When Workplace Democracy Backfires. Lab Evidence on Honesty and Cooperation

Democracy in the workplace often involves employee participation in decision-making and financial matters, both of which have been shown to increase employee effort. However, it is unclear whether these forms of participation also affect other important attitudes that are correlated with the spirit of democratic workplaces such as honesty and cooperation. To address this question, we conducted a laboratory experiment to examine the effects of employee participation on these attitudes. Our results show that both employees’ participation in decision-making and profit-sharing decrease honesty. This effect is stronger for employees involved in financial participation. Additionally, we found that the different treatments also affect productivity in the first and third tertiles of the productivity distribution. On the one side, employees in the first tertile are more productive and more cooperative when they are allowed to choose the type of organization compared to the one who are assigned to the no-participation treatment. On the other side, employees in the third tertile of the productivity distribution are more likely to free ride and reduce cooperation in settings with participation compared to the no-participation. Our study sheds light on the complex effects that participatory practices may have in modern workplaces.