Key Studies on Employee Ownership and Corporate Performance
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| Type of Plan | Performance Measure | Study Period | Performance Impact | Source |
|---|---|---|---|---|
| ESOPs, Private Companies | Annual growth post-ESOP relative to pre-ESOP, indexed for comparable company data | 1988-1997 | Sales growth: +2.4% Employment growth: +2.3% Productivity growth: +2.3% | Douglas Kruse and Joseph Blasi (both of Rutgers) analysis of data for all private company ESOPs for which there were sufficient data. More detail on NCEO Web site at this link |
| Annual growth post-ESOP relative to pre-ESOP, indexed for comparable company data | 1982-1986 | Sales growth: +3.8% Employment growth: +3.4% | Michael Quarrey and Corey Rosen (both of the National Center for Employee Ownership), Harvard Business Review, Sept/Oct 1987 | |
| ESOPs, Public Companies | Tobin's Q (the ratio of the company's stock value to its book equity value) | 1980-2004 | ESOPs led to an 8.12% increase in Tobin's Q relative to the industry median. | "Employee Capitalism or Corporate Socialism? Broad-Based Employee Stock Ownership," E. Han Kim of the University of Michigan and Page Ouimet of the University of North Carolina, paper for American Finance Association 2010 Annual Conference |
| Return on assets, profits, return on equity, and sales growth | 1998-2004 | Compared to comparable companies: Return on assets: +5.5% Net profit margin: +10.3% Return on equity: +5.6% Sales growth rate: -0.8% | Robert Stretcher, Steve Henry, and Joseph Kavanaugh, "The ESOP Performance Puzzle in Public Companies," Journal of Employee Ownership Law and Finance, Fall 2006 | |
| Tobin's Q, long-term investment, operating risk, productivity, and growth | 1995-2001 | Compared to all non-ESOP companies: Median Tobin's Q: -9.0% Median annual sales growth: -3.0% Total factor productivity: -4.7% | Olubunmi Faleye, Vikas Mehrotta, and Randall Morck, "When Labor Has a Voice in Corporate Governance," National Bureau of Economic Research Working Paper, No. 11254, 2005 | |
| ESOPs and Employee Compensation | Salaries and retirement benefits compared to comparable employees in comparable companies using all ESOP companies in Washington State and a sample of comparable non-ESOP companies | 1997 | Wages 5% to 12% higher Total retirement assets 2.6 times greater Diversified retirement assets roughly comparable | Peter Kardas and Jim Keogh of the Washington Department of Community, Trade, and Economic Development, and Adria Scharf of the University of Washington, "Wealth and Income Consequences of Employee Ownership," National Center for Employee Ownership, 1998 |
| Public companies with ESOPs compared to comparable non-ESOP companies | 1980-2004 | Effect on employee compensation in ESOP companies owning: Less than 5%: + 0.8% More than 5%: + 5.2% | "Employee Capitalism or Corporate Socialism? Broad-Based Employee Stock Ownership," E. Han Kim of the University of Michigan and Page Ouimet of the University of North Carolina, paper for American Finance Association 2010 Annual Conference | |
| Participation in other retirement plans for ESOP participants. | 2004-2007 | ESOP participants are at least as likely to participate in a second retirement plans as comparable non-ESOP participants are likely to be in any retirement plan | Loren Rodgers, National Center for Employee Ownership, analysis of Form 5500 filings for all ESOPs and data from the Employee Benefit Research Institute (study to be published 2010) | |
| Stock Options and Corporate Performance | Performance of public companies with broad-based stock option plans (more than 50% of full-time employees receive grants) compared with comparable companies without plans. | 1997-2002 | Companies with broad-based plans saw productivity rise 20% to 33% above comparable firms after plans were implemented, with medium-sized firms at the higher end of the scale. | James Sesil and Maya Krumova, "Broad-Based Stock Options Before and After the Market Meltdown," Rutgers Working Papers, 2002. |
| Before-and-after performance of public companies with broad-based option plans (same definition as above). Companies in three-year post-plan period compared to before and after data for comparable companies without plans. | 1985-1987 and 1995-1997 | Productivity: +14.8% Return on assets: +2.5% | Joseph Blasi, Douglas Kruse, Maya Krumova, and James Sesil, Broadly Granted Stock Options Improve Corporate Performance |
For details on all of the major research on this topic, see our publication Employee Ownership and Corporate Performance for a detailed summary or this article on our Web site for a more basic summary.
