New Research – Sharing ownership widely a powerful strategy
In “Does Linking worker pay to firm performance help the best firms do better ? ” , published by the National Bureau of Economic Research ( US ) , the researchers concluded that “shared capitalist forms of pay are associated with high-trust supervision, participation in decisions, and information sharing and with a variety of positive perceptions of company culture. At the firm level, shared reward forms of pay are associated with lower voluntary turnover and higher ROE ( return on equity ). “Shared Capitalism” is their term for ESOP’s, broad based individual equity compensation plans and profit sharing schemes. The study found that ESOP’s have the most consistently powerful effects.
The data was collected by the Great Place to Work Institute and is perhaps the largest database ever compiled on employee attitudes, culture and company outcomes – the study surveyed 305,339 employees over 780 firms and included financial performance data.
One sixth of the companies had an ESOP and 9.1 % were majority employee owned. ESOP companies are overrepresented in this sample of companies that had been involved in the best companies to work for awards ( both as applicants and winners ) . 18 % report cash profit / gain sharing plans, 22.3 % report deferred profit sharing plans and 44.5 % provided option based plans.
The average % of equity held by the ESOP is 17.4 %, the average contribution to the plans is 7.4 % of annual pay.
The findings strongly confirm an argument that it is a combination of ownership and culture that matters – not either one alone!
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