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The Employee Ownership Update

Loren Rodgers

August 15, 2011

(Loren Rodgers)

Winning Workplaces: Employee Ownership Decreases Turnover

Mark Harbeke's blog post Employee Skin in the Game Is Good for Business draws on data from the 342 organizations that applied for this year's Winning Workplaces award. His finding? The organizations without employee ownership had an average of 16% employee turnover in 2010, while organizations where 40% or more of employees own shares had turnover under 11%. Harbeke notes that voluntary turnover is actually at a three-year high, making retention especially important, and concludes that employee ownership is "a vehicle for both increased job satisfaction and commitment (helping to keep in check and even reduce voluntary turnover)."

Republic Airlines Flight Attendants to Receive Equity Stake

A thousand employees of Republic Airways Holdings and its Frontier Airlines subsidiary will soon receive an ownership stake in the company. The Association of Flight Attendants-CWA approved a new collective bargaining agreement. Some terms are similar to an earlier agreement with the union representing Frontier pilots, who will also get an equity share. In exchange for the stock, the flight attendants agreed to adjustments in their vacation, other pay-related changes, and suspension of the 401(k) match through 2015, the Indianapolis Star reported. The deal is expected to save Frontier $16 million in labor costs over four years.

Experimental Economics and Employee Ownership

Philip Mellizo, an assistant professor at the College of Wooster, performed a game theory experiment to explore the impact of ownership incentives on job performance in a tightly controlled experimental setting. He created three-person teams to perform simulated work, where different formulas would determine the compensation of different groups. Some groups simulated a non-employee ownership company, some represented ownership of a minority of the company's share, and a third set of groups was intended to simulate the incentive that would exist in a company 100% owned by its workforce. Despite the artificial settings, Mellizo's results are similar to the anecdotal results from many actual employee ownership companies: there was little difference among the groups in round 1 or round 2, but in round 3, both of the employee ownership groups showed a statistically significant advantage over the flat-pay group.

Polish Coal Company IPO with Employee Stake

The IPO of the state-controlled coal company Jastrzebska Spolka Weglowa raised 5.4 billion zlotys ($1.96 billion) for the Polish government. Company management released a letter written to the workforce, which begins: "Dear workers, our shareholders," and describes the public sale of 33% of the company's shares. As part of the transaction, current and former employees have received a 17% stake in the company, and one-third of current employees exercised the right to buy additional shares ahead of the IPO.

NCEO Sponsors Ownership Thinking Conference

The fifth annual Ownership Thinking conference will take place on September 22 and 23 in the Denver, Colorado, area. The NCEO is again happy to sponsor this event and recommends it as a way for companies to learn how to build strong ownership culture with actively engaged entrepreneurs. For more information, visit its Web site at ownershipthinking.com.

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