Employee Ownership Research Articles

Keeping them honest? Broad‐based employee ownership and earnings management

AbstractResearch Question/IssueDoes broad‐based employee ownership limit accrual earnings management?Research Findings/InsightsI run a series of random effect and fixed effect models on a sample of S&P 1500 firms between 2008 and 2019 to show that managers at employee‐owned firms manipulate earnings less than managers at nonemployee‐owned firms. My findings suggest that employee ownership enhances financial transparency and limits the opportunities for managers to misrepresent firm performance.Theoretical/Academic ImplicationsThis study develops and tests theory on employee ownership as a form of internal corporate governance. Equity incentives for executives are typically thought to reduce agency costs. The findings here suggest awarding equity incentives broadly, in which the majority of employees receive equity stakes, may be a more effective method of reducing agency costs.Practitioner/Policy ImplicationsEarnings management and intentional financial misreporting are often a result of siloed information within firms. Broad‐based employee ownership is generally associated with enhanced information flows through greater mutual monitoring and information sharing. Corporate governors interested in reducing managerial malfeasance may find that widely awarding equity to employees is more effective than financially incentivizing individual managers to act in the firm's interests.

Employee Ownership and Credible Capitalism: Does Employee Ownership Decrease Financial Misdeeds?

Employee Ownership and Credible Capitalism: Does Employee Ownership Decrease Financial Misdeeds?

Non‐executive Employee Ownership and Target Selection in High‐Tech Mergers and Acquisitions

AbstractThe quest to build and expand a firm's human capital is a key driver for mergers and acquisitions (M&As), but acquiring firms often face the threat of losing their targets' key employees in the post‐M&A period. This is particularly true for high‐tech M&As, as human capital is especially important in high‐tech industries. Because non‐executive employee ownership can incentivize employees to invest in firm‐specific human capital, reducing the likelihood that employees will leave, we argue that when screening for potential M&A targets, acquiring firms are more likely to target companies with higher levels of employee ownership. We also argue that the screening role of employee ownership in M&A target selection will be stronger when targets have higher R&D intensity but weaker when targets treat their employees better. Using a sample of 26,137 firm‐year observations, we find support for our arguments. Findings from this study contribute to M&A research by highlighting the importance of non‐executive employee ownership as a screen for human capital retention in M&A target selection.

Compassionate Capitalism: Understanding the Juxtaposition of Personal Gain and Concern for Others

This article explores the concept of Compassionate Capitalism, which involves creating sustainable business models benefiting society and employees. Through Compassionate Capitalism, business owners can build trust with their customers and stakeholders, and in turn, enhance their long-term profitability through the Employee Stock Ownership Plan (ESOP) structure. The article also discusses the historical perspectives on Capitalism and articulates how Capitalism can coexist with compassion. It highlights the ESOP as a present-day example of Compassionate Capitalism, where employees are given a financial stake in the company for which they are employed. ESOPs redistribute ownership to the workforce and create a unique form of Capitalism that continues a successful company’s tradition. The ESOP benefits the younger members of a company, enhances retirement security, and creates a sense of ownership among employees. The article explains how employee ownership can align the interests of workers with those of management, creating a more collaborative, equitable workplace, contributing to greater overall economic growth. This article includes a case study examining a defense contractor's decision to become an employee-owned company through an ESOP transaction in 2010. The ESOP consulting firm, Executive Financial Services (EFS), provided a feasibility analysis and implementation for the transaction. Over the next decade, the company grew rapidly and eventually sold for $1.6 billion in 2020, creating hundreds of millionaires among the ESOP participants. This decision exemplifies the Compassionate Capitalism model, where the owners chose to honor and support the employees who helped build the company, creating generational wealth opportunities for myriad families. The decision to become an employee-owned company through an ESOP transaction shows that Capitalism and compassion can be compatible.

Employee ownership in Spain: worker cooperatives and sociedades laborales

PurposeThe aim of this paper is to describe the main characteristics of het two most recognised models in Spain: worker cooperatives and worker-owned companies (Sociedades Laborales).Design/methodology/approachTo this end, a review will be carried out of the main factors from the regulatory and financial framework and the support structures of these organisations model.FindingsThe main findings are the constant decrease in the number of SSLL over the past ten years and a certain decrease in the number of worker cooperatives. Some of the reasons put forward for this decline are the lack of effective favourable tax treatment; the establishment of more favourable measures for capitalist companies; the change of the single payment of unemployment benefits; the lack of knowledge and training professionals and politicians.Originality/valueThe main contribution of this paper is to provide a recent analysis of the regulatory changes and developments in the field of worker cooperatives and worker-owned companies in Spain.

