005, December 28). “Kluft zwischen Arm und Reich verringern.”Der Stern.

Der Tagesspiegel (2010a, October 15). Merkel gegen Übernahme von Hochtief.Der Tagesspiegel.

Der Tagesspiegel (2010b, October 16). Merkel bei Hochtief gegen Brüderle.Der Tagesspiegel.

Deutscher Bundestag (2008). Entwurf eines Gesetzes zur steuerlichen Förderung der Mitarbeiterkapitalbeteiligung (Mitarbeiterkapitalbeteiligungsgesetz).

Deutscher Gewerkschaftsbund (DBG). (1954). Protokoll (des) 3. Ordentlichen Bundeskongress Frankfurt 4. bis 9. Oktober 1954.

Däubler, W. (1991).Das Grundrecht auf Mitbestimmung und seine Realisierung durch tarifvertragliche Begründung von Beteiligungsrechten. Hamburg: Europäische Verlagsanstalt (EVA).

Die Welt (2009). SPD plant Mitarbeiterbeteiligung an Krisen-Firmen. 08.09.2009.

Available athttp://www.welt.de/wirtschaft/article4490142/SPD-plantMitarbeiterbeteiligung-an-Krisen-Firmen.html [Accessed 15/09/2015]

Dünkel, F. (2010). Gefangenenraten im internationalen und nationalen Vergleich.Neue Kriminalpolitik. Forum Für Kriminalwissenschaften, Recht Und Praxis, (1).

Erhard, L. (1964).Wohlstand für alle. Düsseldorf: Econ-Verlag.

European Commission (2002). Communication from the Commission to the Council, the European Parliament, the Economic and SocialCommittee and the Committee of the Regions - On a framework for the promotion of employee financial participation (COM(2002) 364 final ).

European Commission (2007). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Towards Common Principles of Flexicurity: More and better jobs through flexibility and security (SEC(2007) 861) (SEC(2007) 862) (COM(2007) 359 final).

European Economic and Social Committee (2003). Opinion of the European Economic and Social Committee on the “Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on a framework for the promotion of employee financial participation” (COM(2002) 364 final). Official Journal of the European Communities,95, 29–34.

European Economic and Social Committee (2010). OPINION of the European Economic and Social Committee on Employee financial participation in Europe (Own-initiative opinion) SOC 371.

European Federation of Employee Share Ownership (EFES) (2015). EFES Newsletter - Januar 2015.EFES Newsletter.

European Parliament (2003). European Parliament resolution on the Commission communication to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on a framework for the promotion of employee financial participation (COM(2002) 364 - 2002/2243(INI)).

Frankfurter Allgemeine Zeitung. (2009, March 24). Deutschen Volksaktien war kein großer Erfolg beschieden.Frankfurter Allgemeine Zeitung.

Frick, J. R., Grabka, M. M., & Hauser, R. (2010).Die Verteilung der Vermögen in Deutschland. Empirische Analysen für Personen und Haushalte. Berlin: edition sigma.

Gamillscheg, F. (1997).Kollektives Arbeitsrecht - Ein Lehrbuch. Band I: Grundlagen, Koalitionsfreiheit, Tarifvertrag, Arbeitskampf und Schlichtung. München: C. H. Beck.

Geissler, Rainer. (1992).Die Sozialstruktur in Deutschland. Bonn: Bundeszentrale für politische Bildung.

Geissler, Rainier. (2014).Die Sozialstruktur Deutschlands. Opladen: Westdeutscher Verlag.

Gierke, O. (1889).Der Entwurf eines bürgerlichen Gesetzbuchs und das deutsche Recht. Leipzig.

Grabka, M. M., & Frick, J. R. (2007). Vermögen in Deutschland wesentlich ungleicher verteilt als Einkommen.DIW Wochenbericht, 74(45), 665–672.

Grabka, M. M., & Westermeier, C. (2014). Anhaltend hohe Vermögensungleichheit in Deutschland.DIW Wochenbericht, (9), 151–164.

Gundelach, H. (1982). Die Sozialausschüsse der CDU und das neueGrundsatzprogramm des DGB. In T. Walter (Ed.), Gewerkschaften und Demokratie: Analysen zum DGB-Grundsatzprogramm ’81. Walberberg: Institut für Gesellschaftswissenschaften Walberberg.

Hanau, P., & Adomeit, K. (2000).Arbeitsrecht. Neuwied: Luchterhand.

Harbaugh, R. (1993).Equity-sharing - effects on collective bargaining position of trade unions (No. Working Paper). CERGE EI, Prague, Charles University.

Harbaugh, R. (2005). The effect of employee stock ownership on wage and employment bargaining.Journal of Comparative Economics, 33(3), 565–583.

