Broad-Based Employee Stock Ownership: Motives and Outcomes

Broad-Based Employee Stock Ownership: Motives and Outcomes

Firms initiating broad-based employee share ownership plans often claim employee stock ownership plans (ESOPs) increase productivity by improving employee incentives. Do they? Small ESOPs comprising less than 5% of shares, granted by firms with moderate employee size, increase the economic pie, bene...

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Bibliographic Details
Published in:The Journal of finance (New York) 2014-06, Vol.69 (3), p.1273-1319
Main Authors: KIM, E. HAN, OUIMET, PAIGE
Format: Article
Language:eng
Subjects:
Anti takeover strategy
Cash
Compensation
Employee motivation
Employee stock option plans
Employee stock ownership plans
Employees
Employment
ESOP
Incentives
Ownership
Productivity
Shareholders
Standard error
Stock exchange
Stock ownership
Stockholders
Studies
Take-overs
Wages
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Summary:Firms initiating broad-based employee share ownership plans often claim employee stock ownership plans (ESOPs) increase productivity by improving employee incentives. Do they? Small ESOPs comprising less than 5% of shares, granted by firms with moderate employee size, increase the economic pie, benefiting both employees and shareholders. The effects are weaker when there are too many employees to mitigate free-riding. Although some large ESOPs increase productivity and employee compensation, the average impacts are small because they are often implemented for nonincentive purposes such as conserving cash by substituting wages with employee shares or forming a worker-management alliance to thwart takeover bids.
ISSN:0022-1082
1540-6261