Employee ownership in the USA: lessons to consider in creating more inclusive capitalism

PurposeThis paper aims to identify the key lessons to learn from the US employee stock ownership plan (ESOP)-model. The lessons are, broad-based employee ownership is difficult to attain and sustain if employees have to use their own money to purchase shares. The paper works better when the shares are held in trust rather than being held individually. Broad-based employee ownership improves corporate performance and employee financial security. Employees care more about how employee ownership affects the stability of their jobs and retirement than having governance rights. If laws require democratic governance there will not be widespread employee ownership. Tax incentives are critical to induce companies and their owners to share ownership.Design/methodology/approachThis paper is based on results from National Center for Employee Ownership research, a review of other research in the field, and the author’s own 45 years of experience in this field.FindingsAbout one-quarter of the private sector workforce in the USA participates in some kind of employee ownership plan. There are 6,700 ESOPs in the USA with 14 million participants. The ESOPs hold over $1.4 trillion in assets. About 6,000 of these plans are in non-listed companies and the companies employ about two million people. Public companies ESOPs generally own under 10% of company stock; private company ESOPs usually own at least 30% of the stock and a majority of the plans own 100% of the stock. Most of these companies have between 20 and 500 employees.Originality/valueThe article gives a practitioner's overview over the main reasons behind the success of the ESOP model in the USA.

The Influence of Corporate Culture and Leadership on the Performance of Permanent Employees at the Budi Luhur STIKes, Cimahi City

This research was conducted on permanent employees at the Budi Luhur STIKes, Cimahi City. The purpose of this study was to find out how much the influence of corporate culture and leadership in a company contributes to the performance of permanent employees either partially or simultaneously at STIKes Budi Luhur, Cimahi City. The research method used in this research is descriptive method and associative method. In this study, the unit of analysis is the individual, namely permanent employees at the Budi Luhur STIKes Cimahi City. This study used a saturated sample because all members of the population were selected as samples, namely all permanent employees at the Budi Luhur STIKes Cimahi City as many as 40 respondents. The data collection technique uses a questionnaire. The analytical method uses multiple linear regression analysis, Besides that, the validity and reliability of the research instruments were also tested. Based on the results of the study, it shows that there is an influence both partially and simultaneously on exogenous variables (corporate culture and leadership) on endogenous variables (employee performance). The implication of this research is that the Budi Luhur STIKes can review the guidelines regarding the implementation of tasks and clear directions regarding the implementation of the assigned tasks and increase the sense of employee ownership of the institution to increase employee responsibility for their work

Worker cooperatives in Italy: legislation, prevalence and recent trends

PurposeIn Italy, worker cooperatives (WCs), whose workers hold major control rights over collectively-owned assets, are the leading vehicle for the promotion and development of employee ownership. Worker cooperatives are present in all regions and in most economic sectors, employing about 506,000 workers and generating a turnover of about €22 bn. Despite their history and diffusion, the high prevalence of WCs in Italy is under-researched and -thematised and requires new research.Design/methodology/approachThe paper leverages unpublished primary and secondary data from Centro Studi Legacoop databank, the Aida-Bureau Van Dijk databank and the Cooperative Registry of the Ministry of Economic Development (CRMED) to explain the spread of WCs in Italy.FindingsThis paper reveals descriptive statistics of WCs and investigates their distribution across economic sectors and regions, their economic and financial performance and gives an overview of the relevant legislation. The paper indicates that older small- and medium-sized cooperatives located in central and north-eastern Italy perform best economically. However, in recent years, an increasing number of young cooperatives has emerged in South Italy thanks to favourable legislation, cooperative finance and the diffusion of cooperative know-how. Limitations to such results are reported in the conclusions.Originality/valueThe paper sheds light on past and recent development trends of WCs in Italy, highlights their growth in South Italy and revitalises the debate on the drivers, structures and rationales of employee-owned enterprises in Italy. Findings generate implications for research and practice. Given the tendency of WCs to better protect jobs than investor-owned enterprises, the spread of these enterprises may help workers find better and more stable jobs, counter-cyclically mitigating the dangerous effects of macro- and meso-economic fluctuations and instability.

