Employee-owned Companies Research Articles

A case study of an ESOP-owned holding company: lessons learned and suggested research topics

PurposeThis case study presents an ESOP-owned holding company, Folience, describing the company’s history and holding company structure and strategy. The purpose is to highlight several advantages of the ESOP-owned holding company and concludes with lessons learned and suggestions for research.Design/methodology/approachThe case study design is descriptive and relies on proprietary knowledge and observation, along with access to documents, discussions, meetings and other primary resources and interactions.FindingsThe case study highlights several advantages of the ESOP-owned holding company structure: diversification, greater access to capital, transformation of culture, sustainability and the path to convert businesses to employee ownership. It draws lessons from observations and concludes with suggestions for additional research.Research limitations/implicationsThis is a single holding company case study, heavily reliant on participant observation by the author.Practical implicationsThis case study describes an innovative ESOP holding company whose design may be replicable.Social implicationsThe social impact is that ESOP-owned holding companies are shown to be a path for transitioning companies to being employee-owned and creating economic and cultural gains in doing so. The literature suggests that creating more employee-owned companies, and more employee owners, could have positive social and financial benefits for employees, their families and their communities.Originality/valueThis case study describes an innovative ESOP holding company whose design may be replicable. The social impact is that ESOP-owned holding companies are shown to be a path for transitioning companies to being employee-owned and creating economic and cultural gains in doing so. The literature suggests that creating more employee-owned companies, and more employee owners, could have positive social and financial benefits for employees, their families and their communities. There has been little or no focus, by case study or research, specific to the differentiation of and advantages of ESOP-owned holding companies.

Feeling like owners: the impact of high-performance work practices and psychological ownership on employee outcomes in employee-owned companies

ABSTRACT A central finding of scholarship on employee ownership (EO) is that EO has the strongest impacts on employee outcomes when implemented with other management practices that are typically associated with high-performance work systems (HPWS). However, our explanations for why these complementary practices matter remain underdeveloped. In this paper, we examine whether the extent to which employees feel like owners, using the construct of psychological ownership (PO), mediates the impact of three HPWS practices on four employee outcomes in a dataset of 881 employees in nine companies with employee stock ownership plans (ESOPs) in the United States. Our findings support our core argument that these practices make it more likely that employees will feel like owners, which in turn leads to positive impacts on employee outcomes. More specifically, we find that the extent to which employees perceive that they have influence, are engaged as owners through information sharing and business literacy training, and receive high quality communications about EO are positively associated with PO, and that PO is positively associated with organizational commitment, turnover intention, voice behavior, and helping behavior. We discuss the theoretical, management, and policy implications of our analysis and findings.

Interrelations of broad-based employee stock compensation, organisational justice perception, and psychological ownership

ABSTRACT Psychological ownership is one of the most important mechanisms through which broad-based share compensation leads to positive employee attitudes and behaviours. Despite the implications of broad-based share compensation for employees’ perceptions of organisational justice (OJ), little academic attention has been paid to the relationship of share compensation, justice perception, and psychological ownership. This study focuses on this understudied link and examines if broad-based employee stock ownership can make a difference in employee attitudes such as psychological ownership and perceived organisational justice, and their relationships. This study analysed the surveys of workers from employee-owned companies (the National ESOP Employee Survey) and a comparison group from Amazon’s MTurk to examine the association between antecedents of psychological ownership and justice perception, and the differences made by broad-based share compensation.

Impact of High-Performance Work Practices on Employee Outcomes in Employee-Owned Companies

Impact of High-Performance Work Practices on Employee Outcomes in Employee-Owned Companies

Collective entrepreneurship through worker cooperatives and employee-owned companies in the autonomous community of Euskadi

This article studies collective entrepreneurship through the two legal figures that positive law establishes for the development of associated work: worker cooperatives and labor employee-owned companies (sociedades laborales). Collective self-employment as an alternative formula with respect to salaried work for others, and individual self-employment. The study is based on the main general contributions, both doctrinal and jurisprudential, to focus on the Basque area as regards cooperative positive law. The main objective is to provide a better understanding of the nature, characteristics and legal architecture of worker cooperatives and employee-owned companies, especially in the complex aspect of the legal relationship between the worker-members and the company in which they participate. The nature of that relationship will determine the applicable legal system.

