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Abstract

Details

Journal of Participation and Employee Ownership, vol. 4 no. 2
Type: Research Article
ISSN: 2514-7641

Article
Publication date: 7 August 2018

Joseph Blasi, Douglas Kruse and Richard B. Freeman

The purpose of this paper is to review the historical background for broad-based ownership in the USA, the development of forms of employee ownership and profit sharing in…

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Abstract

Purpose

The purpose of this paper is to review the historical background for broad-based ownership in the USA, the development of forms of employee ownership and profit sharing in the USA, the research literature on employee ownership and profit sharing and related employee participation, the development of policy and options for new policies.

Design/methodology/approach

It is a literature review.

Findings

There are four reasons to be interested in employee stock ownership and profit sharing today: first, employee share ownership and profit sharing can increase worker pay and wealth and broaden the overall distribution of income and wealth, a key ingredient for a successful democracy. To be a tool for reducing inequality, employee stock ownership and profit sharing must be spread more widely and meaningfully than it is today. Second, employee share ownership and profit sharing provide incentives for more effort, cooperation, information sharing and innovation that can improve workplace performance and company productivity. Third, employee share ownership and profit sharing can save jobs by enhancing firm survival and employment stability, with wider economic benefits that come from decreasing unemployment. Fourth, employee share ownership and profit sharing can create more harmonious workplaces with greater corporate transparency and increased worker involvement in their work lives through access to information and participation in workplace decisions.

Research limitations/implications

Growth has been extraordinarily sluggish in the recovery from the Great Recession and has weakened in advanced countries over a longer period, leading some analysts to believe that the authors have entered a new economic era of small to modest growth. This may turn out to be true, which will increase the importance of growth-enhancing policies. The evidence that firms with employee stock ownership and/or profit-sharing perform better than others suggests that policies that extend ownership would boost the country’s lagging growth rate. The evidence that employee share ownership firms preserve jobs and survive recessions better than others suggests that policies that extend ownership could help stabilize the economy when the next recession comes down the pike.

Practical implications

Because there may be informational or institutional barriers about the benefits of ownership and sharing and the ways firms can introduce such programs that government can help overcome. Government has often played a role in promoting performance-enhancing work practices to enhance overall economy-wide outcomes from higher productivity and innovation, such as the long history of agricultural extension services (since 1887) to spread information on best practices in farming, and employer education on safety practices conducted by the Occupational Safety and Health Administration.

Social implications

Because of the “externalities” – effects that extend beyond the firm and its members – that greater ownership/profit sharing can bring us. If employee ownership and profit sharing lead to fewer layoffs and firm closures, this can reduce recession-created drops in consumer purchasing power and aggregate demand; government expenditures on unemployment compensation and other forms of support; decreased tax base for supporting schools and infrastructure; and potentially harmful social and personal effects, such as marital breakups and alcohol abuse. Apart from unemployment, more broadly shared prosperity and lower inequality may also have wider benefits for macroeconomic growth, stability and societal outcomes, as described by a number of social scientists. To the extent the ownership and profit sharing is a public good, a nudge in policy to consider the idea makes sense.

Originality/value

Because it is hard to find policy options that are as bipartisan as the shares policy. In The Citizens’ Share, and in other articles and venues, the authors lay out the areas in which there is evidence or logic for in-depth development of, and experimentation with, several broad policy directions, with the details to be worked out by members of Congress based on their deliberations.

Details

Journal of Participation and Employee Ownership, vol. 1 no. 1
Type: Research Article
ISSN: 2514-7641

Keywords

Content available
Article
Publication date: 5 December 2019

Joseph Blasi, Dan Weltmann and Douglas Kruse

Abstract

Details

Journal of Participation and Employee Ownership, vol. 2 no. 3
Type: Research Article
ISSN: 2514-7641

Article
Publication date: 10 November 2021

Joseph Blasi, Douglas Kruse and Dan Weltmann

The purpose of this study is to understand how majority employee-owned firms responded to the pandemic compared to firms that were not majority employee-owned. The…

Abstract

Purpose

The purpose of this study is to understand how majority employee-owned firms responded to the pandemic compared to firms that were not majority employee-owned. The Employee Ownership Foundation partnered with Rutgers University and the SSRS survey firm to survey ESOP and non-ESOP firms about their responses to the COVID-19 pandemic. A key purpose of the survey was to estimate firm-level changes in employment from mid-January to August (current employment figures were adjusted to August 5 using BLS industry employment trends). The survey also looked at other forms of adjustment and responses to the pandemic as reviewed below. The focus in this study is on the differences between firms that are majority owned by ESOPs and those that are not.

Design/methodology/approach

The survey included 247 executives from ESOP Association member companies and 500 executives from an SSRS business panel constructed to be representative of US companies with 50 or more employees. The survey started on August 5 and ended on September 23, 2020.

Findings

(1) Majority ESOP firms had employment declines from January to August that were on average only one-fourth as large as for other firms. The difference is maintained when controlling for industry membership. (2) Majority ESOP firms were more likely to be declared “essential,” but the lower employment cutbacks among majority ESOP firms remain among essential and non-essential businesses. As essential businesses, majority ESOP firms were more likely receive Paycheck Protection Program or other government pandemic assistance, but both assistance recipients and non-recipients had lower employment cutbacks among majority ESOP firms. (3) The extent of employment cutbacks was higher for non-managers than for managers, but the manager/non-manager gap was higher among other firms than among majority ESOP firms.