Measuring employee empowering and ownership under accountability pressure: the case of J&J Industries

Research Methodology Data used to develop the case included primary data from employees and supervisors of a commercial floorcovering manufacturing plant in Northwest Georgia. The case company is not disguised. The survey was developed using existing instruments from the Organizational Behavior and Human Resources Literature. Instruments were listed in Exhibits 2 through 7. The survey administration had the support of the Vice President for Resources and Facilities, and employees and their supervisors were given time to complete the surveys. The data gathered was analyzed by the researcher using SPSS statistical software. Case overview/synopsis Established in 1957, J&J started as a family-owned business but had grown and diversified its product offerings by focusing on commercial flooring. It survived several economic downturns and remained competitive in a market dominated by more prominent flooring manufacturers. J&J Industries strived to empower its 800 employees with various incentive programs. Employees remained loyal to J&J; many had worked for the company for over 15 years. However, management wanted to measure the impact of empowering and initiatives on employee performance and satisfaction to determine the real power of employee incentive programs. The Resources and Facilities Vice President employed Professor Lopez, a Management Professor, to develop a survey to measure these constructs and analyze the data to guide future incentive programs. Data from the employee and supervisor survey was provided along with the statistical analysis results for interpretation and recommendations for VP Fordham. Complexity academic level The target audience for this case is primarily students in a research methodology course and students studying quantitative regression analysis and interpretation. The focus is predominantly on graduate-level students in Master of Business Administration or Master of Accounting programs in business. Graduate students should have completed courses in management or organizational behavior, business statistics or quantitative methods or data visualization and cleaning as background knowledge for this case. Specifically, students should understand regression analysis and know when and how the tool is used for managerial decision-making.

Comparing organizational democracy in Norway and Mondragon: Lessons learned for other nations and initiatives

We have been asked to compare and contrast the Norwegian system of industrial democracy with the Mondragon federated corporation of worker cooperatives to arrive at a realistic appraisal of what can be learned from both systems and to discern the lessons to be learned for other nations and other initiatives. In doing so, the kinds of lessons that are needed for the emerging system of broad-based employee share ownership and industrial participation in the United States will be introduced as a part of our analysis. We are hoping that our colleagues and readers can benefit from the books and empirical research sponsored by Rutgers University’s Institute for the Study of Employee Ownership and Profit Sharing1 and our sister Journal of Participation and Employee Ownership.

One tool to rule? – A field experimental longitudinal study on the costs and benefits of mobile device usage in public agencies

With the rising number of mobile technologies used in work- and private-life domains, opportunities, and challenges of mobile device usage in daily lives arise. Against this background, we strive to investigate how corporately provided mobile devices, i.e., tablets, affect work-life conflict and innovation behavior of public sector employees over time. We analyze employees in German public agencies due to their high intrinsic motivation goals alongside strict working schedules, regulations, and payments in contrast to the employees of the private sector. Our research pursues a sequential explorative multi-method approach of conducting a field experiment with qualitative and quantitative data. Twenty employees were divided into two equal groups: 1.) employees with tablets, 2.) employees without tablets. After analyzing the interviews and survey data using methods from grounded theory, we found that a) digital competences can create a bottleneck for employees' innovation behavior, b) corporately provided mobile devices (COPE) decrease employees work-life conflict despite increasing their workload, and c) COPE-IT can support innovation behavior of employees in public agencies, assisting them in keeping up their efficient work when work demands are high. All these effects can be mediated by the development of employee's ownership towards their COPE-IT.

A Study of the Impact of Executive Power and Employee Stock Ownership Plans on Corporate Cost Stickiness: Evidence from China A-Share Non-Financial Listed Companies

It is of great value to study the stickiness of enterprise cost for reducing enterprise cost and improving enterprise performance. This paper selected all A-share non-financial listed companies from 2014 to 2019 to study the impact of executive power and employee stock ownership plans on cost stickiness. The study found that the higher the executive power, the stronger the cost stickiness of the enterprise. By reducing the adjustment costs and optimistic expectations of management and improving the performance sensitivity of executive compensation and quality of information disclosure, an employee stock ownership plan plays a role in suppressing the cost-stickiness effect of executive power. The larger the scale and the more times the employee stock ownership plan is implemented, the stronger the inhibition effect is. An employee stock ownership plan has a stronger inhibiting effect on the cost-stickiness effect of executive power in enterprises with a large proportion of state-owned and institutional shares and high employee status. Combining the research themes of management accounting and financial accounting, this study discusses the economic consequences of ESOP from the perspective of enterprise cost control, which is helpful for internal and external stakeholders of enterprises to understand the characteristics and effects of ESOP in the new era, and also provides new evidence for enterprise cost control while enlightening policy makers and listed companies to explore the feasible mechanism of enterprise cost control from the staff level. It is of great value to study the stickiness of enterprise cost for reducing enterprise cost and improving enterprise performance. This paper selected all A-share non-financial listed companies from 2014 to 2019 to study the impact of executive power and an employee stock ownership plan on cost stickiness. It is found that the higher the executive power, the stronger the cost stickiness. An employee stock ownership plan has a stronger inhibiting effect on the cost-stickiness effect of executive power in enterprises with a large proportion of state-owned and institutional shares and high employee status. This study provides new evidence for corporate cost control.