Country study on drivers and barriers for employee ownership: the case of MONDRAGON group

PurposeThis article analyses how the MONDRAGON Group has overcome the barriers that the literature identifies in the creation of employee owned companies (Mygind and Poulsen, 2021), and how it has managed to grow over the last few decades.Design/methodology/approachTo this end, based on an analysis of the legislative framework and the internal documentation of the MONDRAGON Group and its cooperatives, the case of what is often considered the most successful and highly developed network of co-operative firms is studied.FindingsThe study leads us to conclude that MONDRAGON has had sufficient capacity to overcome the barriers faced by worker-owned companies and has known how to adapt to the economic and social demands of each moment, despite the fact that at certain times it has had to act flexibly in its principles.Research limitations/implicationsThe work is limited to the analysis of the Group's internal documentation. It would be interesting to complement this vision with the perceptions of MONDRAGON's partners.Practical implicationsThe MONDRAGON Group's study can show other cooperative experiences what the keys to success are.Originality/valueMONDRAGON has been analysed from different perspectives, but how it has overcome the specific barriers presented by employee-owned companies has not been specifically studied. This perspective makes it possible to identify some of the group's success factors.

Rebalancing Workers for Responsible Management: Employee-Owned Companies and Stakeholder Engagement

Rebalancing Workers for Responsible Management: Employee-Owned Companies and Stakeholder Engagement

Governance and culture within employee-owned companies

PurposeThe purpose of this paper is to examine the type of governance dominant within employee-owned companies established as an Employee Stock Ownership Plan (ESOPs) and to ascertain if governance follows the agency or stewardship theory of governance.Design/methodology/approachA sequential mixed method (Quantitative/Qualitative) research design was used with a convenience sample of employee-owned companies who were members of The ESOP Association (TEA). The Stewardship Climate Scale (SCS) was used as the quantitative instrument and structured interviews were used as the qualitative instrument.FindingsA majority (96%) of ESOPs participating in the study self-identified as stewardship governance, only 6 of the 154 companies (4%) self-identified as having agency governance.Research limitations/implicationsThere is a potential of self-report bias based on the use of convenience sampling which should be minimized based on the large number of participants. The study was not able to examine the relationship between stewardship and productivity.Originality/valueThis is the first large scale research study examining governance within employee-owned companies.

Member surveys on employee ownership and the COVID-19 pandemic

PurposeTo gather data about how employee-owned companies performed during the COVID-19 pandemic and whether employee ownership was a competitive advantage.Design/methodology/approachSurveys of members of the National Center for Employee Ownership.FindingsEmployee-owned companies were more likely to have positive than negative outcomes and many attribute part of their success to their employee ownership structure.Research limitations/implicationsData was from NCEO member companies and not a representative sample of employee-owned companies.Practical implicationsCompanies should consider employee ownership as a strategy; employee-owned companies should consider employee engagement efforts.Originality/valueThis includes the first data gathered specifically on employee-owned companies during the pandemic.

