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To join or not to join? Factors influencing employee share plan membership in a multinational corporation

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  • Bryson, Alex
  • Freeman, Richard B.

Abstract

Many firms encourage employees to own company stock through share plans that subsidizethe price at favorable rates, but even so many employees do not buy shares. Using a newsurvey of employees in a multinational with a share ownership plan, we find considerablevariation in joining among observationally equivalent workers and explore the reasons for thevariation. Participation in the plan is higher the greater the potential pay-off from joining theshare plan, which indicates that rational economic calculations affect the decision to join. Butthere is also evidence that psychological factors affect the decision to join. Some nonmemberssay they intend to join in the future, which means they forgo the benefits ofimmediate membership. The proportion of workers who purchase shares varies acrossworkplaces beyond what we predict from worker characteristics. This suggests that coworkerbehavior influences decisions. Indeed, workers say that they pay most attention toother workers and little attention to company HR management in their decision on joining.

Suggested Citation

  • Bryson, Alex & Freeman, Richard B., 2010. "To join or not to join? Factors influencing employee share plan membership in a multinational corporation," LSE Research Online Documents on Economics 48915, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:48915
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    References listed on IDEAS

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    1. Edward L. Glaeser & Bruce Sacerdote & José A. Scheinkman, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 507-548.
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    5. Bryson, Alex & Freeman, Richard, 2008. "How does shared capitalism affect economic performance in the UK?," LSE Research Online Documents on Economics 51596, London School of Economics and Political Science, LSE Library.
    6. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
    7. Duflo, Esther & Saez, Emmanuel, 2002. "Participation and investment decisions in a retirement plan: the influence of colleagues' choices," Journal of Public Economics, Elsevier, vol. 85(1), pages 121-148, July.
    8. John W. Budd, 2010. "Does Employee Ignorance Undermine Shared Capitalism?," NBER Chapters,in: Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options, pages 291-316 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Bryson, Alex & Clark, Andrew E. & Freeman, Richard B. & Green, Colin P., 2016. "Share capitalism and worker wellbeing," Labour Economics, Elsevier, vol. 42(C), pages 151-158.

    More about this item

    Keywords

    share plans; share contributions; risk aversion; peer effects; social norms;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms

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