Home > Reference Desk > Research & Statistics >

Notes and References

Research Evidence on Prevalence and Effects of Employee Ownership

Main article
Tables (will open in new window)

Notes

1. Based on results from a 1986 BNA/NCEO/Bruskin poll, and 1989 and 1994 EBRI/Gallup polls, summarized in Kruse and Blasi (1999).
2. Albert Gallatin, Thomas Jefferson's Secretary of the Treasury, made such arguments with regard to the closely-related idea of profit sharing, claiming that the "democratic principle upon which this nation was founded should not be restricted to the political processes but should be applied to the industrial operation" (quoted in U.S. Senate, 1939; 72).
3. For evidence on profit sharing see Kruse (1993) and Pliskin et al. (1997), and for evidence on broad-based stock options see U.S. Bureau of Labor Statistics (2000), Blasi et al. (2000), and Sesil et al. (forthcoming).
4. These figures are based on the Form 5500 Research File for fiscal year 1998, made available by the Pension and Welfare Benefits Administration. Many of the plans report assets in common and collective trusts, which hold assets of several pension plans within a company. Failing to account for employer stock held by these trusts will understate the amount of employer stock in pension plans. Since the fiscal year 1998 data do not break out investments of these trusts, this analysis uses data from the regular and "spread" files of fiscal year 1996 (when the Pension and Welfare Administration had such data broken out) matched to 1998 data to impute employer stock in common/collective trusts in fiscal year 1998.
5. Figures on small pension plans are not shown in Table 1, since the research file does not contain data on employer stock in small plans. There were 106.5 million employees of private companies in March 1999, from calculations using Current Population Survey data.
6. The lower-bound estimate is based on summing only the participants in the largest plan in each company, eliminating any possibility of double-counting.
7. Brickley and Hevert (1991) found that 8.9% of employees directly owned company stock in 1983. Only a very small percentage of U.S. workers are in worker cooperatives (see Craig and Pencavel, 1995, and Bonin et al., 1993).
8. This is based on a December 1993 Gallup survey and January 1997 Princeton Survey Research Associates survey, summarized in Kruse and Blasi (1999). This does not include employees in stock option plans.
9. Estimate by Corey Rosen of the National Center for Employee Ownership, Oakland, CA.
10. The data on private companies is at http://www.nceo.org/library/esop_perf.html, and the study of ESOP adoption among public companies is in Kruse (1996).
11. This is based on the 26 studies reviewed in Kruse and Blasi (1997), plus Grunberg et al. (1996), Pendleton et al. (1998), Keef (1998), Brown et al. (1999), and Logur and Yates (2001). The studies were selected based upon the criteria that they used systematic data collection from representative samples of employees, and used statistical techniques to rule out sampling error. Many but not all of the studies used multivariate analysis to hold constant the effect of other salient variables on employee attitudes or behavior.
12. Reminders by management that the strike would hurt ESOP account values brought the response "We don't vote; we don't control the company; we don't care." (Kruse, 1984)
13. Another theoretical objection to group incentive schemes such as employee ownership is that they can weaken managerial incentives to monitor workers closely (Alchian and Demsetz, 1972). Group incentives may, however, lead to better performance if workers have greater information about co-worker performance and group incentives elicit useful information-sharing and peer pressure (Nalbantian, 1987; Putterman and Skillman, 1988).
14. Kruse and Blasi (1997) review 29 of these studies; the additional three are Smith et al. (1997), Ohkusa and Ohtake (1997), and McNabb and Whitfield (1998). As with the employee attitude studies surveyed above, these studies used systematic data collection across a large sample of firms (excluding individual case studies), and statistical techniques to control for other influences upon performance and rule out sampling error.
15. See Logue and Yates (2001) for a detailed examination of the routes through which ESOPs can affect productivity and profits.
16. Based on figures for the nonfinancial corporate sector from U.S. Department of Labor (2001: Table 27).
17. In addition, evidence on the type of worker who chooses to work in group incentive plans indicates that the generally positive performance results are unlikely to be explained by worker self-selection (Weiss, 1987).
18. For example, a majority of Americans say that if they owned company stock and an outside investor was attempting a takeover, they would not sell even for twice the market value of the stock (1994 EBRI/Gallup poll summarized in Kruse and Blasi, 1999).
19. The study also found that these plywood cooperatives did not have the "perverse" response to demand shocks predicted in theory on labor-managed firms.
20. Among 1176 private companies with ESOPs in 1988, 69.6% survived through 1999, compared to only 54.8% of non-ESOP companies in the same industry and of the same size (www.nceo.org/library/esop_perf.html)

