The Role of Employee Stock Purchase Plans — Gift and Incentive? Evidence from a Multinational Corporation

Abstract

Employee share purchase plans (ESPPs) give free or discounted shares of stock to workers who buy shares in the hope that the greater share ownership will retain workers, build loyalty and raise productivity, as in gift exchange models. Using measures of workers' organizational loyalty and sense of ownership in a multinational firm that puts the ESPP at the heart of its compensation policy, we find that workers who join the ESPP have lower turnover intentions and do less on-the-job search than others, motivated in part by gift exchange reciprocity, and also respond to the group incentive of ownership with greater work effort, longer hours, and lower absence rates. Workers in workplaces with high perceived rates of ESPP participation are more likely to intervene against shirkers. The results appear robust to the selectivity of who joins the ESPP. The mix of gifting shares to workers who buy shares and the group incentive of ownership makes ESPPs a unique dual form of compensation.

Does contingent pay encourage positive employee attitudes and intensify work?

“…Again, these results contradict previous studies (e.g. Kruse et al, 2010;Bryson and Freeman, 2014) where share-ownership schemes have been linked with positive employee outcomes. It is suggested that organisation-wide incentives allow employees to partake in the distribution of organisational wealth thereby improving employees' work-related attitudes.…”

What do people think employee share ownership schemes do for them? A qualitative study of participants’ experiences in three UK share schemes

“…Some research (e.g. Bryson and Freeman, 2014;Caron, Ben Ayed and Vandenberghe, 2013) shows that supervisors and coworkers are where the participative action is, but there was no evidence in our data that participation at this level was attributed to ESO:…”

“…Drawing on Akerlof (1982), some studies in the field of labour economics have discussed how ESO might be seen as a gift from the organization which encourages employees to give something back (gift exchange), typically in the form of harder work but also possibly longer tenure and a greater felt loyalty to the employing organization (Bryson and Freeman, 2014). In ESO schemes employees buy shares at discounted rates, and/or are given shares or share options.…”

Supervisory Incentives within Contracts: A Principal-Supervisor-Agent Approach

“…The interest of economics for non-market institutions such as social relations networks is reflected in pioneering worksof Stiglitz (1974) on tenant farming, pursued by Laffont and Matoussi (1995) and renewed by Bidishaand al. (2018).It also concerns the gift-exchange and market nexus (Akerlof, 1982), extended by Bryson and Freeman (2018).…”