Participation in the Age of Globalization and Information: Volume 9

This volume of Advances in the Economic Analysis of Participatory and Labor-Managed Firms marks the third volume in this series to be produced by Elsevier. The two previous volumes, Employee Participation, Firm Performance and Survival, edited by Virginie Perotin and Andrew Robinson, published in 2004, and The Determinants of the Incidence and the Effects of Participatory Organizations, edited by Takao Kato and Jeffrey Pliskin and published in 2003, marked the re-launching of the series. (The series began in 1985. Six volumes appeared during 1985–1995 when the series was published by JAI and was co-edited by Jan Svejnar and Derek C. Jones.)

This volume of Advances in the Economic Analysis of Participatory and Labor-Managed Firms consists of 12 original and innovative articles. The first four papers relate to the growing literature on employee participation and firm performance. The second group of papers looks at the impact of ownership structures into managerial compensation and control. The third set of papers analyzes the role of co-operatives in the changing economic environment. The three papers in the final section range from the historical perspective on participation to the role different forms of participation may play in the future.

Using data from a large cross-section of British establishments, we ask how different firm characteristics are associated with the predicted benefits to organizational performance from using team production. To compute the predicted benefits from using team production, we estimate structural models for financial performance, labor productivity, and product quality, treating the firm's choices of whether or not to use teams and whether or not to grant teams autonomy as endogenous. One of the main results is that many firm characteristics are associated with larger predicted benefits from teams to labor productivity and product quality but smaller predicted benefits to financial performance. For example, this is true for union recognition as measured by the number of recognized unions in an establishment. Similarly, when a particular firm characteristic is associated with lower benefits from teams to labor productivity or product quality, the same characteristic is frequently associated with higher predicted benefits to financial performance. This is true for the degree of financial participation and employee ownership and also for establishment size and a number of industries. These results highlight the advantages of analyzing broader measures of organizational performance that are more inclusive of the wide spectrum of benefits and costs associated with teams than the labor productivity measures frequently studied in the teams literature.

In this paper we begin with documenting the nature and scope of a popular participatory employment practice in postwar Japan, or Joint Labor Management Committees (JLMCs), using unique survey data. We combine the survey data with corporate proxy statement data and produce firm-level micro data for over 200 Japanese firms with JLMCs which contain detailed information on various characteristics of their JLMCs. The resulting micro data are then used to estimate the effects on productivity and other outcome measures (such as profitability and labor cost) of varying attributes of Japanese JLMCs. For diverse specifications, consistently we find the positive and highly significant productivity effect of the breadth of information sharing via JLMCs. Specifically, sharing information obtained during JLMC meetings with ALL employees on one additional issue will be associated with a 3% increase in productivity. As such, our findings point to the importance of disseminating information shared via JLMCs widely to all employees. We further identify two important mechanisms through which such information dissemination can occur effectively, i.e., unions and employee participation/involvement at the grassroots level such as Shop Floor Committees. This constitutes yet another example of the complementary role of unions in participatory employment practices and synergy between various participatory employment practices.

Organizational change is generally looked at as a planned process. Yet, when the employees buy their own company they embark on a venture that eventually emerges as a self-growing culture. The article outlines major challenges and findings, including some of the emotional consequences. At first both management and workers expect each other to change. But gradually, a minority of technical activists sets an inspiring example for the rest to follow. As management and labor hereafter begin to listen to and recognize the need to remedy the concerns of each other, a new cooperative spirit of sharing, caring and honesty slowly emerges. The findings are based upon a four-year-long cross-comparative study of six, mainly 100 percent employee-owned manufacturing companies in the US.

This paper examines roles of mandated employee participation rights (EPRs), such as works council legislation, in corporate governance. Links between employment and corporate relationships are stressed. Market failure arguments are developed, predicting that EPRs, and the interaction between EPRs and investments in skills, can positively impact productivity; preliminary evidence from German establishments is generally supportive. A qualitative appraisal concludes that EPRs have not harmed economies that adopt them. Policies to expand EPRs in the US are introduced, jointly encouraging skill development and employee decision-making participation, full rights for employee stock ownership plan (ESOP) participants, legal regulation of terms such as “participation,” and EPR extension services.

Following the formation of the first cooperative creamery in Denmark in 1882, the number of creameries adopting this particular organisational form grew rapidly over the next 20 years. These cooperatives had to delegate the running of the creamery to a professional manager leading to potential incentive problems. This paper documents the extensive use of performance related pay. Three findings stand out. Firstly, the creameries’ awareness of the incentive problems. Secondly, the incentive contracts used were often quite complex and sometimes non-linear. Thirdly, contract terms often varied over time, even within individual creameries.