Hecker, D. (1990). Eigentum als Sachherrschaft. Zur Genese und Kritik eines besonderen Herrschaftsanspruchs(Vol. 57). Paderborn, München: Ferdinand Schöningh.

Heinsohn, G., & Steiger, O. (1994). Eigentum und Systemtransformation. In J. Hölscher, A. Jacobsen, H. Tomann, & H. Weisfeld (Eds.), Bedingungen ökonomischer Entwicklung in Zentralosteuropa. Band 2: WirtschaftlicheEntwicklung und institutioneller Wandel. Marburg: Metropolis Verlag.

Heinsohn, G., & Steiger, O. (1996).Eigentum, Zins und Geld: Ungelöste Rätsel der Wirtschaftswissenschaft. Reinbek: Rowohlt.

Hexel, D. (2007). Kapital in Mitarbeiterhand – ein Beitrag für mehr Mitbe-stimmung und Teilhabe.AGP-Forum. Zeitschrift Für Betriebliche Partnerschaft, (1), 73–74.

Hexel, D. (2008).Stellungnahme des DGB zum Regierungsentwurf eines Gesetzes zur steuerlichen Förderung der Mitarbeiterkapitalbeteiligung. (DeutscherGewerkschaftsbund (DGB), Ed.). Deutscher Gewerkschaftsbund (DGB).

Hierlemann, D., Wohlfahrt, A., & Vehrkamp, R. (2013).Inspiring democracy. New forms of public participation. Bertelsmann Stiftung.

Holzhey, H. (1983). Lockes Begründung des Privateigentums in der Arbeit. In H. Holzhey & G. Kohler (Eds.),Eigentum und seine Gründe. Ein philosophischer Beitrag aus Anlass der schweizerischen Verfassungsdiskussion (Vol. 12). Stuttgart, Bern: Paul Haupt Verlag. impulse (2008). Interview mit Bundeskanzlerin Angela Merkel: “Geist der sozialen Marktwirtschaft ändert sich” - Sorge um die Akzeptanz der Wirtschaftsordnung. Impulse, (2).

Institut für Angewandte Wirtschaftsforschung e.V., & Universität Tübingen (2011). Forschungsprojekt: Aktualisierung der Berichterstattung über die Verteilung von Einkommen und Vermögen in Deutschland. Institut für Angewandte

Wirtschaftsforschung e.V., Universität Tübingen.

Junker, A. (2009).Grundkurs Arbeitsrecht. München: C. H. Beck.

Kamp, M. (2010). Der Ball liegt auf dem Elfmeter-Punkt - Michael Lezius zum Abschied.AGP-Forum. Zeitschrift Für Betriebliche Partnerschaft, (1), 9.

Kelso, L. O., & Adler, M. J. (1958).The capitalist manifesto. New York: Random House.

Kelso, L. O., & Kelso, P. H. (1967).Two-factor theory: The economics of reality. Vintage Books.

Kelso, L. O., & Kelso, P. H. (1991).Democracy and economic power: Extending the ESOP revolution through binary economics. Lanham, Maryland: University Press of America.

Kelso, L. O., & Kelso, P. H. (1986). Democracy and Economic Power: Extending the Employee Stock Ownership Plan Revolution. Harper Business.

Kirchhof, P. (2009). Rückbesinnung auf ein Grundrecht - Eigentum als Schule von Freiheit und Risiko. In O. Depenheuer (Ed.),Eigentumsverfassung und Finanzkrise(pp. 7–18). Heidelberg: Springer.

Kirchhof, P. (2010). Der Schaden der anderen. In F. Schirrmacher & T. Strobl (Eds.), Die Zukunft des Kapitalismus (pp. 44–51). Berlin: Suhrkamp Verlag.

Krelle, W, Schunk, J., & Siebke, J. (1968).Überbetriebliche Ertragsbeteiligung der Arbeitnehmer. Tübingen.

Krelle, W. (1993). Wirtschaftswachstum und Vermögensbeteiligung. Wie ist eine gleichmäßigere Vermögensverteilung zu erreichen? In Kirchenamt & Deutsche Bischofskonferenz (Eds.), Beteiligung am Produktiveigentum(pp. 33–56). Hannover, Bonn.

Kruse, D., Blasi, J., & Freeman, R. (2011). Does Shared Capitalism Help the Best Firms Do Even Better? Paper presented at the British Academy Seminar ‘The Economics of Share Ownership and Gainsharing: Findings and Policy Implications’, Centre for Economic Performance, London School of Economics, 26.05.2011.

Kuhn,    N.    (2015).    Zeit    zum    Handeln    -    Mitarbeiterkapitalbeteiligung    und

Belegschaftsaktien endlich fördern.

