Employee Share Ownership and Performance: Golden Path or Golden Handcuffs?

Abstract

  • Data Source: Matched employer-employee data from the 1998 Workplace Employee Relations Survey, providing comprehensive insights into workplace dynamics across various sectors.

  • Findings:

    • No significant association between employee share ownership (ESO) and employee commitment, indicating a disconnect that may influence overall company culture.

    • Significant negative relationship between share ownership and workplace turnover suggests that while ESO may aim to enhance stability, it does not necessarily correlate with increased employee loyalty or commitment.

    • This challenges the prevailing view that share ownership primarily enhances performance through alignment of interests between employees and employers (often described as the golden path), instead suggesting it might more accurately function as a mechanism to reduce turnover (referred to as golden handcuffs).

Keywords

  • Employee share ownership, performance, turnover, commitment, workplace dynamics, employee engagement.

Introduction

  • Context: In today's competitive business environment, firms increasingly seek improved performance through holistic approaches that focus on worker involvement and satisfaction (Appelbaum & Batt, 1994; Osterman, 1994; Paauwe, 2004; Whitfield & Poole, 1997). These strategies often involve innovative employee ownership schemes that promise to enhance motivation and engagement.

  • Role of ESO: Employee Share Ownership (ESO) schemes are perceived as mechanisms that encourage alignment between employees and their organization, thereby enhancing overall contributions to workplace productivity (Rosen, 1990; Blasi et al., 2003; Conte & Svejnar, 1988; Klein, 1973). By providing employees with a vested interest in the company, proponents argue that ESO can lead to improved performance and reduced conflict.

  • Performance Evidence: While firms that implement ESO schemes frequently report better performance metrics, the underlying mechanisms connecting ESO to performance outcomes remain inadequately explored. Previous studies suggest a correlation but lack clarity on how ESO affects various performance facets within organizations.

  • Research Aim: The aim of this study is to rigorously investigate the impact of ESO on organizational performance by focusing on two critical mediating factors: employee commitment and turnover. This approach seeks to link traditional literature concerning employee motivation and organizational effectiveness with contemporary insights into ownership models.