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Do Employee Share Owners Face Too Much Financial Risk?

Author

Listed:
  • Douglas Kruse
  • Joseph Blasi
  • Dan Weltmann
  • Saehee Kang
  • Jung Ook Kim
  • William Castellano

Abstract

A major theoretical objection against employee share ownership is that workers are exposed to excessive financial risk. Theory posits that 10 to 15% of a typical worker’s wealth portfolio can be prudently invested in employer stock. The authors analyze employee share ownership in US family portfolios using the 2004 to 2016 Survey of Consumer Finances. Overall, 15.3% of families with private-sector employees held employer stock in 2016, and one in six of these families exceeded the 15% threshold. Employee share ownership appears to generally add to, rather than substitute for, both pension and overall wealth. Employee share owners express higher risk tolerance and financial knowledge and greater understanding of the value of diversification. While financial risk does not appear to be a substantial problem for most employee share owners, a small minority may face excessive risk, and the authors suggest approaches to reduce such risk.

Suggested Citation

  • Douglas Kruse & Joseph Blasi & Dan Weltmann & Saehee Kang & Jung Ook Kim & William Castellano, 2022. "Do Employee Share Owners Face Too Much Financial Risk?," ILR Review, Cornell University, ILR School, vol. 75(3), pages 716-740, May.
    • Handle: RePEc:sae:ilrrev:v:75:y:2022:i:3:p:716-740
    DOI: 10.1177/00197939211007394
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    References listed on IDEAS

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    1. Wu, Fang & Cao, June & Zhang, Xiaosan, 2023. "Do non-executive employees matter in curbing corporate financial fraud?," Journal of Business Research, Elsevier, vol. 163(C).
    2. Arnaud Chevalier, 2022. "Does employee ownership improve performance?," IZA World of Labor, Institute of Labor Economics (IZA), pages 311-311, May.

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