Do Workers Gain by Sharing? Employee Outcomes under Employee Ownership, Profit Sharing, and Broad-Based Stock Options

Abstract

This paper examines how shared capitalism compensation systems -those that link employee pay to company performance -affect diverse employee outcomes. It uses two data sets: the national GSS survey that provides a broad representative view of the extent of the programs; and the NBER Shared Capitalism Project surveys of workers in 14 companies that use shared capitalism programs extensively. We find that greater involvement in the programs is generally linked to greater participation in decisions, higher quality supervision and treatment of employees, more training, higher pay and benefits, greater job security, and higher job satisfaction. We also find positive interactions of shared capitalism with high-performance policies in predicting participation in decisions and overall job satisfaction, and negative interactions of shared capitalism with close supervision in affecting almost all of the outcomes. Overall the results support the idea that workers can gain by sharing, but whether this happens is contingent on other workplace policies.

Profit sharing: Consequences for workers

“…A recent analysis of shirking, using two major US databases, found that shirking is not confined to workplaces that have adopted "shared capitalism" (profit sharing, employee stock plans, and the like) but is also common in other workplaces [6]. The study posits that, contrary to the free-rider argument, workers in such arrangements may engage in "mutual monitoring" and may intervene with workers who are perceived to be putting forth insufficient effort.…”

“…The empirical results indicate that workers are most likely to intervene with shirkers in companies that have some form of employee profit sharing and where employees participate in decisions or work in teams [6].…”

“…While proponents of employee profit sharing argue that it increases employee earnings [6], others contend that the effect of profit sharing on employee earnings will be neutral [7], and still others argue that profit sharing can reduce earnings [8]. Knowing which outcome generally prevails is important to scholars in unraveling the effects of profit sharing, to managers and employees in deciding whether to embrace profit sharing, and to public policymakers in assessing whether public support for profit sharing is warranted.…”

The impact of financial participation on workers' compensation

“…They interact a measure of pay with an index of shared capitalism. Kruse et al (2008) find that "greater involvement in the programs (shared compensation schemes) is generally linked to greater participation in decisions, higher quality supervision and treatment of employees, more training, higher pay and benefits, greater job security, and higher job satisfaction".…”

“…The most recent evidence comes from an NBER project: see, for example Freeman (2008), Blasi et al (2008) and Kruse et al (2008). Freeman (2008) concentrates on the idea that worker co-monitoring can get around the free-rider problem.…”