Körner, M. (2009). Das französische Modell der Mitarbeiterbeteiligung. BetriebsBerater Special, 64(1), 8–11.

Leuner, R. (2009). Mitarbeiterbeteiligung: Recht, Steuern, Beratung. Wiesbaden: Gabler Verlag.

Levy, R. (1983). Eigentum und Macht in der modernen Industriegesellschaft. In H. Holzhey & G. Kohler (Eds.),Eigentum und seine Gründe. Ein philosophischer Beitrag aus Anlass der schweizerischen Verfassungsdiskussion (Vol. 12, pp. 145– 160). Stuttgart, Bern: Paul Haupt Verlag.

Lingemann, S., Gotham, M., & Marchal, H. (2010). Arbeitsrechtliche Fallstricke im neuen Mitarbeiterkapitalbeteiligungsgesetz.Der Betrieb, (8), 446–451.

Lowitzsch, J. (2006).The PEPPER III Report : Promotion of Employee Participation in Profits and Enterprise Results in the. Commission of the European Communities.

Lowitzsch, J. (2007). Der Employee Stock Ownership Plan (ESOP) als Vehikel der Unternehmensnachfolge.AGP-Forum. Zeitschrift Für Betriebliche Partnerschaft, (1), 21–23.

Lowitzsch, J. (2008).Financial participation for a new social Europe: A building block approach. Rome, Berlin: Inter-University Centre Split/Berlin, Institute for Eastern European Studies, Free University of Berlin.

Lowitzsch, J.(2010). Neuausrichtung der Sozialpolitik im EuropäischenReformvertrag. Umsetzungsproblme am Beispiel der Mitarbeiterbeteiligung. Zeitschrift Für Europäisches Sozial- Und Arbeitsrecht, (5-6), 217.

Lowitzsch, J., & Hanisch, S. (2014).Mitarbeiterkapitalbeteiligung unter Verwendung einer Beteiligungsgesellschaft - Gestaltung und Finanzierungsansätze (Vol. 279). Düsseldorf: Hans-Böckler-Stiftung.

Lowitzsch, J., Hashi, I., & Woodward, R. (2009). The PEPPER IV Report: Benchmarking of Employee Participation in Profits and Enterprise Results in the Member and Candidate Countries of the European Union. Inter-University Centre Berlin/Split.

Lowitzsch, J., & Hashi, I. (2014). The promotion of employee ownership and participation. Study prepared by the Inter-University Centre for European Commission’s DG MARKT (Contract MARKT/2013/0191F2/ST/OP). Bruxelles: European Union.

Lowitzsch, J., & Neusel, T. (2014). Entwicklung einesMitarbeiterkapitalbeteiligungsmodells unter Verwendung einerBeteiligungsgesellschaft. In J. Lowitzsch & S. Hanisch (Eds.),

Mitarbeiterkapitalbeteiligung unter Verwendung einer Beteiligungsgesellschaft - Gestaltung und Finanzierungsansätze (Vol. 279, pp. 115–133). Düsseldorf: HansBöckler-Stiftung.

Lowitzsch, J., & Roggemann, H. (2014). Einführung. In J. Lowitzsch & S. Hanisch (Eds.), Mitarbeiterkapitalbeteiligung unter Verwendung einer

Beteiligungsgesellschaft - Gestaltung und Finanzierungsansätze (Vol. 279, pp. 23– 40). Düsseldorf: Hans-Böckler-Stiftung.

Lowitzsch, J., Spitsa, N., Roggemann, H., & Waas, B. (2009). Gesetz zur steuerlichen Förderung der Mitarbeiterkapitalbeteiligung.

Luhmann, N. (1994).Die Wirtschaft der Gesellschaft. Berlin: Suhrkamp Verlag.

Marx, K. (1898). Lohn, Preis, Profit. Vortrag gehalten im Generalrath der “Internationale” am 26. Juni 1865 von Karl Marx. Die Neue Zeit. Revue Des Geistigen Und Öffentlichen Lebens,2(27), 4–13.

Mehrens, K., Stracke, S., & Wilke, P. (2011).Die finanzielle Mitarbeiterbeteiligung praxistauglich weiterentwickeln. (Friedrich-Ebert-Stiftung, Ed.). Bonn: FriedrichEbert-Stiftung.

Mengel, A. (2008).Erfolgs- und leistungsorientierte Vergütung. Berlin: Erich Schmidt Verlag.

Menke, J. D., & Hanisch, S. (2008). The U.S. ESOP as an example of an advanced model. In J. Lowitzsch (Ed.),Financial participation for a new social Europe. A building block approach(pp. 51–88). Rome, Berlin: Inter-University Centre Split/Berlin, Institute for Eastern European Studies, Free University of Berlin.

