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Book part
Publication date: 9 December 2013

Joseph Blasi, Douglas Kruse and Dan Weltmann

Using a population study, we provide evidence on the important but understudied issue of company survival under employee ownership, as well as on the performance effects of…

Abstract

Purpose

Using a population study, we provide evidence on the important but understudied issue of company survival under employee ownership, as well as on the performance effects of employee ownership and the issue of whether employee ownership substitutes for other pension benefits.

Design/methodology/approach

Company survival and pension benefits are assessed using a unique dataset from Dun & Bradstreet of privately held Employee Stock Ownership Plan (ESOP) companies over the 1988–1999 period, matched to non-ESOP companies in the same industry. Performance is assessed using pre/post-comparisons of ESOP adopters in the 1988–1994 period.

Findings

Privately held ESOP companies in 1988 were only half as likely as non-ESOP firms to go bankrupt or close over the 1988–1999 period, and only three-fifths as likely to disappear for any reason. The ESOP companies had significantly higher post-adoption annual employment and sales growth, along with higher sales per employee. ESOP companies are four times more likely than their non-ESOP pairs to have defined benefit pension plan and other forms of defined contribution plans.

Research implications

The greater survival was not explained by higher productivity, or by greater compensation flexibility. The higher survival may instead be tied to complementary policies adopted along with ESOPs to create a more committed and engaged workforce that contributes ideas to enhance survival and is more flexible when economic difficulties arise. The pension results are consistent with other studies on compensation under employee ownership, suggesting that employee ownership is generally used as a form of efficiency wage to provide above-market compensation.

Social implications

Higher survival among ESOP companies could result in lower job loss and unemployment, potentially providing a public policy rationale for support of employee ownership.

Originality/value

The chapter provides the first examination of company survival in privately held ESOP companies, and one of the few examinations of how ESOPs relate to other pension benefits.

Details

Sharing Ownership, Profits, and Decision-Making in the 21st Century
Type: Book
ISBN: 978-1-78190-750-4

Keywords

Book part
Publication date: 15 December 2015

Dan Weltmann, Joseph R. Blasi and Douglas L. Kruse

Past research has found employee ownership to be linked to better attitudes and behaviors. We investigate three possible mechanisms: (a) a selection effect – employees who buy…

Abstract

Past research has found employee ownership to be linked to better attitudes and behaviors. We investigate three possible mechanisms: (a) a selection effect – employees who buy stock in their own company may have better attitudes to begin with; (b) a status effect – employees who have any amount of employee ownership may have better attitudes; and (c) a size of stake effect – employee attitudes and behaviors may be influenced by the size of their employee ownership stake. We used a rich database of over 40,000 employee surveys from one large multinational company and 13 other companies. We find some support for all three mechanisms. Selection effects are indicated by several positive relationships between attitudes and stock that is bought by the employees rather than being granted by the employer. Status and size of stake effects are indicated by several positive relationships between attitudes and stock that is granted by the employer, particularly when the employee ownership is accompanied by high-performance work policies. While dividing employee ownership into bought or granted stock sheds light on the selection issue, the data are cross-sectional so selection and causality cannot be firmly established. There is need for further research on selection versus causality in examining the effects of employee ownership. The results indicate that companies may improve employee attitudes and behaviors of people by granting them stock and by having opportunities for employees to purchase stock. Even the results pointing to selection effects, however, can be important for companies, since offering stock ownership opportunities to employees may be an effective way to identify which employees are most committed to the firm and are likely to become good corporate citizens.

Details

Advances in the Economic Analysis of Participatory & Labor-Managed Firms
Type: Book
ISBN: 978-1-78560-379-2

Keywords

Content available
Book part
Publication date: 9 December 2013

Abstract

Details

Sharing Ownership, Profits, and Decision-Making in the 21st Century
Type: Book
ISBN: 978-1-78190-750-4

Content available
Book part
Publication date: 15 December 2015

Abstract

Details

Advances in the Economic Analysis of Participatory & Labor-Managed Firms
Type: Book
ISBN: 978-1-78560-379-2

Book part
Publication date: 9 December 2013

Abstract

Details

Sharing Ownership, Profits, and Decision-Making in the 21st Century
Type: Book
ISBN: 978-1-78190-750-4

Book part
Publication date: 15 December 2015

Abstract

Details

Advances in the Economic Analysis of Participatory & Labor-Managed Firms
Type: Book
ISBN: 978-1-78560-379-2

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