This paper compares the performance of 229 'New Economy' firms offering broad-based stock options to that of their non-stock option counterparts. A simple comparison of these firms reveals that the former have higher shareholder returns, Tobin's q and new knowledge generation. Multivariate analysis using panel data also suggests that the adoption of a stock option plan results in higher levels of value added per employee. However, we do not find evidence that these plans result in superior growth in Tobin's q or new knowledge generation.
Increased equity participation by employees has attracted substantial interest for its potential to affect both economic outcomes (e.g., worker and firm performance) and social outcomes (e.g., wealth and income inequality). This paper summarizes the findings from over 50 large-sample empirical studies that have been done on employee ownership and broad-based stock option plans in the past 25 years, covering studies on plan adoption, employee attitudes and behaviours, firm performance, and employee wages and wealth. The results from these studies indicate employee ownership is linked to better outcomes on average but employee ownership clearly does not automatically improve worker and firm outcomes given that there are both positive and neutral findings. Additional research is needed to determine the conditions under which employee ownership improves economic outcomes, to examine worker and employer concerns and the trade-offs they are willing to make, and to explore the further potential of these systems.
This paper examines the productivity effect of broad-based and executive stock option programs in adoption year and five subsequent years. The findings include a positive impact on productivity, which is maintained over a five-year period after adoption for executive plans but diminishes immediately for broad-based plans. We interpret these findings as evidence of stock option usage being of benefit to organizations. However, to sustain the impact of broad-based plans options, grants may need to be made with the same frequency as executive option grants.
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