TABLE OF CONTENTS
Acknowledgments
Introduction - Richard B. Freeman, Joseph R. Blasi, Douglas L. Kruse
DOI: 10.7208/chicago/9780226056968.003.0001
[shared capitalism, U.S. economy, employee compensation, Employee Stock Ownership Plan, stocks, employee ownership, shares]
This chapter presents an introduction to shared capitalism of the U.S. economy. Shared capitalism refers to a diverse set of compensation practices through which worker pay or wealth depends on the performance of the firm or work group. In the United States, one major form for employee ownership is the Employee Stock Ownership Plan (ESOP), which federal legislation established to allow companies to contribute money to a trust to buy worker shares or to borrow money to fund worker ownership and then repay in installments from company revenues. Individual employee stock ownership refers to situations in which workers buy shares in the firm and vote those shares privately. Profit sharing pays workers specified shares of profits when the firm makes money. The payments can be cash bonuses on a yearly or more frequent basis or can take the form of placing the workers' share of profits in a retirement plan. (pages 1 - 38)
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I. The Extent and Operation of Shared Capitalism
Shared Capitalism in the U.S. Economy: Prevalence, Characteristics, and Employee Views of Financial Participation in Enterprises - Douglas L. Kruse, Joseph R. Blasi, Rhokeun Park
DOI: 10.7208/chicago/9780226056968.003.0002
[shared capitalism, United States, General Social Survey, National Bureau for Economic Research, risk aversion, free riding, U.S. economy]
This chapter gives an account of the current forms and extend of shared capitalism in the U.S. economy and provides an overall portrait of shared capitalism using the General Social Survey (GSS) and National Bureau for Economic Research (NBER) data sets. Both the NBER data set and the nationally-representative GSS data set indicate that while shared capitalism exists broadly throughout the economy, it is not distributed randomly across firms and employees. One important finding is that, shared capitalism plans are more likely in larger establishments, where free riding is likely to be the highest. To counter free riding, firms may combine shared capitalism with other policies to create a cooperative culture. An examination of risk aversion in the NBER data set shows that, risk aversion is linked to lower participation in several types of plans and less positive views of shared capitalism. (pages 41 - 75)
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Worker Responses to Shirking under Shared Capitalism - Richard B. Freeman, Douglas L. Kruse, Joseph R. Blasi
DOI: 10.7208/chicago/9780226056968.003.0003
[shared capitalism, shirking, General Social Surveys, National Bureau for Economic Research, bonus, group incentive plans, profit sharing, gain sharing]
This chapter examines worker reactions to shirking by analyzing questions on the 2002 and 2006 General Social Surveys (GSS) and the National Bureau for Economic Research (NBER) surveys of fourteen companies that have some forms of group incentive plans. In the GSS data, the most important factor behind anti-shirking activity is the presence of profit sharing and gain sharing. In the NBER data for which detailed information on the extent of profit sharing was available, it was the intensity rather than the presence of profit sharing and gain sharing. Anti-shirking activity is strongly related to both profit-sharing bonus size and gain-sharing bonus size. Analysis of the decision equation for workers to intervene against shirking suggests that some of the factors that influence behavior should enter equations in an interactive rather than linear way. The worker decides to intervene against a shirker when the expected benefits of intervening exceed the costs. (pages 77 - 104)
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Risk and Lack of Diversification under Employee Ownership and Shared Capitalism - Joseph R. Blasi, Douglas L. Kruse, Harry M. Markowitz
DOI: 10.7208/chicago/9780226056968.003.0004
[shared capitalism, employee ownership, diversification, annual pay, economic insecurity, risk]
This chapter discusses the impact of subjective risk on workers' attitudes, preferences, and behaviors under shared capitalism and whether employee ownership and other forms of worker equity participation be consistent with proper diversification and shared capitalism. The three components of a worker's economic insecurity score are the size of each worker's fixed annual pay, how many multiples each worker's total wealth (minus debt) is relative to that worker's fixed annual pay, and the extent to which each worker perceives they are competitively paid in the firm where they work. It has been demonstrated that as economic insecurity of workers rises, it is associated with worse worker attitudes toward shared capitalism, preferences for variable pay, and behavioral outcomes under shared capitalist arrangements. The level of economic insecurity also influences how well they actually respond to shared capitalist arrangements such as employee ownership in their workplace. (pages 105 - 136)
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II. Firm Performance
Creating a Bigger Pie? The Effects of Employee Ownership, Profit Sharing, and Stock Options on Workplace Performance - Joseph R. Blasi, Richard B. Freeman, Christopher Mackin, Douglas L. Kruse