Menrad,     W.     (2005).    Manifest     für     Vermögensbildung     und     Eigentum     in

Arbeitnehmerhand. Berlin.

Merz, F. (2009). “Sozial ist, was Bürger zu Eigentümern macht.” In O. Depenheuer (Ed.),Eigentumsverfassung und Finanzkrise (pp. 19–26). Heidelberg: Springer.

Müller, U. (2000). Die vermögens- und verteilungspolitischen Aspekte einer Mitarbeiterbeteiligung. Frankfurt am Main: Peter Lang.

National Center For Employee Ownership (NCEO) (2015). A Statistical Profile of Employee Ownership. Retrieved from http://www.nceo.org/articles/statisticalprofile-employee-ownership [Accessed 15/09/2015]

OECD. (2014).Society at a glance 2014: OECD social indicators. OECD Publishing.

Offermanns, M. (1994). Das Renten-Überleitungsgesetz und seine Konsequenzen. In I. Krieger & J. Zerche (Eds.),Vom sozialistischen Versorgungsstaat zum Sozialstaat Bundesrepublik: Ausbau oder Abbau der sozialen Lage in den neuen Bundesländern? (Vol. 25, pp. 120–147). Regensburg: Transfer-Verlag.

Ognedal, T. (1992). The effects of union owned shares on the outcome of wage bargaining.Journal of Economic Behavior & Organization, 18(2), 185–200.

Otto,     B.     (2009).    Mitarbeiterbeteiligung     in     Deutschland,     Österreich     und

Grossbritanien. Freie Universität Berlin.

O’Kelly, K. (2013). Policies and attitudes to financial participation in the EU.

Oxera (2007). Oxera Agenda – Advancing economics in business – Sharing the wealth: can employee share schemes improve the company performance? Agenda – Advancing economics in business, October 2007. Available at

http://www.oxera.com/Oxera/media/Oxera/downloads/Agenda/Sharing-thewealth.pdf?ext=.pdf [Accessed 15.09.2015]

Papier, H.-J. (2008). Art. 14 Rdn. 16. In T. Maunz, G. Düring, R. Herzog, & R. Scholz (Eds.),Grundgesetz. Loseblatt-Kommentar (p. 132). München: C. H. Beck.

Pendleton A. (2014). Employee Ownership: Research and Practice. Presentation at the Expert Conference of IAFP and AGP: Employee Financial Participation in Europe and Germany, Frankfurt/M., Germany, 23.10.2014

Pendleton, A., Poutsma, E., Brewster, C., & van Ommeren, J. (2001).Employee share ownership and profit-sharing in the European Union. European Foundation for the Improvement of Living and Working Conditions.

Pendleton, A., Robinson, A., & Wilson, N. (1995). Does Employee Ownership Weaken Trade Unions? Recent Evidence from the UK Bus Industry.Economic and Industrial Democracy, 16(4), 577–605.

Piketty, T. (2014a).Capital in the Twenty-First Century. The Belknap Press.

Piketty, T. (2014b). Globale Ungleichheit Weshalb wir eine globale Vermögenssteuer brauchen. Retrieved April 25, 2015, from http://www.ipg-online.de

Plenker, J. (2009). Wesentliche Gesetzesänderungen aus Arbeitgeber- und Arbeitnehmersicht 2008 bis 2010.Zeitschrift Für Bilanzierung UndRechnungswesen, 33(1), 34–37.

Poutsma, E. (2001). Recent Trends in Employee Financial Participation in the European Union. Luxembourgh: Office for Official Publications of the European Communities.

Preis, U. (2009). Arbeitsrecht: Individualarbeitsrecht. Lehrbuch für Studium und Praxis. Köln: Verlag Dr. Otto Schmidt.

Priewe, J. (1994). Die Folgen der schnellen Privatisierung der Treuhandanstalt: Eine vorläufige Schlußbilanz.Aus Politik Und Zeitgeschichte, 44(43), 21–30.

Proudhon, P.-J. (1963).Ausgewählte Texte. (T. Ramm, Ed.). Stuttgart: Koehler.

Rittstieg, H. (1975).Eigentum als Verfassungsproblem: Zu Geschichte und Gegenwart des bürgerlichen Verfassungsstaates. Darmstadt: Wissenschaftliche


Roggemann, H. (1995).Fragen und Wege zur Rechtseinheit in Deutschland. Berlin: Verlag Arno Spitz

Roggemann, H. (1997a). Functional changes in property rights in East and West: Some comparative remarks concerning post-socialist transformation in eastern and Western Europe(No. IGS Discussion Papers Series 97/20). University of Birmingham, Institute for German Studies,  

Roggemann, H. (1997b). Funktionswandel des Eigentums in Ost und West - vergleichende Anmerkungen zur postsozialistischen Transformation in Ost- und Westeuropa.Recht in Ost Und West, 41, 189–.