Social responsibility in non-investor-owned organisations

PurposeThis study investigates how the creation of social value occurs in different organisational fields, and how it is implemented by organisations that are typically associated with member welfare and social objectives. The purpose of this study, specifically, is to analyse how social responsibility is implemented in organisational forms that do not pursue profit-making objectives in an exclusive or dominant way, that is, organisations that explicitly shape their aims and governance around the production of social value.Design/methodology/approachThe paper discusses the main types of organisational forms and their relation with social responsibility. It then presents four case studies completed between 2011 and 2013 in Scotland, UK. These include a range of types of non-investor-owned organisations: two employee-owned companies, one co-operative enterprise and one social enterprise. The case studies have explanatory and descriptive nature, and were aimed at enquiring how non-conventional organisations design their governance, achieve economic sustainability and show capacity to produce social value.FindingsFindings highlight the most common elements of the modality by which social responsibility is instituted in the non-profit sector. These include: modifying control rights (“who takes part” and “according to what criteria”); including stakeholders in decision-making processes eventually by means of external networking (how decisions are made and what resources are shared); and making societal aims explicit (“to what expected effects”). Results also emphasise that the production of social value presents challenges.Research limitations/implicationsResults indicate that social responsibility can be created in different ways. This study’s analysis, however, is limited to illustrative cases from the specific context of Scotland. First, further research is needed on solutions that contribute to a practical understanding on how social value is produced in a variety of contexts. Second, this research does not address what competences are required to develop such solutions. Finally, in this study, the focus has been mostly on successful cases. More insights on the difficulties and limitations that non-investor-owned organisations face when implementing social responsibility would be needed.Practical implicationsThe implementation of this study’s findings is within the control of practitioners and can be useful to the sector, as it identifies the features and challenges of governance consistent with deep forms of social responsibility.Social implicationsThe paper identifies forms of organisations that place the creation of social value at their core. In doing so, this study’s contribution improves understanding around forms of enterprise that can generate positive impacts for society, so that society can promote them actively.Originality/valueThis study’s contribution offers unique case studies using a framework that analyses social responsibility in a novel way that is by explaining how non-conventional firms design their governance consistently with the aim of producing value for society and to what extent this is done by including diverse interests coming from a variety of stakeholders.

The differentiation of economic efficiency within employee-owned companies

Background: The empirical research on the differentiation of economic efficiency within em­ployee-owned companies as measured in terms of sales revenue while minimizing the degree of ownership concentration thematically applies toward evaluating the effectiveness of the direct privatisation method implemented by giving a state-owned enterprise for use against payment.
 Research purpose: The main goal of this article is to empirically verify the research hypothesis, stating that the degree of ownership concentration significantly differentiates the economic effi­ciency of employee-owned companies in terms of sales revenue.
 Methods: The empirical verification of this hypothesis was carried out using the method of Data Envelopment Analysis (DEA), which measures the relative technical efficiency of a given deci­sion-making unit (DMU). Empirical studies were conducted on a group of 13 employee-owned companies from the Mazowieckie Province, which concluded agreements with the State Treasury between the years 2000–2005 and covered a 10-year research period. The analysis of sales reve­nue and the degree of ownership concentration was made on the basis of hand-collected data from documents submitted by surveyed employee-owned companies in the National Court Register in the years between 2002–2017.
 Conclusions: Presented results of the empirical research do not allow for full confirmation of the research hypothesis because employee-owned companies, in which DEA efficiency measures were lower than the average measure for all surveyed companies were characterized by the differ­ent average annual degree of ownership concentration.

Turning employees into owners

Purpose The purpose of this paper is to review and analyze policies where employee share ownership might be relevant to the inequality debate in the USA. Design/methodology/approach Description and analysis of policy alternatives designed to increase the prevalence of employee ownership in the USA economy. Findings Since 1974, Congress has passed many provisions to encourage employee ownership, all with widespread bipartisan support. Additional policies would have an even greater impact. Congress could “level the playing field” for corporate divestitures and sales of companies by private equity firms; create Employee Ownership Investment Corporations, modeled after Small Business Investment Corporations, to provide capital for sales to employees; and create an Employee Equity Loan Program to guarantee loans for employee-ownership transactions. Such measures would have no budgetary impact. It could also create tax incentives to encourage corporate and private-equity sales to employees and establish regulations to ensure that employee-owned companies are eligible for the full benefit of recent opportunity zone legislation. Legislation could also encourage publicly traded companies to offer stock to employees at a discount and require companies that receive various forms of special treatment from the government to establish employee stock-ownership programs. Originality/value The academic journal literature has virtually no policy analyses on employee share ownership.

Working in employee-owned companies: The role of economic democracy skills

Employee-owned companies (EOCs) are a growing sector of the UK economy and yet research remains divided on their impact and effectiveness. While research has focused on the links between ownership form and organisational performance, this article investigates whether distinctive ‘economic democracy skills’ can be identified. The findings reveal that economic democracy skills in EOCs comprise formal business-owner skills – termed skills in economic democracy – and softer socioemotional skills necessary for effective democratic functioning, which are labelled economic democracy skills. These skills are developed through democracy work by EOCs. The implications of these findings for the sustainable performance of democratically owned firms are discussed.