DOI: 10.7208/chicago/9780226056968.003.0005
[shared capitalism, workers, General Social Survey, National Bureau of Economic Research, workplace performance, turnover, loyalty, employee ownership, profit sharing]
This chapter analyzes the relationship of various forms of shared capitalist compensation to six workplace outcomes—turnover, absenteeism, perceived effort of co-workers, loyalty to the firm, willingness to work hard, and frequency of worker suggestions to improve productivity from the perspective of shared capitalism. It also examines employee responses to questions about their response to shared capitalist incentives and analysis using the General Social Survey (GSS) and NBER data sets. It states that shared capitalism affects workplace performance and substantiated by the fact that the results from the NBER sample are broadly similar to the results from the nationally-representative GSS. Shared capitalism is linked to lower turnover and greater loyalty and willingness to work hard, particularly when combined with high-performance policies, low levels of supervision, and fixed pay at or above market levels. Workplaces where workers average more shared capitalist compensation report greater employee effort along several dimensions. (pages 139 - 166)
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Complementarity of Shared Compensation and Decision-Making Systems Evidence from the American Labor Market - Arindrajit Dube, Richard B. Freeman
DOI: 10.7208/chicago/9780226056968.003.0006
[shared compensation, decision making, labor market, Workplace Representation and Participation Survey, California Establishment Survey, United States]
This chapter examines the shared compensation and decision making practices with evidence from the American labor market using the nationally representative 1994–1995 Freeman-Rogers Workplace Representation and Participation Survey (WRPS) for the United States and the 2003 California Establishment Survey (CES). The WRPS focuses on employee involvement and work organization but also asks about the mode of compensation so that we can link compensation systems and employee decision making. The CES surveys businesses on compensation and decision-making practices, and has productivity-related outcomes that allow examination of the relation between firm performance and compensation and decision-making systems. Shared compensation is stated to be positively associated with shared decision making, and that combining shared compensation systems and employee involvement has greater impacts on outcomes than the systems separately. (pages 167 - 200)
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How Does Shared Capitalism Affect Economic Performance in the United Kingdom? - Alex Bryson, Richard B. Freeman
DOI: 10.7208/chicago/9780226056968.003.0007
[shared capitalism, economic performance, United Kingdom, productivity, workplace, share ownership, Workplace Employment Relations Survey]
This chapter explores the effect of shared capitalism in economic performance in the United Kingdom. It mentions that firms use various forms of shared capitalist pay together and often accompany them with other labor practices, consistent with the complementary hypothesis. But firms switch among schemes frequently, which suggests that they have trouble optimizing and that the transactions cost of switching are relatively low. Among the single schemes, share ownership has the clearest positive association with productivity, but its impact is largest when firms combine it with other forms of shared capitalist pay. An analysis was conducted by using the linked employer-employee data from the British 2004 Workplace Employment Relations Survey (WERS) to estimate the impact of shared capitalism on productivity and to assess some of the mechanisms by which it produces different outcomes at different workplaces. (pages 201 - 224)
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Who Has a Better Idea? Innovation, Shared Capitalism, and Human Resources Policies - Erika E. Harden, Douglas L. Kruse, Joseph R. Blasi
DOI: 10.7208/chicago/9780226056968.003.0008
[innovation, shared capitalism, human resources, work performance, high performance work practices]
This chapter examines the role played by shared capitalism and high performance work policies as a means to achieve innovation outcomes. It also explores a process mechanism, employee alignment, as one way in which shared capitalism and high performance work policies impact innovation outcomes. A culture for innovation can be developed and supported through the use of shared capitalism and high performance work practices. It mentions that moderate support for the importance of pairing shared capitalism and high performance work practices together to achieve the greatest impact on a culture for innovation. Additionally, shared capitalism and high performance work practices work in part by aligning employees around the goals and objectives of the organization. A way to promote employee willingness and ability to contribute innovation ideas is stated to be use of high performance work policies and shared capitalism, both of which had a strong positive relationship with this outcome. (pages 225 - 254)
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III. Worker Well-Being
Do Workers Gain by Sharing? Employee Outcomes under Employee Ownership, Profit Sharing, and Broad-Based Stock Options - Douglas L. Kruse, Richard B. Freeman, Joseph R. Blasi
DOI: 10.7208/chicago/9780226056968.003.0009