Roggemann, H. (1999). Functional change in property rights in the welfare state: Lessons from the Federal Republic of Germany. In I. Collier, H. Roggemann, O. Scholz, & H. Tomann (Eds.),Welfare states in transition: East and west. Studies in economic tranistion (pp. 25–40). Basingstoke, London: Palgrave Macmillian.

Roggemann, H. (2010).Mitarbeiterbeteiligung und Eigentum. Ein Diskussionsbeitrag zur Wirtschaftskrise (Vol. 65). Berlin: Berliner Wissenschafts-Verlag (BWV).

Roggemann, H. (2011a). Das Mitarbeiterkapitalbeteiligungsgesetz von 2009 – Eine rechtspolitische Kritik, Zeitschrift für Rechtspolitik (ZRP) 2011, S. 49 ff., München C.H.Beck,

Roggemann, H. (2011b). Arbeiterselbstverwaltung in Jugoslawien undMitarbeiterbeteiligung in Europa - Systemtranszendierende Aspekte eines sozialölkonomischen Partizipationsgrundrechts auf dem Wege in eine europäische Sozialordnung. In H. Küpper (Ed.),Von Kontinuitäten und Brüchen: Ostrecht im Wandel der Zeiten, Festschrift für Friedrich-Christian Schroeder zum 75. Geburtstag (pp. 367–409). Frankfurt am Main, Berlin, Bern: Peter Lang.

Roggemann, H., & Lowitzsch, J. (2008). The challenge: Functional changes in property rights in Europe. In J. Lowitzsch (Ed.),Financial participation for a new social Europe. A building block approach (pp. 101–109). Rome, Berlin: InterUniversity Centre Split/Berlin, Institute for Eastern European Studies, Free University of Berlin.

Rosen, C. (2002). Observations on Employee Ownership. United Airlines, ESOPs, and Employee Ownership. Available at https://www.nceo.org/observations-employeeownership/c/united-airlines-esops-employee-ownership [Accessed 15.09.2015]

Rosen, C., Case, J., & Staubus, M. (2005).Equity: Why employee ownership is good for business. Boston, MA: Harvard Business Review Press.

Rosinus, A. (2009).Vermögenskonzentration und Mitarbeiterkapitalbeteiligungsgesetz(Vol. 38). Frankfurt am Main: Peter Lang.

Sachverständigenrat (2008). Die Finanzkrise meistern - Wachstumskräfte stärken. Jahresgutachten 2008/09. Sachverständigenratzur Begutachtung dergesamtwirtschaftlichen Entwicklung, Statistisches Bundesamt.

Sachverständigenrat (2009). Die Zukunft nicht aufs Spiel setzen. Jahresgutachten 2009/10. Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, Statistisches Bundesamt.

Schanz, K.-M. (2000). Mitarbeiterbeteiligungsprogramme. Neue Zeitschrift Für Arbeitsrecht, (12), 626–634.

Schlomann, H. (1993). Die Entwicklung der Vermögensverteilung inWestdeutschland. In E.-U. Huster (Ed.),Reichtum in Deutschland. Der diskrete Charme der sozialen Distanz (pp. 54–83). Frankfurt am Main, New York.

Scholz, O., & Tomann, H. (1999). The role of social policy during the transformation in Central Europe. In I. Collier, H. Roggemann, O. Scholz, & H. Tomann (Eds.), Welfare states in transition: East and west. Studies in economic tranistion (p. 93). Basingstoke, London: Palgrave Macmillian.

Siegler, A. (1979). Der Beteiligungsgedanke im 19. und frühen 20. Jahrhundert und seine Beurteilung durch die organisierte Arbeitnehmerschaft: Parallelen zur Entwicklung der Gegenwart?Die Betriebswirtschaft, 39(1b), 143–153.

Sinn, H.-W. (1998). Kapitalbeteiligung und Lohndifferenzierung: Ein Vorschlag zur Lösung der Beschäftigungskrise. In H.-J. Arentz & H.-P. Stihl (Eds.), Vermögensbildung in Arbeitnehmerhand: Wege zu einer Gesellschaft von Teilhabern (pp. 9–24). Sankt-Augustin: Konrad-Adenauer-Stiftung.

Smith, R. J. (2003).Property Law (4th Edition). Harlow: Pearson Education.