Defining employee ownership: four meanings and two models

PurposeThe field of broad-based employee ownership within corporations is a specific application of the foundational topic of property ownership. It is situated at the intersection of a broad range of scholarly disciplines including economics, law, finance and management. Each discipline contributes vocabulary and distinctions describing this field. That broad spectrum of disciplinary inquiry is a strength but it also lends a “ships passing in the night” quality to discussions of employee ownership. This paper attempts to unravel the narrative diversity surrounding this topic. Four meanings of ownership are introduced. Those meanings are in turn embedded within two abstract models of the corporation; the corporation as property and the corporation as social institution.Design/methodology/approachThere is no experimental design The paper presents a conceptual overview and introduces a taxonomy of four meanings and two models of ownership.FindingsFour meanings of ownership are introduced. The meanings are ownership as compensation, investment, retirement and membership. Those meanings are in turn embedded within two abstract models of the corporation; the corporation as property and the corporation as social institution.Research limitations/implicationsNo hypotheses are advanced. This is not a research paper. A conceptual overview that makes use of taxonomy of meanings and models is introduced to help clarify confusions abundant in the field of employee ownership. Readers may differ with the categories of meanings and models introduced in this conceptual overview.Practical implicationsThe ambition of the paper is to describe the various meanings and models of employee ownership presently in use in both academic and applied settings. It is not necessary or desirable to assert the primacy of a single meaning or model in order to achieve progress. The analysis provided here surfaces a range of assumptions about ownership that have heretofore been implicit in both scholarship and in practice. Making those assumptions explicit should prove useful to both scholars and practitioners of employee ownership.Social implicationsThe concept of employee ownership enjoys a relatively broad appeal with the public. Among the academic disciplines that have trained their lights upon it, a more mixed reception prevails. Much of the academic and policy controversy derives from confusion about the nature and structure of employee ownership. This paper attempts to address that confusion by presenting a taxonomy of meanings and models that may prove useful for future research.Originality/valueThis study is one of the first efforts to comprehinsively map the various meanings and models of broad-based employee ownership.

Moonshots

In the last half-century, technological progress has stagnated. Rapid advances in information technology disguise the slow pace of productivity growth in other fields. Reigniting technological progress may require firms to invest in moonshots—long-term projects to commercialize innovations. Yet all but a few giant tech firms shy away from moonshots, even when the expected returns would justify the investment. The root of the problem is corporate structure. The process of developing a novel technology does not generate the kind of interim feedback that shareholders need to monitor managers and managers need to motivate employees. Managers who anticipate these agency problems invest in incremental innovations instead.
 In the last few years, a new structure designed to commercialize long-term innovations has emerged—the venture carveout. A venture carveout is a private company with one or two public company parents, outside private investors, and employee ownership. The parents provide intellectual property and a long-term strategic commitment. The private investors supply patient capital that insulates the project from short-term shareholder pressure. The employees’ equity motivates them to bring a product to market. The first venture carveouts are attempting to commercialize autonomous vehicles. If they succeed, they will validate a new model for innovation. This Article argues that venture carveouts could enable more companies to invest in moonshots, compete with the tech giants that dominate our economy, and accelerate technological progress.

Diversity, Equity, and Inclusion – Insights from a Justice Perspective

Diversity, equity, and inclusion have been topics of increasing interest as many organizations give lip service to the importance of treating employees fairly. In this paper we expand the discussion of justice - noting that equity is only one of twelve justice-based elements and clarifying why all twelve of those elements are essential in increasing employee belonging and commitment. We encourage organizations to expand their commitment to all the elements of justice to increase employee ownership and performance and to build greater organization trust.

