The mainstream framework for corporate governance is that all corporate activity should be directed towards shareholder wealth maximization. This article posits that public policy should move away from shareholder primacy and instead recognize employees as key contributors to corporate value-creation. One way to implement this approach is to require the creation of Employee Equity Funds (EEFs) at large corporations, which would pay employees dividends alongside external shareholders and establish a collective employee voice in corporate governance. EEFs may reduce economic inequality while improving firm performance and macroeconomic stability. This article provides an original estimate of average employee dividends, illustrating the potential of employee equity funds.
Analysis of employee dividends for Employee Equity Funds at large U.S. corporations, using publicly available corporate finance data.
Based on historic dividend payments and employee counts in public 10-K filings, I find that, if EEFs held 20% of outstanding equity, the average employee dividend across this sample would be $2,622 per year, while the median is $1,760. This indicates that employee dividends can be a small but meaningful form of redressing wealth inequality for the low-wage workforce, though it should emphatically not be seen as a replacement for fair wages.
Original data analysis of a proposed policy reform to increase the benefits of employee equity in the United States.
Funding: The author gratefully acknowledge funding from the Rutgers Institute for the study of Employee Ownership and Profit Sharing. Thank you to Chirag Lala for excellent research assistance and Mat Lawrence for insights from policy analysis conducted for the Inclusive Ownership Funds proposal.
Palladino, L. (2022), "The potential benefits of employee equity funds in the United States", Journal of Participation and Employee Ownership, Vol. 5 No. 1, pp. 56-78. https://doi.org/10.1108/JPEO-08-2020-0023
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