Productivity effects of the ownership concentration in Polish employee-owned companies

Research background: The conducted empirical research on the influence of the degree of ownership concentration in the employee?owned companies on their sales revenues thematically fits into the issue of efficiency of the direct privatisation method, in particular giving a state?owned enterprise for use against payment.
 Purpose of the article: The main goal of this article is to verify the research hypothesis stating that in employee?owned companies an increase in the degree of ownership concentration leads to an increase in sales revenues.
 Methods: The empirical studies were carried out on a sample of 15 employee-owned companies from Mazowieckie Province, which concluded the agreement of giving a state?owned enterprise for use against payment from 2000 to 2004 and using the data from financial statements handed in by these entities to the National Court Register for a ten?year period after the privatisation year. The verification of research hypothesis was based on the estimation of a Cobb?Douglas production function by Ordinary Least Squares method for two variants, differing in the way of measuring the degree of ownership concentration in investigated employee?owned companies.
 Findings & Value added: The research hypothesis formulated in this paper was verified negatively as the increase in the degree of ownership concentration in employee?owned companies caused the decrease in their sales revenues. The conducted empirical research also suggests that sales revenues in examined employee?owned companies peak at some intermediate/optimal level of ownership concentration.

Shared core values of high performing employee-owned enterprises

Values represent guidelines for behavior and are important determinants of organizational performance. In addition, employee-owned enterprises (EOEs) tend to outperform traditional organizations. Thus, identifying the core values that underlie successful EOEs should provide insights for improved firm performance. Based on an exploratory comparative analysis of eight high-performing, employee-owned companies, a common set of values that form the basis of their cultures was identified. At one level, four core foundational values – honesty, autonomy, empowerment, and egalitarianism – stood out as enhancing the work experience of individual employees. At another level, four organizational values – accountability, transparency, community, and sustainability – were evident. The identified values do overlap and may serve to support, reinforce, or initiate each other. Moreover, these firms appear to have built management practices and policies that bolster these values. Thus, knowledge of the practices, policies, and core values should be beneficial to organizations seeking high performance.

Koncentracja własności a rentowność majątku w spółkach pracowniczych

Zasadniczym celem artykułu jest zweryfikowanie hipotezy badawczej, stanowiącej, iż w większości spółek pracowniczych wzrostowi stopnia koncentracji własności towarzyszy spadek poziomu rentowności majątku. Badania empiryczne zostały przeprowadzone wśród 15 spółek pracowniczych z województwa mazowieckiego, które zawarły umowę o oddanie przedsiębiorstwa państwowego do odpłatnego korzystania w latach 2000–2004, w oparciu o dane z Krajowego Rejestru Sądowego. Uzyskane wyniki wskazują, iż w badanych spółkach pracowniczych między koncentracją własności a rentownością majątku występowała zarówno dodatnia, jak i ujemna zależność korelacyjna.

Book Review: Jonathan Michie, Joseph R. Blasi and Carlo Borzaga (Eds.): The Oxford Handbook of Mutual, Co-operative and Co-owned Business

The Oxford Handbook of Mutuals and Co-Owned Business investigates all types of 'member owned' organizations, whether consumer co-operatives, agricultural and producer co-operatives, worker co-operatives, mutual building societies, friendly societies, credit unions, solidarity organizations, mutual insurance companies, or employee-owned companies. Such organizations can be owned by their consumers, the producers, or the employees - whether through single-stakeholder or multi-stakeholder ownership.

Economic and Legal Support of Employee of Employee-Shared Ownership in Modern Russia: Regions’ Opinion

Currently in Russia, a great part of capital is steadily formed in a small number of people. Unfortunately, this model of capital concentration cannot be considered effective nor called socially equitable for the majority of the population. The difficult state of domestic production in all regions of the country, the negative impact of general political developments in the world and other factors contribute neither to the increase in the productivity of enterprises, nor to the increase in the employee’s interest to improve the profitability of enterprises, nor to the growth of the Russian economy as a whole. It is therefore necessary to consider alternative ways of development of the modern economy, to raise the interest of each employee (not only the owner, shareholder or senior management) of enterprises in the end result of their activity. In our opinion, an alternative form of society capitalization is the development of employee-shared ownership. This experience is especially prevalent today in many countries with successful economies. In Russia, this ownership exists in the form of a few public enterprises (employee-owned closed joint-stock companies). This paper considers the question of the attitude of the country’s regions to the functioning and dissemination of the experience of enterprises with employee stock ownership in the current Russian economic reality.