SPD-Parteivorstand (2013). Das Wir entscheidet. Das Regierungsprogramm 2013-

2017. Bonn: SPD-Parteivorstand. Retrieved from


2017.pdf [Accessed 15/10/2015]

Statistisches Bundesamt. (2009).Volkswirtschaftliche Gesamtrechnungen.Inlandsproduktsberechnung. Detaillierte Jahresergebnisse. Statistisches Bundesamt.

Steinhaus, H. (2011).Mitarbeiterbeteiligung als Krisenbewältigungsinstrument aus akteurtheoretischer Sicht. Wiesbaden: Gabler.

Stiglitz, J. E. (2012).Price of inequality. Norton & Company.

Stiglitz, J. E. (2014). Inequality is not inevitable. Retrieved fromhttp://opinionator.blogs.nytimes.com/ [Accessed 25/05/2015]

Tapio Lappi-Seppälä. (2007). Penal Policy in Scandinavia.Crime and Justice,36(1), 217–295.

The Council of the European Communities. (1992). 92/443/EEC: Council recommendation of 27 July 1992 concerning the promotion of participation by employed persons in profits and enterprise results (including equity participation). Official Journal of the European Communities,35, 53–55.

The Editorial Board. (2014, November 11). The Worst Voter Turnout in 72 Years.The New York Times.

Thormann, M. (1996). Abstufungen in der Sozialbindung des Eigentums: Zur Bestimmung von Inhalt und Schranken des Eigentums nach Art. 14 Absatz 1 Satz 2 GG im Spannungsfeld von Eigentumsfreiheit und Gemeinwohl. München: Boorberg Verlag.

Uvalic, M. (1991). The Pepper Report: Promotion of Employee Participation in Profits and Enterprise Results in the Member States of the European Commnity. Bruxelles: Commission of the European Communities.

Uvalić, M. (2008). Lessons from PEPPER I to PEPPER IV. In J. Lowitzsch, I. Hashi, & R. Woodward (Eds.),Industrial relations (pp. 179–189). Inter-University Centre Berlin/Split, Institute for Eastern European Studies, Free University of Berlin.

Vanek, J. (1965). Workers’ Profit Participation, Unemployment and the Keynesian Equilibrium.Weltwirtschaftliches Archiv,94, 206–214.

Von Gierke, J. (1959).Das Sachenrecht des bürgerlichen Rechts. Berlin, Frankfurt am Main.

Waas, B. (2014). Mitarbeiterkapitalbeteiligung und Arbeitsrecht. In J. Lowitzsch & S. Hanisch (Eds.),Mitarbeiterkapitalbeteiligung unter Verwendung einer

Beteiligungsgesellschaft - Gestaltung und Finanzierungsansätze (Vol. 279, pp. 67– 114). Düsseldorf: Hans-Böckler-Stiftung.

Wagner, K. R. (2003). Mitarbeiterbeteiligung in Deutschland - ein Überblick.Neue Juristische Wochenschrift, (43), 3081–3086.

Wagner, K.-R. (2008). Kapitalbeteiligung von Mitarbeitern und Führungskräften: Möglichkeiten, Chancen Visionen. Frankfurt am Main: Verlag Recht und


Wendt, R. (2009). Art. 14 Eigentum, Erbrecht und Enteignung. In M. Sachs (Ed.), Grundgesetz: GG. Kommentar (pp. 602–667). München: C. H. Beck.

Westermeier, C., & Grabka, M. M. (2015). Große statistische Unsicherheit beim Anteil der Top-Vermögenden in Deutschland.DIW Wochenbericht,82(7), 123–133.

Zeising, P., & Weigert, D.-R. (2015). Verfassungsmäßigkeit des Mindestlohngesetzes. Neue Zeitschrift Für Arbeitsrecht, (1), 15–22.

Zonenausschuss der CDU (1947). Ahlener Programm.


[1] This article is based on and continues previous contributions to the topic by the author. (See Roggemann, 1996, 1997a, 1997b, 1999, 2010, 2011a, 2011b; Roggemann & Lowitzsch, 2008)

[2] Univ.-Prof. a. D. Dr. iur. Dr. h. c., Institute for Eastern European Studies and Faculty of Law of Free University Berlin and Scientific Coordinator in the Interuniversity Centre Berlin/Frankfurt (Oder)/Split/Paris I, e-mail: herwig.roggemann@gmx.de; roggemann@fu-berlin.de

[3] The genuine decentralising effect of private property follows from the individual power of disposition, ‘it is the ultimate right to use (and abuse) the object or right in question’ (Smith, 2003, p. 6; for property rights and social power, see Levy, 1983 & Roggemann, 2010). Private Property had  already been characterised as individual power against centralised state power by Proudhon (1963) in his famous controversy with Karl Marx.

