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Creating a Bigger Pie? The Effects of Employee Ownership, Profit Sharing, and Stock Options on Workplace Performance

In: Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options

  • Joseph R. Blasi
  • Richard B. Freeman
  • Christopher Mackin
  • Douglas L. Kruse

This paper uses data from NBER surveys of over 40,000 employees in hundreds of facilities in 14 firms and from employees on the 2002 and 2006 General Social Surveys to explore how shared compensation affects turnover, absenteeism, loyalty, worker effort, and other outcomes affecting workplace performance. The empirical analysis shows that shared capitalism has beneficial effects on all outcomes save for absenteeism and that it has its strongest effects on turnover, loyalty, and worker effort when it is combined with: a) high-performance work policies (employee involvement, training, and job security), b) low levels of supervision, and c) fixed wages that are at or above market level. Most workers report that cash incentives, stock options, ESOP stock, and ESPP participation motivate them to work harder. The interaction of the effects of shared capitalism with other corporate policies suggests that the various shared capitalist and other policies may operate through a latent variable, "corporate culture".

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This chapter was published in:
  • Douglas L. Kruse & Richard B. Freeman & Joseph R. Blasi, 2010. "Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options," NBER Books, National Bureau of Economic Research, Inc, number krus08-1, September.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8089.
    Handle: RePEc:nbr:nberch:8089
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    National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

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    1. Derek C. Jones & Takao Kato & Jeffrey Pliskin, 1999. "Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects," Macroeconomics 9903010, EconWPA.
    2. Sandra E Black & Lisa M Lynch, 2002. "What's Driving the New Economy? The Benefits of Workplace Innovation," Working Papers 02-03, Center for Economic Studies, U.S. Census Bureau.
    3. Craig, Ben & Pencavel, John, 1992. "The Behavior of Worker Cooperatives: The Plywood Companies of the Pacific Northwest," American Economic Review, American Economic Association, vol. 82(5), pages 1083-105, December.
    4. Peter Cappelli & David Neumark, 2001. "Do “High-Performance†Work Practices Improve Establishment-Level Outcomes?," ILR Review, Cornell University, ILR School, vol. 54(4), pages 737-775, July.
    5. Saul Estrin & Derek C. Jones, 1992. "The Viability of Employee-Owned Firms: Evidence from France," ILR Review, Cornell University, ILR School, vol. 45(2), pages 323-338, January.
    6. McNabb, Robert & Whitfield, Keith, 1998. "The Impact of Financial Participation and Employee Involvement on Financial Performance," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(2), pages 171-87, May.
    7. Kochan, Thomas A., 1996. "What works at work : overview and assessment," Working papers 3886-96., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    8. Brent Boning & Casey Ichniowski & Kathryn Shaw, 2001. "Opportunity Counts: Teams and the Effectiveness of Production Incentives," NBER Working Papers 8306, National Bureau of Economic Research, Inc.
    9. Daniel G. Hansen, 1997. "Worker Performance and Group Incentives: A Case Study," ILR Review, Cornell University, ILR School, vol. 51(1), pages 37-49, October.
    10. Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps, November.
    11. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
    12. Chris Doucouliagos, 1995. "Worker Participation and Productivity in Labor-Managed and Participatory Capitalist Firms: A Meta-Analysis," ILR Review, Cornell University, ILR School, vol. 49(1), pages 58-77, October.
    13. Andrew M. Robinson & Nicholas Wilson, 2006. "Employee Financial Participation and Productivity: An Empirical Reappraisal," British Journal of Industrial Relations, London School of Economics, vol. 44(1), pages 31-50, 03.
    14. Dong-One Kim, 2005. "The Benefits and Costs of Employee Suggestions under Gainsharing," ILR Review, Cornell University, ILR School, vol. 58(4), pages 631-652, July.
    15. Sarah Brown & Fathi Fakhfakh & John G. Sessions, 1999. "Absenteeism and Employee Sharing: An Empirical Analysis Based on French Panel Data, 1981–1991," ILR Review, Cornell University, ILR School, vol. 52(2), pages 234-251, January.
    16. Martin Conyon & Richard B. Freeman, 2004. "Shared Modes of Compensation and Firm Performance U.K. Evidence," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 109-146 National Bureau of Economic Research, Inc.
    17. Joseph Blasi & Michael Conte & Douglas Kruse, 1996. "Employee Stock Ownership and Corporate Performance among Public Companies," ILR Review, Cornell University, ILR School, vol. 50(1), pages 60-79, October.
    18. Felix R. FitzRoy & Kornelius Kraft, 1987. "Cooperation, Productivity, and Profit Sharing," The Quarterly Journal of Economics, Oxford University Press, vol. 102(1), pages 23-35.
    19. Nicholas Wilson & Michael J. Peel, 1991. "The Impact on Absenteeism and Quits of Profit-Sharing and other Forms of Employee Participation," ILR Review, Cornell University, ILR School, vol. 44(3), pages 454-468, April.
    20. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
    21. James C. Sesil & Maya K. Kroumova & Joseph R. Blasi & Douglas L. Kruse, 2002. "Broad-based Employee Stock Options in US 'New Economy' Firms," British Journal of Industrial Relations, London School of Economics, vol. 40(2), pages 273-294, 06.
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