ESOPs

In the 28 years since Congress established Employee Stock Ownership Plans (ESOPs), over 10,000 U.S. companies have adopted and maintained ESOPs—dozens of studies have evaluated the effects of ESOP on company performance. After reviewing the research literature, Dr. Douglas Kruse concluded: “25 years of research shows that employee ownership often leads to higher-performing workplaces and better compensation and work lives for employees.” Study 1 (below) indicates that this “ownership effect” averages 2 to 3% per year on a variety of measures.

One key rationale for the creation of ESOP law in 1974 was to share wealth with the workers who helped create wealth. Today, many companies use the wealth sharing aspect of their ESOPs as an effective retention and recruitment tool. But just how effective a means of distributing wealth are ESOPs? Two studies, one conducted in Washington State and one in Massachusetts, have looked at the wealth consequences of ESOPs.

This paper argues the conjecture that worker cooperatives (WCs) are rare because of competitive disadvantages relative to conventionally-owned firms (CFs) is not supported by existing research. It surveys research on the survival and failure of WCs and CFs and estimates the nonparametric hazard and survival functions for CFs in the US. Because the rarity of WCs cannot be attributed to performance it must result from a low formation rate.

The initial draft of this paper was written in response to a request for research on the relationship between self-direction in the workplace, employee ownership, and organizational outcomes. It outlines three aspects of shared decision-making: autonomy, participation, and influence. It then explores the relationship between two of those aspects (autonomy and participation) and a series of productivity-related cultural norms, including ownership identity.