Motivating Employee-Owners in ESOP Firms: Human Resource Policies and Company Performance

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.

Motivating Employee Owners in ESOP Firms: Human Resource Policies and Company Performance

What enables some employee ownership firms to overcome the free rider problem andmotivate employees to improve performance? This study analyzes the role of humanresource policies in the performance of employee ownership companies, using employeesurvey data from 14 companies and a national sample of employee-owners. Between-firmcomparisons of 11 ESOP firms show that an index of human resource policies, nominallycontrolled by management, is positively related to employee reports of co-workerperformance and other good workplace outcomes (including perceptions of fairness, goodsupervision, and worker input and influence). Within-firm comparisons in three ESOP firms,and exploratory results from a national survey, show that employee-owners who participatein employee involvement committees are more likely to exert peer pressure on shirking coworkers.We conclude that an understanding of how and when employee ownership workssuccessfully 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) thecorporate culture which battles against tendencies to free ride.human resources, industrial relations, employee ownership

Show Me the Money: Does Shared Capitalism Share the Wealth?

This paper examines the effect of a variety of employee ownership programs on employees' holdings of their employers' stock, their earnings and their wealth. Two major datasets are employed: the NBER Shared Capitalism Research Project employee survey dataset and the 2002 and 2006 national General Social Surveys (GSS). The GSS national survey shows that 29% of permanent, full-time employees with at least one year on the job own their employers' stock, compared to the unsurprisingly higher 87% of employees in the NBER "shared capitalist" firms. The employees in the national sample hold an average of $10,600 of employer stock, compared to$52,800 in the NBER sample. Employee owners in NBER companies with broad-based ownership structures fare better: those in majority-owned ESOPs hold on average $86,000 in company stock and those in broad-based stock option plans hold options worth an average of$283,000. We find no evidence -- either between datasets or between employee-owners and non-owners within datasets -- of substitution of company stock ownership for pay or benefits. Moreover, our analysis suggests that company stock ownership substantially raises total employee wealth, though it appears to have little effect on the overall distribution of wealth. These results suggest that employee ownership tends to raise both ownership stakes and economic resources of American workers across the economic spectrum.