The Employee Ownership Update
February 27, 2007
New Data on Breadth of Employee Ownership in U.S.New data from the General Social Survey show that 20 million American workers own stock in their company through a 401(k) plan, ESOP, direct stock grant, or similar plan, while 10.6 million hold stock options. That means that 17% of the total workforce, but 34.9% of those who work for companies that have stock, own stock through some kind of benefit plan, while 9.3% of the workforce, but 18.6% of those in companies with stock, hold options.
The survey source is the 2006 General Social Survey, one of the largest national surveys on work and other issues. The sample size was 1,242 working adults who were asked very specific questions about their participation in these plans. The survey is a project of the National Opinion Research Center. The analysis and questions were designed by Douglas Kruse and Joseph Blasi of Rutgers University and Richard Freeman of Harvard University for the National Bureau of Economic Research (NBER) Shared Capitalism Project. The project received funding from several sources, including the NBER, the Employee Ownership Foundation, the Beyster Institute, the NCEO, and the Profit Sharing Council of America.
Report Finds ESOPs Generally Improve PerformanceA new review of existing research on ESOPs by Steven Freeman of the University of Pennsylvania finds that the plans generally lead to improved corporate performance, although primarily when combined with high-involvement management systems. Moreover, ESOPs generally are on top of, not in place of, wages or other benefits. Freeman notes that "high profile cases accentuate potential risks through lack of diversification, but most employee-owners are less vulnerable than counterparts." ESOP companies also tend to stay in business longer. ESOPs have little impact on performance in public companies, however, with a number of studies resulting in very mixed results. Public company ESOPs, of course, tend to be dramatically different in structure, financial significance, and cultural relevance than closely held companies.
Freeman finds there is a need for more research on the specific management practices, other than a generally high-involvement work organization, that differentiate one ESOP company from another.
The report was commissioned by the Employee Ownership Foundation, which asked Freeman to provide an unbiased and objective overview of the impact of ESOPs. Copies are available at this link.