By using new panel data for a sample of Bulgarian firms that comprises both state-owned and privatized firms (including new private firms), evidence is presented on the potential impact of ownership and age of the firm on diverse issues concerning corporate governance and executive compensation during 1997–2001. Privatization status and whether firms are de novo or not is found to be associated with differences in many areas including: the size and composition of company boards; the size of CEO pay; internal wage differences; the incidence of performance-based compensation (PBC); firm objectives; and patterns of decision-making influence.To investigate the determinants of executive compensation we first estimate standard CEO specifications. These baseline regressions reveal that CEO pay is: (i) positively related to size (ii) positively related to performance; (iii) significantly affected by ownership; and (iv) influenced by whether a firm is de novo or not. These findings and the fact that both size and performance elasticities are much larger than those estimated before the start of mass privatization provide more general support than previously for the view that privatization has imposed strong discipline on the level of CEO compensation. In a series of additional regressions we proceed beyond standard specifications and examine the impact on CEO pay on other aspects of corporate governance. We find CEO pay is associated with: decision-making influence; whether the contract provides for PBC; whether the firm belongs to an employer's federation; the extent of employee and managerial ownership. However some dimensions of corporate governance are not systematically associated with CEO pay. Chief amongst these is board structure. Many of these findings provide support for the view that managerial influence (rather than agency relationships) plays a key role in corporate governance in Bulgarian firms.

Developing an alternative and more realistic modeling of the firm, the key point of this paper is that workers cooperatives represent a form of corporate governance, which is a subset of the participatory organizational form, that constitutes a competitive alternative to the typical relatively hierarchical and narrowly controlled firms. An important component of the cooperative advantage lies in its capacity to increase the quantity and quality of effort inputs into the ‘production process.’ However, to do so incurs economic costs. Thus, cooperatives can yield competitive outcomes without driving out of the market non-cooperative organizational forms. To some extent, whether cooperative or other participatory solutions are adopted depends upon the preferences of economic agents since cooperatives are shown to be competitive even in an extremely competitive environment. However, dominant or not, the cooperative solution can yield higher social–economic welfare levels to members.

In the last two decades, a new form of organization has progressively become predominant on many global markets: networks. Very few worker co-operatives have adopted such a pattern though, despite the fact that, as the theoretical literature shows, the advantages of network industrial structures are numerous and networking can be considered a necessity in the context of globalization. After introducing a new framework for analyzing networks, we argue that combining several dimensions of integration has been an important factor of efficiency in three case studies: Mondragon Corporacion Cooperativa, the industrial districts of Emilia-Romagna, and Scop Entreprises.

Workers live two overlapping lives, at work and outside work. The spillover of favourable workplace experiences into non-work domains of life means that the workplace can be a means by which organisational members who experience network poverty arising from adverse social factors can overcome social exclusion. Social acceptance and interaction data from 105 adults with mild to moderate learning disabilities working in eight social enterprises in the UK and Ireland is examined to establish the link between organisation culture and workplace social integration. In this study organisation cultures in which user/worker-involvement in management and control decision-making is emphasised seem to engender a positive influence on the social interaction experiences of members with learning disabilities in work and non-work domains of life, having regard to difference in demographic factors, employment characteristics, country of residence, and level of disability. The study accentuates the importance of workplace democracy in enhancing the quality of life of working adults with learning disabilities, who might otherwise be disenfranchised in numerous areas of life.

This paper revisits the early-20th-century British blueprint for Guild Socialism and discusses its similarities and differences with labor managed firm (LMF) theory and with the historic Yugoslav system. It finds that the Guild Socialist vision of a corporatist workers’ state based on universal, non-anonymous, multi-party negotiation of incomes, prices, and quantities comes much closer to anticipating the real-world Yugoslav experiment in worker-managed market socialism than the market-syndicalist utopia embodied in the Western economic model of the LMF and economy.

Today, there is the real possibility that self-management and workplace democracy will follow socialism into the dustbin of history. But the connection of self-management to socialism was misconceived from the beginning. Workplace democracy has its own roots in the historical struggle against slavery and against autocracy. The paper reviews the history of the theory of inalienable rights that applies not only against the self-sale contract and the political contract of subjection but also against of the self-rental or employment contract, today's contract of subjection for the workplace. The paper concludes with the current debate about corporate governance.

This paper looks at the research to date on the future of broadly granted stock options (options granted to at least half the full-time employees of a company). In the U.S., granting options broadly became popular in the late 1990s, but has lost some of its appeal in the wake of stock market declines, accounting changes, and increased shareholder concerns about dilution. The data indicate a significant minority of companies will change their plans, but a substantial majority will keep them. The data also indicate changes in accounting rules will not affect stock prices and that broadly granted options are better for corporate performance than narrowly granted options.