[employee ownership, profit sharing, gain sharing, stock options, job satisfaction, shared capitalism, high-performance policies, supervision]
This chapter analyzes the relationship of shared capitalism programs to a range of employee outcomes: participation in decisions, supervision, training, company treatment of employees, pay, job security, and job satisfaction by using the General Social Survey (GSS) and NBER data sets. Profit sharing is stated to be most consistently linked to the positive outcomes, although gain-sharing, stock options, and employee ownership also affect some outcomes positively. In many cases the positive effect was tied to simply being covered by a policy, but there were also many cases in which the effect was tied to the size of the financial stake involved. Those who are covered by the combination of high-performance policies with shared capitalism are most likely to report high participation in decisions, satisfaction with participation, and overall job satisfaction. The combination of close supervision with shared capitalism, however, has negative effects on almost every outcome. (pages 257 - 290)
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Does Employee Ignorance Undermine Shared Capitalism? - John W. Budd
DOI: 10.7208/chicago/9780226056968.003.0010
[shared capitalism, incentives, employee-employer relationship, employee ignorance, communication, incentive-based plan]
This chapter discusses employer-provided shared capitalism and employee relationship. Employee ignorance might very well undermine shared capitalism, though this ignorance might stem from ineffective corporate communications and uneven implementation in addition to employee inattentiveness. An analysis of the NBER Shared Capitalism data set of thousands of employee responses linked to company-provided information from fourteen private-sector organizations reveals significant fractions of employees whose perceptions of whether or not they are covered by various shared capitalism programs do not match their employers' policies. In addition to employee ignorance, the analyses document significant numbers of false positive responses—that is, employees that believe they are covered by a shared capitalism program when their employer states that they are not. This aspect of overall inaccuracy might not undermine the incentive intentions of shared capitalism if perception becomes reality: workers that believe they are covered by an incentive-based plan. (pages 291 - 316)
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Who Benefits from Shared Capitalism? The Social Stratification of Wealth and Power in Companies with Employee Ownership - Edward J. Carberry
DOI: 10.7208/chicago/9780226056968.003.0011
[shared capitalism, employee ownership, social stratification, ethnicity, profit sharing, gender, race, disability]
This chapter examines how access to shared capitalism, returns from shared capitalism programs, and organizational power and authority within companies with shared capitalism are stratified by gender, race, ethnicity, and disability. The value of assets acquired through shared capitalism is usually directly related to pay; it is not possible to assume that implementing shared capitalism creates instant equity and fairness. The reality is that the implementation and operation of these plans occurs within broader structures of stratification, and this reality may have negative consequences for the effectiveness of these plans if employees perceive their implementation and operation as unfair. Beyond the traditional mechanisms of stratification, the ways in which certain types of shared capitalism are designed and operated can create further disparities in access and financial value for different groups. (pages 317 - 350)
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Show Me the Money Does Shared Capitalism Share the Wealth? - Robert Buchele, Douglas L. Kruse, Loren Rodgers, Adria Scharf
DOI: 10.7208/chicago/9780226056968.003.0012
[shared capitalism, stock options, wealth, United States, employee ownership, employee stock ownership, pension wealth, United States]
This chapter addresses several questions surrounding employee stock ownership as a wealth-sharing tool. It discusses how much on average do employee owners own in “shared capitalist” firms (those with broad-based employee ownership, profit sharing, gain sharing, and/ or stock options). It explores how company stock distributed among employee-owners, which ownership structures distribute wealth most equitably, and how the distribution of employee stock ownership wealth compares to the distribution of wealth among US households. Further, the extent of employer stock substitute for other forms of compensation (higher pay and benefits) and for other forms of wealth is discussed. It also describes the effect of universal employee ownership of employer stock on the overall distribution of stock ownership and pension wealth in the United States. Results indicated that broad-based employee ownership may be raising wealth for many workers without unduly increasing worker risk. (pages 351 - 376)
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Epilogue (and Prologue) - Joseph R. Blasi, Douglas L. Kruse, Richard B. Freeman
DOI: 10.7208/chicago/9780226056968.003.0013
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Appendix A: Variable Definitions and Descriptive Statistics (All Chapters)
Appendix B: The Shared Capitalist Thermometer Index
Contributors
Author Index
Subject Index