Resurrected, recovered, but still didn’t survive? A case study on the viability of employee-owned companies

1. IntroductionFor what reasons do employee-owned companies (EOC) often transform into classic enterprises in the medium term? The and answers regarding the viability of EOC have become relevant against the backdrop of some broad discussions about alternative forms of companies and management throughout the past few decades. The theoretical key question (Dow, 2003, p. 5) of this debate is: Why do only a limited number of EOCs exist? After all, they promise to combine the preferred characteristics of democratic corporate governance with some advantages in productivity, in an increasingly-complex production environment?There is, unfortunately, no uniform definition or concept in the literature of companies that are owned to a considerable extent by their employees. In this paper, we analyze an empirical case of an EOC with the legal and organizational form of a limited liability company. For practical purposes, we conceptualize EOCs as the organizational and legal form of a 'worker capitalist' company, where employees share capital to purchase their company and hold at least a majority share of 51% of the equity, thereby consciously excluding from this working definition cooperatives and other alternative forms like kibbutzim.Unfortunately, we only possess rather rough data about the frequency of EOCs in Germany. Duhm (1990), for instance, was only able to identify about 40 cases. It was later estimated that more than 3000 companies had been privatised in East Germany through management- or employee-buyouts (Schwien, 1995; Gros, 1998); however, we do not know how many EOCs have resulted and how many of them have survived.The scientific debate on the viability of EOCs is clearly dominated by some formalistic model assumptions (for an overview, see Dow, 2003), while in-depth case studies remain fairly rare. This is particularly true for private companies, while cooperatives have been well researched in the past. The aim of this paper, thus, is to critically the existing explanations of EOC viability and, if possible, to enrich and deepen our respective knowledge. This will be done on the basis of a broadlydeveloped single case study of an EOC that emanated from a case of insolvency and, several years later, lost its EOC characteristics and transformed into a 'normal' company.In the following chapter, we critically review the state of the literature on EOC viability. Subsequently, the methods of both data gathering and analysis will be outlined. The description and explanation of the case study are then dealt with extensively. This will be followed by a discussion of the findings as well as of some implications and limitations of our study.2. State of researchEOC has been a topic of academic interest since the early 20th century (Jensen, 2011; for the ideological bases, see Vanek, 1975). Since the 1970s at least, several studies have given more in-depth consideration to two basic problems. On the one hand, they asked for the reasons behind the relative rarity of this organizational form, in spite of its promises to combine the desired characteristics of democratic governance struc- tures with productivity advantages against the background of an increasingly complex production regime. On the other hand, they explored the viability of EOCs and the reasons for their potential viability deficits and their higher degeneration and mortality rates.The following analysis is limited to capitalist economic systems and renounces some more general or system comparative approaches. We focus instead on the organizational level and do not explicitly engage in any macroeconomic considerations (e.g. on the so-called 'labour-managed economies'). We also abstain from examining some cooperatives and other unique forms of community ownership (e.g. kibbutzim). Finally, given the particular character of our case study, we also leave aside any discussions about productivity advantages or disadvantages here. …

Kredyty i pożyczki jako źródło finansowania działalności gospodarczej spółek pracowniczych

The main objective of the paper is to recognize the level of use of credits and loans as the source of financing for business activity of employee-owned companies. The formulated research hypothesis states that the majority of employee-owned companies financed business activity from credits and loans to a small extent. The empirical investigation of the constructed hypothesis has been carried out among 17 employee-owned companies in the Mazowieckie Province, which concluded privatisation agreements with the State Treasury in the years 2000–2002 on the basis of their financial statements. The empirical research proved that employee-owned companies had financed their business activities from credits and loans to the small extent.