References

Alchian, Armen A., and Harold Demsetz. 1972. "Production, Information Costs, and Economic Organization." American Economic Review, 62, December, pp. 777-795.

Blair, Margaret, Douglas Kruse, and Joseph Blasi. 2000. "Is Employee Ownership an Unstable Form? Or a Stabilizing Force?" in Thomas Kochan and Margaret Blair, eds., Corporation and Human Capital. Washington, D.C.: The Brookings Institution.

Blasi, Joseph, Michael Conte and Douglas Kruse. 1996. "Employee Ownership and Corporate Performance Among Public Corporations," Industrial and Labor Relations Review, Vol. 50, No. 1, October, pp. 60-79.

Blasi, Joseph, and Douglas Kruse. 1991. The New Owners: The Mass Emergence of Employee Ownership in Public Companies and What It Means to American Business. New York: HarperBusiness.

Blasi, Joseph, Douglas Kruse, James Sesil, Maya Kroumova, and Ed Carberry. 2000. Stock Options, Corporate Performance, and Organizational Change. Oakland, CA: National Center for Employee Ownership.

Bonin, J.P., Derek Jones and Louis Putterman. 1993. "Theoretical and Empirical Studies of Producer Cooperatives: Will The Twain Ever Meet?" Journal of Economic Literature, 31, 1290-1320.

Brickley, J.A., and Hevert, K.T. 1991. "Direct Employee Stock Ownership: An Empirical Investigation," Financial Management, Summer, pp. 70-84.

Brown, Sarah, Fathi Fakhfakh, and John G. Sessions. 1999. "Absenteeism and Employee Sharing: An Empirical Analysis Based on French Panel Data, 1981-1991," Industrial and Labor Relations Review, Vol. 52(2), January, pp. 234-251.

Craig B. and J. Pencavel. 1992. "The Behavior of Worker Cooperatives: The Plywood Companies of the Pacific Northwest," American Economic Review, 82, 1083-1105.

-----. 1993. "The Objectives of Worker Cooperatives," Journal of Comparative Economics, Vol. 17(2), June, pp. 288-308.

-----. 1995. "Participation and Productivity: A Comparison of Worker Cooperatives and Conventional Firms in The Plywood Industry," Brookings Papers on Economic Activity, 212-160.

Estrin, Saul, and Derek C. Jones. 1992. "The Viability of Employee-Owned Firms: Evidence from France," Industrial & Labor Relations Review, Vol. 45 (2). p 323-38, January.

Gates, Jeffrey R. 1998. The Ownership Solution: Toward a Shared Capitalism for the 21st Century, Addison-Wesley.

Grunberg, Leon, Sarah Moore, and Edward Greenberg. 1996. "The Relationship of Employee Ownership and Participation to Workplace Safety," Economic and Industrial Democracy, Vol. 17(2), May, pp. 221-241.

Kardas, Peter; Adria L. Scharf; and Jim Keogh. 1998. "Wealth and Income Consequences of ESOPs and Employee Ownership: A Comparative Study from Washington State," Journal of Employee Ownership Law and Finance. Vol. 10, No. 4, Fall.

Keef, Stephen P. 1998. "The Causal Association between Employee Share Ownership and Attitudes: A Study Based on the Long Framework," British Journal of Industrial Relations, Vol. 36(1), March, pp. 73-82.

Kruse, D. 1984. Employee Ownership and Employee Attitudes: Two Case Studies. Norwood, PA: Norwood Editions.

-----. 1993. Profit Sharing: Does It Make A Difference? Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.

-----. 1996. "Why Do Firms Adopt Profit-Sharing and Employee Ownership Plans?" British Journal of Industrial Relations, Vol. 34, No. 4, December 1996, pp. 515-38.