Research limitations/implications

This study supports empirical findings done previously.

Practical implications

This study suggests to non-EO firms what they can do.

Social implications

This study suggests strengths of EO firms.

Originality/value

A very original and one-of-a-kind dataset.

Details

Journal of Participation and Employee Ownership, vol. 4 no. 2
Type: Research Article
ISSN: 2514-7641

Keywords

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…

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

Andrea Kim, Kyongji Han, Joseph R. Blasi and Douglas L. Kruse

Building on economic and psychological ownership theories, this study investigates whether group incentives can reduce shirking because these practices enable employees to…

Abstract

Building on economic and psychological ownership theories, this study investigates whether group incentives can reduce shirking because these practices enable employees to feel psychological ownership that motivates them to prevent their own and coworkers shirking in a collective work setting. We analyzed a sample of 38,475 employees in eight companies that participated in the survey administered by the National Bureau of Economic Research (NBER) in 2005. Our findings reveal that (1) short-term-oriented group incentives (STOGIs) and long-term-oriented group incentives (LTOGIs) are positively related to self-shirking regulation and coworker-shirking intervention; (2) STOGIs have stronger relationships with these anti-shirking outcomes than LTOGIs; and (3) the interaction between LTOGIs and formal training is positively related to these anti-shirking outcomes. Although some scholars are concerned about the free rider problem in the collective working and rewarding structure, our work demonstrates how and why employee shirking may be mitigated in such settings.

Details

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

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…

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

Book part
Publication date: 9 December 2013

Philip Mellizo

Group incentive schemes have been shown to be positively associated with firm performance but it remains an open question whether this association can be explained by the…

Abstract

Purpose

Group incentive schemes have been shown to be positively associated with firm performance but it remains an open question whether this association can be explained by the motivating characteristics of the group-incentive scheme itself, or if this is due to factors that tend to accompany group-incentive schemes. We use a controlled experiment to directly test if group-incentive schemes can motivate sustained individual effort in the absence of rules, norms, and institutions that are known to mitigate free-riding behavior.

Design/methodology/approach

We use a controlled lab experiment that randomly assigns subjects to one of three compensation contracts used to incentivize an onerous effort task. Two of the compensation contracts are group-incentive schemes where subjects have an incentive to free-ride on the efforts of their coworkers, and the third (control) is a flat-wage contract.

Findings

We find that both group-incentive schemes resulted in sustained, higher performance relative to the flat-wage compensation contract. Further, we do not find evidence of free-riding behavior under the two group-incentive schemes.

Research limitations/implications

Although we do find sustained cooperation/performance over the three work periods of our experiment under the group-incentive schemes, further testing would be required to evaluate whether group-incentive schemes can sustain cooperation over a longer time horizon without complementary norms, policies, or institutions that mitigate free-riding.

Originality/value

By unambiguously showing that group-incentive schemes can, by themselves, motivate workers to provide sustained levels of effort, this suggests that the “1/n problem” may be, in part, an artifact of the rational-actor modeling conventions.

Details

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

Keywords

Book part
Publication date: 6 July 2004

Douglas Kruse, Richard Freeman, Joseph Blasi, Robert Buchele, Adria Scharf, Loren Rodgers and Chris Mackin

What enables some employee ownership firms to overcome the free rider problem and motivate employees to improve performance? This study analyzes the role of human resource…

Abstract

What enables some employee ownership firms to overcome the free rider problem and motivate employees to improve performance? This study analyzes the role of human resource policies in the performance of employee ownership companies, using employee survey data from 14 companies and a national sample of employee-owners. Between-firm comparisons of 11 ESOP firms show that an index of human resource policies, nominally controlled by management, is positively related to employee reports of co-worker performance and other good workplace outcomes (including perceptions of fairness, good supervision, and worker input and influence). Within-firm comparisons in three ESOP firms, and exploratory results from a national survey, show that employee-owners who participate in employee involvement committees are more likely to exert peer pressure on shirking co-workers. We conclude that an understanding of how and when employee ownership works successfully requires a three-pronged analysis of: (1) the incentives that ownership gives; (2) the participative mechanisms available to workers to act on those incentives; and (3) the corporate culture that battles against tendencies to free ride.

Details

Employee Participation, Firm Performance and Survival
Type: Book
ISBN: 978-0-76231-114-9

Book part
Publication date: 9 December 2013

Tatiana Kachalina (Ershova)

The purpose of this article is to analyze the present state of employee ownership in Russia and reasons for its decline due to the drawbacks of economic reforms on the country.

Abstract

Purpose

The purpose of this article is to analyze the present state of employee ownership in Russia and reasons for its decline due to the drawbacks of economic reforms on the country.

Design/methodology/approach

The design of the article includes the analysis of the Russian model of ESOP and its differences from the U.S. analog. The author also describes the practical experience of the Russian people’s enterprises and the drawbacks in the legal foundations of their work.

Findings

The key finding of this work is that the correction of these drawbacks would lead to broader development of employee owned companies in Russia.

Social implications

The author’s ideas of changing focus of the market reforms in Russia and facilitating the development of economic democracy in the country constitute the major social implication of her research.

Practical implications

It may have practical implications both for developed market economies and economies in transition.

Originality/value

The originality of the paper is determined by drawing a logical link between the development of employee ownership and overall market reform in Russia, as well as by presenting a comparative analysis of the U.S. and Russian models of ESOP.

Details

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

Keywords

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