[4] The former President of the Federal Republic of Germany, Horst Köhler, in 2004: ‘I think time is ripe to put participation in enterprise results and in economic property on the table again’ (see his interview in Der Stern, 2005; also reported at the 57th Conference of the Bundesverband für Mitarbeiterbeteiligung [AGP]).

[5] At the 20th Congress of the Christian Democratic Party (CDU) in Dresden on 27 November 2006 Chancellor Angela Merkel said that ‘new ways for more justice through participation’ should be found. A Congress resolution voted for ‘social partnership in capital and more employee participation in profit and capital’ (CDU-Bundesvorstand, 2006).

[6] Principle of Solidarity: Art.1 III; 2 I EUV; preamble. VI; Art. 27ff. European Charter of Fundamental Rights 2007; Art. 4 European Social Charter 1961.

[7] Art. 6;7 The International Agreement on Economic, Social, and Cultural Rights (The Social Pact) 1966, in effect since 1976.

[8] Kelso & Adler (1958) describe these structural consequences starting with decreasing purchasing power on the one hand and the ongoing concentration of the ownership of capital on the other hand as ‘the basic cause of depressions in a capitalist economy’, and they point out why legislative taxation and other measures for transfers and redistribution of property and wealth ‘to prevent the collapse of the economy’ are of limited effect or even counterproductive because ‘theses practices increase operating costs to a point at which they can be absorbed only by the most heavily capitalised business’ (p. 190 et seq., p. 203, 208). This argumentation of Louis Kelso is renewed now in the debate on the introduction of legal minimum wages and its bureaucratic tendencies in Germany in 2015. For recent development of the ESOP system in the US and the following data, see National Center for Employee Ownership (NCEO) (2015) and also Rosen (2002).

[9] See Art. 20 I German Basic Law – Constitution (GG).

[10] ‘Gerechtigkeitslücke’ (Der Spiegel, 2007b).

[11] See also the discussion in the context of the presentation of the fourth governmental report of the Federal Republic of Germany on poverty and wealth (Bundesministerium für Arbeit und Soziales, 2013) and in the context of the publication of the OECD report on income and property structure in Germany and economic and social consequences for Germany and Europe (OECD, 2014).

[12] Law on Minimum Wage (‘Gesetz zur Regelung eines allgemeinen Mindestlohnes (MindestlohnG – MiloG)’) dated 11/08/2014, BGBl. I S.1348.

[13] ‘Germany would not have been able to act as motor and one of the three economic powers of the European Union without the German constitution of labour’ (Gamillscheg, 1997, p. 11 et seq.) with its co-determination model.

[14] Promotion of Employee Participation in Profits and Enterprise Results (PEPPER)

[15] On the legal-political dimension and the Hartz IV ruling by the German Constitutional Court (BVerfG, 09/02/2010 - 1 BvL 1/09; Borchert, 2010).

[16] According to the Scientific Advisory Council of the German Ministry of Economics in a letter to the minister dated 17/04/2008 (for a different view that shows a re-thinking of the problem of financial participation of employees by the German trade unions, see Die Welt, 2009).

[17] Compared with the expected annual yield rate for capital owned by the enterprise (Renditeerwartung für Eigenkapital) of 25 per cent, this profit rate can be held rather conservatively (see for these examples Menrad, 2005; Lowitzsch & Hanish, 2014).

[18] Yet in 1964 the IG Metall and the trade union for public services, transport and traffic rejected the proposal made by the chairperson of the trade union BauSteine-Erden, Julius Leber, for a collective agreement fixed capital formation by employees through the establishment of funds at the sectoral level as a ‘hindrance of trade union collective bargaining’. To date, the trade unions prefer intercompany or even nationwide fund solutions (for the ideological conflict see Siegler, 1979).

[19] ‘It is one of the primary concerns of the DGB and its member unions to advocate for more participation and equal participation of workers in Germany.’ (Hexel, 2007, p. 75).

[20] Art. 9 III GG; § 2 Tarifvertragsgesetz (TVG). The Federal Constitutional Court of Germany said, ‘ ‘Based on the freedom of coaltition, the autonomous right of collective bargaining aims at regulating labour relations in the public interest through collective agreements as far as allowed by legislation, in particular to fix the wages for certain professions and thus create social peace in society.’ (BVerfG dated 06/05/1964, AP no. 15 on § 2 TVG; see also Preis, 2009).

[21] The well-known German author and political analyst Sebastian Haffner characterised this fact – political revolution without property revolution – as an ‘unfinished’ or ’betrayed revolution’.

[22] Law on Housing Grants 1959; Law on Savings Grants 1959; Law on Property Formation 1961, 1965, 1970; Law on Property Participation 1982, 1986, 1998.

