New Research on the Impact of Employee Ownership

At our 2011 annual conference on employee ownership in April, Richard Freeman of Harvard University and Joseph Blasi of Rutgers presented new research on employee stock plans done with their colleague Doug Kruse of Rutgers. The new research draws on data from the Great Place to Work Institute—information that has never before been made available to independent researchers—and represents the largest study ever on the connections among various forms of shared capitalism, organizational culture, and company performance. The data is from companies that applied to Fortune magazine's list of the "100 Best Companies to Work for in America" from 2006 to 2008, and it covers more than 300,000 employee surveys from all 1,300 corporations that applied. Here are four highlights:

• Applicant companies are more likely than average to have some form of employee ownership. Namely, 15% of applicants have ESOPs, 10% are majority employee-owned, and 16% give options to most employees.
• The amount of shared capitalism in a company (i.e., different types of employee ownership and profit sharing) is associated with a significantly higher Trust Index (the Great Place to Work Institute's principal measure of credibility), respect, fairness, pride, and camaraderie within each company's workforce.
• The combination of shared capitalism and the Trust Index is associated with significantly lower turnover in a company, and this is true when actual turnover is reported by the company and when expected turnover is reported by the worker.
• As shared capitalism and the Trust Index go up together, the firm is more valuable to shareholders, as measured by one of the most accepted measures of shareholder value used by researchers, Tobin's q (the market value of the firm relative to the book value of its historical assets).

These and other conclusions of the study support the findings of an earlier 10-year study summarized in their book Shared Capitalism at Work, published by the University of Chicago Press. The book is just now being released in paperback.