New Research on Participation and Employee Ownership: International Evidence
Saturday, Jan. 5, 2019 8:00 AM - 10:00 AM
- Chair: Peter Cappelli, University of Pennsylvania
Attention for the Inattentive in Employee Stock Ownership Plans
AbstractUsing unique data on employee ownership plans sponsored by U.S. public companies, we find that large negative market shocks lead to active changes in portfolio choices among inexperienced and previously inattentive investors. We use employee ownership plans to identify a set of inexperienced investors who did not actively select to participate in the market and who are confronted with a difficult financial decision. These investors appear inattentive at the beginning of the sample. However, following the 2008 Financial Crisis, they are more likely to exercise options, sell restricted stock and participate in an ESPP. We argue these changes are most likely welfare increasing, since the passive default option (nonparticipation) in the ESPP leaves money on the table. Our results suggest a new wrinkle in our understanding of how investors’ personal return experiences interact with risk preferences. Negative shocks mitigate investor inattention on the extensive margin. Thus, at least along certain dimensions, these shocks can induce investors to make decisions that are closer to the optimum.
Footsie, Yeah! Share Prices and Worker Wellbeing
AbstractA large body of research has focused on the impact of business conditions, particularly economic downturns, on individuals' mental health. More recently, there have been examinations of how stock market conditions affect worker wellbeing (Deaton, 2011; Ratcliffe and Taylor, 2012). This, it is argued, can occur through either direct wealth loss or due to the stock market acting as a barometer for business conditions. Linking workers' compensation directly to business conditions, for instance through share ownership and profit sharing, can smooth labour demand fluctuation over business cycles (Weitzman 1986). This may lower the likelihood of job loss during economic downturn, and perceptions of job insecurity. Less attention has been paid to the possibility that stock market fluctuations may affect worker motivation and effort via effects on worker wellbeing. Using British panel data over 25 years our paper demonstrates that worker wellbeing depends on (arguably exogenous) share prices. This effect is concentrated heavily among those who hold shares or profit shares as part of their compensation. Insofar as worker wellbeing and job satisfaction are linked to effort decisions, this suggests a channel through which business cycles influence worker behaviour, and how this may vary by compensation structure. We provide suggestive evidence that poor stock market conditions reduce the effort of workers in receipt of shares.
How Workplace Democracy Moderates the Effects of Workforce Diversity: Evidence from Worker Cooperatives in France
AbstractWorker cooperatives, understood as firms with widespread worker ownership and democratic governance, are of interest to both scholars concerned with inequality and those interested in the less hierarchical organizational forms that may facilitate flexibility, innovation, and creativity. A longstanding concern about worker cooperatives, however, is their capacity to effectively manage workforce diversity. In short, a more diverse workforce is thought to have more heterogeneous interests, which become a source of particularly high coordination costs in a democratic workplace. To date, a key limitation is data availability: worker cooperatives are relatively rare in comparison with conventional firms and there are few data sources that provide detailed information on the characteristics of employees within these firms. To overcome this obstacle we leverage a unique setting and data source: the population of nearly 3,000 worker cooperatives in France and the French governmentâ?Ts publication of ten-year linked employer-employee data for all firms in the country. Leveraging firms that switch organizational structures matched with comparable non-switchers, we analyze how workplace democracy moderates the effects of gender, age-based, ethnic, and occupational diversity. Our findings suggest that, in the French context, workplace substantially alters the effect of workplace diversity, but not always in a negative manner. Age diversity is associated with increases in labor productivity in worker cooperatives while it is associated with reduced labor productivity in conventional firms. However, occupational diversity is negatively associated with labor productivity in both democratic and conventional firms, while the negative effect is three times greater in worker cooperatives. Interestingly, when we focus in innovative industries, workplace democracy positively moderates the effect of occupational diversity.
- M5 - Personnel Economics