[23] See decision in the case concerning the possession of rented apartments dated 26/05/1993, BVerfGE 89, p. 1 et seq., 6.

[24] See decision dated 22/02/2001 – 1 BvR 198/98; see also BVerfGE 101, 54, 74.

[25] In its famous decision in the co-determination case (Mitbestimmungsurteil) dated 12/02/1979, BVerfGE 50, 290, 342; BVerfG, 01/03/1979 – 1 BvR 532, 533/77, 419/78, 1 BvL 21/78; see also Wendt (2009).

[26] Gini coefficient for EU average: 0.68; for Germany: 0.76; in comparison for the U.S.: 0,87. Reduction of the Gini coefficient by means of tax and social security transfers to 0.35 gross and 0.29 net. In any case, this procedure illuminates the basic structural deficit of participation in value creating, and because social insurance payments, which make up the biggest part of transfer costs, are based on previous social contributions, there is no real material re-distributive result between people and generations but only a time-related transfer effect to temporarily mitigate the existing growing income inequality (Bach, Grabka & Tomasch, 2015).

[27] This highly asymmetric trend increased during the last decade. Parallel to the growing total net wealth of private households in 2012 (about €9.3 trillion), the share of the richest ten percent of the population increased from 64 per cent to 74 per cent and at the same time the rate of poverty and inequality also grew (Westermeier & Grabka, 2015). ‘Problems do not arise from the creation of the public wealth but from its primary and secondary distribution. Poverty and inequality in Germany also have political reasons.’ (Der Paritätische Gesamtverband, 2015, p. 4).

[28] The European Federation of Employee Share Ownership (EFES) (2015) does right to render prominently this context underscoring the decrease of participation through share ownership in European economies like France and Italy and Germany should also be added (see also Kelso & Kelso, 1986).

[29] The incarceration rate (‘Gefangenenrate’) of 707 incarcerated persons per 100,000 of the adult population in the US is the highest of the world (except the Seychelles that are an incomparable example). In comparison, the rate in Russia is 618, France 96, Germany 83, Denmark 66, Sweden 74, Finland 67, but in the UK 154. Recent criminological research affirms the relationship between socioeconomic integration, participatory culture and welfare state on the one hand and the rate of incarceration on the other hand (see Dünkel, 2010 with reference to Cavadino & Dignan, 2012 and Tapio Lappi-Seppälä, 2007).

[30] Recently and concerning the election in the Federal State Hamburg 2014 with a voter turnout of only 57 per cent (Hierlemann, Wohlfahrt & Vehrkamp, 2013).

[31] ‘We are democratically on the way from Denmark towards the U.S.’ (Hierlemann et al., 2013)

[32] Counterexample: Law on the Promotion of Labour dated 1969, BGBl I 1969, 582, since 1998 SBG III.

[33] This has also been criticised by the Union of Employers in their statement dated 29/10/2008 (Roggemann, 2011a).

[34] Privatisation of Preussag: two years, savings grants according to §4 of the 5th Capital Accumulation Law (VermBG): six years; fund model RLPplus: ten years (see also BFHE 135, 542; BeckRS 1982, 22006139).

[35] Co-Determination Law (MitbestimmungsG) dated 04/05/1976, BGBl. I S.1153.

[36] Law on Minimum Wages (Gesetz zur Regelung eines allgemeinen Mindestlohnes [MindestlohnG – MiloG]) dated 11/08/2014, BGBl. I S.1348.

[37] Co-determination decision (Mitbestimmungs-Urt.) dated 12/02/1979, BVerfGE 50, 290, 342.

[38] Compatibility with art. 14 I GG was apparently regarded as largely beyond doubt. The central issue was the compatibility with art. 9 III GG (collective bargaining) and art. 12 I GG (professional freedom).

[39] Letter from the Federal Ministry of Finance dated 08/12/2009 on the income tax treatment of cession of equity shares as of 2009 (BStBl I 2009, 1513; Plenker, 2009).

[40] Preussag 1959, Volkswagen 1961, Veba 1965.

[41] Schneider, Institute for the future of labour, Tagesspiegel 23/04/2008.

[42] Öchsner, Süddeutsche Zeitung 07/01/2010.

[43] Through the law on the implementation of European taxation condition as well on the alteration of tax regulations dated 08/04/2010, BGBl I 2010, 386, art. 1.

[44] Among others by the German Federation of Chambers of Commerce (DIHK), Tagesspiegel 23/04/2008.

[45] By the new Law on Capital Investment (Kapitalanlagengesetzbuch [KAGB]), in force since 22/07/2013.









Powered/Template by CMSimple | modified by artefakt design | Login