-----, and Joseph Blasi. 1997. "Employee Ownership, Employee Attitudes, and Firm Performance: A Review of the Evidence," in The Human Resources Management Handbook, Part 1. Edited by David Lewin, Daniel J.B. Mitchell, and Mahmood A. Zaidi. Greenwich, CT.: JAI Press.

-----. 1999. "Public Opinion Polls on Employee Ownership and Profit Sharing," Journal of Employee Ownership Law and Finance, Vol. 11, No. 3, pp. 3-25.

Logue, John, and Jacquelyn Yates. 2001. The Real World of Employee Ownership. Ithaca, NY: Cornell University Press.

McNabb, Robert, and Keith Whitfield. 1998. "The Impact of Financial Participation and Employee Involvement on Financial Performance," Scottish Journal of Political Economy, Vol. 45(2), May, pp. 171-187.

Nalbantian, Haig, ed. 1987. Incentives, Cooperation, and Risk Sharing. Totowa, N.J.: Rowman and Littlefield.

Ohkusa, Yasushi, and Fumio Ohtake. 1997. "The Productivity Effects of Information Sharing, Profit Sharing, and ESOPs," Journal of the Japanese and International Economies, Vol. 11(3), September, pp. 385-402.

Pendleton, Andrew, Nicholas Wilson, and Mike Wright. 1998. "The Perception and Effects of Share Ownership: Empirical Evidence from Employee Buy-outs," British Journal of Industrial Relations, Vol. 36(1), March, pp. 99-123.

Pliskin, Jeffrey, Takao Kato, and Derek Jones. 1997. "Profit Sharing and Gain Sharing: A Review of Theory, Incidence and Effects," in The Human Resources Management Handbook, Part 1. Edited by David Lewin, Daniel J.B. Mitchell, and Mahmood A. Zaidi. Greenwich, CT.: JAI Press.

Putterman, Louis, and G. Skillman. 1988. "The incentive effects of monitoring under alternative compensation schemes," International Journal of Industrial Organization, pp. 109-119.

Quarrey, M., & Rosen, C. 1993. Employee Ownership and Corporate Performance. Oakland, CA: National Center for Employee Ownership.

Scharf, Adria, and Christopher Mackin. 2000. "Census of Massachusetts Companies with Employee Stock Ownership Plans (ESOPs)." Boston: Commonwealth Corporation.

Sesil, James, Maya Kroumova, Douglas Kruse, and Joseph Blasi. Forthcoming. "Broad-based Employee Stock Options in U.S. 'New Economy' Firms," British Journal of Industrial Relations.

Smith, Stephen, Beom-Cheol Cin, and Milan Vodopivec. 1997. "Privatization Incidence, Ownership Forms, and Firm Performance: Evidence from Slovenia," Journal of Comparative Economics, Vol. 25(2), October, pp. 158-179.

U.S. Bureau of Labor Statistics. 2000. "Pilot Survey on the Incidence of Stock Options in Private Industry in 1999," News Release USDL 00-290, October 10.

U.S. Department of Labor. 2001. 2001 Report on the American Workforce. Washington, D.C.: U.S. Department of Labor.

U.S. Senate, Subcommittee of the Committee on Finance. 1939. "Survey of Experiences in Profit Sharing and Possibilities of Incentive Taxation." Washington, D.C.: Government Printing Office.

Weiss, Andrew. 1987. "Incentives and Worker Behavior," in Haig Nalbantian, ed., Incentives, Cooperation, and Risk Sharing. Totowa, N.J.: Rowman and Littlefield, pp. 137-150.

Winther, Gorm, and Richard Marens. 1997. "Participatory Democracy May Go A Long Way: Comparative Growth Performance of Employee Ownership Firms in New York and Washington States," Economic and Industrial Democracy, Vol. 18(3), August, pp. 393-422.

^^Top of Page

---

Copyright © 2002 by The National Center for Employee Ownership (NCEO) (phone 510/208-1300; email nceo@nceo.org; WWW http://www.nceo.org/). All rights reserved.