The Employee Ownership Update
August 29, 2008
Majority ESOP-Owned Companies Have 8.8% Productivity EdgeA new study of 328 majority ESOP-owned members of the ESOP Association by Brent Kramer has found that these companies have sales per employee that are 8.8% greater than comparable non-ESOP companies. 100% ESOP-owned companies did better than those that were over 50% but not 100%. Smaller companies and companies with greater ESOP account value per employee also did better. Employee influence on new products, work design, and marketing all were also strongly related to performance outcomes.
The study does not demonstrate that having an ESOP per se causes these performance benefits: its design cannot preclude the possibility that better-performing companies are more likely to have ESOPs in the first place (although prior research using before-and-after data, indexed for competition, does indicate a casual effect). The correlates of performance, however, are less subject to this chicken-and-egg problem and provide useful insight into what makes an ESOP work.
Kramer's study, "Employee Ownership and Participation Effects on Firm Outcomes," was his doctoral thesis for the City University of New York.
New NCEO Issue Brief on State of Broad-Based Equity Plans in the U.S.A new NCEO issue brief, The State of Broad-Based Employee Equity Plans, looks at research on the prevalence of these plans, who participates in them, and how they have changed in the last decade. It also reviews research on the impact of equity plans on corporate performance.
The issue brief finds that the consensus of researchers indicates that about nine million U.S. employees receive stock options, restricted stock, or other individual equity awards. Most technology companies still offer awards to most or all employees, and virtually all pre-IPO firms do. About 11% of public companies make most employees eligible for awards, although eligibility does not always translate into actually receiving an award. About 11 to 12 million employees participate in employee stock purchase plans. The number of employees involved in both individual equity and stock purchase plans has dropped about 30% from its 2001 peak, but is about the same as the late 1990s.
The issue brief also summarizes research on the impact of broad-based versus narrowly issued plans. Almost all the studies on broad-based plans find that they have a positive impact in performance. Plans focused on executives have a mixed record in the research.
The study is available for $15 to NCEO members and $25 to non-members. See here for excerpts and ordering information.