Participative Management and Employee Productivity in Agro- Entrepreneurship Firms in Anambra State

The study examined the participative management and employee productivity in agro-entrepreneurship firms in Anambra state. the objectives of the study were to: examine the effect of direct employee’ participation, consultative employee’ participation, representative employee’ participation employee ownership participation on employee productivity in agro-entrepreneurship firms in Anambra state. However four hypotheses are formulated in line with the objectives. The study were anchored on Subjective Expected Utility theory (SEU) developed by L. J. Savage in 1954. The study adopted survey method of research. Data were generated through primary and secondary sources. The method for data collection was questionnaire which was administered randomly among the staff of the selected firm. The populations of the study were 2244, The sample size of the study is four hundred and thirty-two (432). While three hundred and thirty-two (332) where retrieved. The hypotheses were tested using regression method at 0.05% level of significance. The findings of the study revealed, There was significant relationship between direct employees’ participation in effective decision making and employee productivity in agro-entrepreneurship firms in Anambra state (t-7.761 p-0.00).There was significant relationship between consultative employees’ participation in effective decision making and employee productivity in agro-entrepreneurship firms in Anambra state (t-6.112 p-0.00).There was significant relationship between Representative employees’ participation in effective decision making and employee productivity in agro-entrepreneurship firms in Anambra state (t-2.836 p-0.00).The study recommends that The dimension and scope to which employee participate in organization sensitive issues should be deepened so as to attracts employee trust and commitment.Monthly or quarterly meetings and consultations with subordinates on crucial issues will stimulate employee morale and promote self-motivation as they will feel recognized and valued in the organization. This will be achieved through open and effective communication between the management and subordinates.

The Profound Connotation, Realistic Dilemma and Countermeasures of Humanistic Care of Multinational Enterprises

The 21st century is an era of both opportunities and challenges. With the rapid economic development of our country, the enterprise culture derived from the modern enterprise management thought has been widely paid attention to by managers. The quality of people’s life has been significantly improved, and the traditional business management mode is no longer applicable to modern enterprises. Humanistic care is a means used by enterprises to balance the gap between dreams and reality, and fully respect people’s emotional needs. Enhance the sense of ownership and responsibility of employees to take the enterprise as their home, so as to reduce or even avoid many unnecessary disputes and contradictions, and improve the happiness index of employees and the competitive advantage of the enterprise. It is necessary to analyze the humanistic care in enterprise management and find problems in time, and then put forward effective improvement measures.

Employee stock ownership plans and firm productivity in China

AbstractA growing number of Chinese firms motivate their employees through employee stock ownership plans (ESOPs). Using a sample of listed firms in China, this paper examines the impact of ESOPs on firms’ total factor productivity (TFP), as well as the mechanisms of ESOPs. The empirical results show that ESOPs have a positive impact on firm TFP. The mechanism tests convey that ESOPs increase firm TFP by promoting research and development (R&D) investment and mitigating agency costs. These results are robust after accounting for endogeneity and using alternative metrics of TFP. In addition, we find that the positive effect of ESOPs on firm TFP is more pronounced in non-state-owned firms and firms with a less severe free-riding problem. Furthermore, the effect on firm TFP is positively associated with the subscription proportion of non-executive employees in ESOPs. Overall, the results of this study underscore the important role of employee ownership in firms’ productivity improvement.

Should Family Businesses Have Employee Ownership Plans?

Should Family Businesses Have Employee Ownership Plans?

Broad-based Employee Ownership in Great Reset of capitalism

Purpose: the authors explore the Role of Employee Ownership in the context of the Great Reset of Capitalism.Methods: in contrast to the theory of stakeholder capitalism, this article discusses an alternative point of view on the reset of capitalism – through the Broad-based Employee Ownership of companies in the world and Russian economy. The article criticizes G. Dow's methodological approaches and the underestimation on the contribution of Labour-managed firms to the world economy. The criterion of "45 founders or more" is applied to the mass ownership of employees, with a minimum number of founders of a cooperative of 5 persons.Results: the article presets results of two empirical studies. The first is to verify the current assessment of the head of the National Center for Worker Ownership (NCEO) on the significant role of Employee Ownership. Since neither the Employee Stock Ownership Plan (ESOP) nor its analogues are implemented in Russia, the second empirical study was conducted on an array of 15,086 agricultural cooperatives representing small and medium-sized businesses in the Russian Federation.Сonclusions and Relevance: it is concluded that the NCEO assessment was fully confirmed, and accordingly, G. Dow's assessment was refuted. The share of medium-sized enterprises-agricultural cooperatives with mass ownership of workers (45 founders or more) in the general database of enterprises-agricultural cooperatives is estimated to be an order of magnitude higher than the share of medium-sized enterprises in the total number of small and medium-sized enterprises (SMEs). To improve the mechanism of state financial support in the long term, new directions havebeen identified: the organizational and legal the form of a small and medium-sized business entity, the ownership and Broad-based employee ownership (founders /co-owners) of companies.