Employee Ownership and Corporate Performance
August 27, 2007

The NCEO has updated their Employee Ownership and Corporate Performance page, which documents the research on employee ownership and corporate performance:

“The research comes to a very definite conclusion: the combination of ownership and participative management is a powerful competitive tool. Neither ownership nor participation alone, however, accomplishes very much…The findings also seem to apply primarily to closely held companies. Research indicates that public companies generally do not view employee ownership as much more than another corporate benefit. For this and other reasons explored below, the relationship between employee ownership and corporate performance in public companies is ambiguous.”

The page discusses the following studies:

• The 2000 Rutgers Study – “ESOPs increase sales, employment, and sales/employee by about 2.3% to 2.4% per year over what would have been expected absent an ESOP. ESOP companies are also somewhat more likely to still be in business several years later.”
• The 1986 NCEO Study – “The study found that ESOP companies had sales growth rates 3.4% per year higher and employment growth rates 3.8% per year higher in the post-ESOP period than would have been expected based on pre-ESOP performance.”
• The New York and Washington Studies – “In both studies, employee ownership per se had little or no impact on corporate performance, but a substantial impact when combined with participative management.”
• The GAO Study – “The GAO study found that ESOPs had no impact on profits, but that participatively managed employee ownership firms increased their productivity growth rate by 52% per year.”

The page also addresses the following topics:

• The Impact of ESOPs on Employee Compensation – a study shows that ESOP employees are significantly better compensated.  “In ESOP companies, the average corporate contribution per employee per year was between 9.6% and 10.8% of pay per year, depending on how it is measured. In non-ESOP companies, it was between 2.8% and 3.0%.”
• Public Companies and Employee Ownership
• Broadly Granted Stock Options and Stock Prices
• Other Studies
• Broadly Granted Stock Options and Corporate Performance