PIECES OF THE ACTION:
OWNERSHIP AND THE CHANGING EMPLOYMENT RELATIONSHIP
Denise M. Rousseau
Heinz School of Public Policy
and Graduate School of Industrial Administration
Carnegie Mellon University
Pittsburgh, Pennsylvania USA
1(412) 268-8470 (voice)
1(412) 268-7902 (fax)
email: [email protected]
Zipi Shperling
Faculty of Industrial Engineering and Management
Technion- Israel Institute of Technology
Technion City, Haifa, Israel
972-56-552151 (voice)
972-3-9323277 (fax)
We appreciate the support provided by the Heinz School of Public Policy and
Management and the H.J. Heinz II Chair during the writing of this paper. Paul Goodman,
Peter Roberts, Barry Staw, and Wolfgang Weber provided helpful comments on an
earlier draft. Jason Merante provided research assistance in the writing of this essay. We
also thank Carole McCoy, for word processing and Cathy Senderling for editing this
manuscript. We wish to express our great appreciation to Art Brief and the three
reviewers who provided challenging and thoughtful feedback on previous versions of this
paper. This article is truly a joint product. Earlier versions were presented at the
Academy of Management meetings, August 2000 in Toronto, and at the XIeme Congres
de l’Association de la Gestion des Ressources Humaines, November 2000, Paris.
Academy of Management Review, 28,553-570
This essay examines the changing relationship between workers and employers
with respect to ownership in firms, particularly with regard to highly skilled workers
contributing to a firm’s competitive advantage. The privileges of firm ownership are
increasingly parceled out among financial investors, managers, and workers. This
parceling out entails not only allocating different shares among stakeholders, it also
disaggregates the privileges associated with ownership and distributes them in different
combinations. These disaggregated privileges include profit sharing, participation in
decisions regarding the firm’s assets, and access to financial information. Building upon
this model of ownership allocation, this essay develops theory specifying the role of
ownership in the employment relationship. It addresses how sharing in ownership’s
privileges can create convergent psychological contracts between workers and employers.
It specifies two factors limiting the attractiveness of ownership for some workers, that is,
the potential for internal conflict among worker/owners transitioning to this dual role, and
the risks that ownership entails. It also outlines a research agenda to investigate how
allocating ownership to workers impacts their interests along with those of managers and
investors.
2
PIECES OF THE ACTION:
OWNERSHIP AND THE CHANGING EMPLOYMENT RELATIONSHIP
Workers in many countries hold ownership stakes in the firms that employ them,
and the proportion who do so is increasing (Greenwood & Gonzalez Santos, 1992; Keef,
1998; Nadler, 1998; Gilpin, 1999; Koretz, 1999). By way of example, employee stock
ownership plans in the United States grew from 1600 in 1975 to 11,400 in 1998 (National
Center for Employee Ownership, 2000). The percentage of large firms granting stock
options to at least half of their employees has increased from 17% in 1993 to 39% in
1999 (ACA News, 1999). As a part of this trend, significant changes are occurring in the
roles of key organizational stakeholders: workers, managers, and investors. A deeper
appreciation of the nature of ownership is required to understand this shift in roles. This
essay develops the construct of firm ownership, specifying its distribution of claims and
privileges (e.g., access to profits or information regarding the firm’s financial standing)
and the ways in which these increasingly are allocated to workers. Recognizing that
ownership and its privileges can be allocated in various combinations, this paper
develops theory specifying the changing interests workers and investors have in the firm
and the resulting introjections of ownership into the employment relationship.
Our analysis of ownership has several core themes. First, the meaning and value
of property rights can change with shifts in the mix of assets upon which the firm’s value
rests. Parties who once enjoyed benefits from controlling property (e.g., deciding how a
physical plant and its equipment should be used) can find it difficult to exercise that
control when the form that property takes becomes less tangible (e.g., a firm comprised
of software developers). A related second theme is that ownership rights and privileges
3
can be less valuable to investors unless shared with workers, whose commitment to the
firm can enhance the value of its assets. Lastly, ownership allocations differ not only with
respect to the proportions various parties share (e.g., minority versus majority stakes) but
also with respect to the specific claims or privileges various parties exercise or transfer to
others (e.g., access to profits or to the firm’s financial information).
Our underlying thesis is that the traditional boundary between workers and
owners is blurring as workers increasingly participate as owners in the firms that employ
them by holding equity and stock options. Moreover, we argue that this shift is
concomitant with a change in the balance of power in the employment relationship
particularly in high technology, knowledge-oriented, and start-up firms, and among
mobile high-skilled workers. In this context, "balance of power" refers to the relative
influence workers have over the terms of their employment, in comparison with that of
financial investors and the managers charged with representing them. As firms become
increasingly dependent on skilled workers and the assets arising from the collective
resources they help generate, the balance of power shifts toward these valuable
employees (Pfeffer & Salancik, 1978; Leana & Rousseau, 2000). This shift in worker
power coincides with the expansion of knowledge-based firms, appreciation for the value
of human, relational and intellectual assets, and the greater ease of new business startups, along with the need for firms to find innovative ways to attract and retain talented
workers. Moreover, the increasing value of assets workers contribute to the firm
individually and collectively relative to physical assets makes some traditional ownership
claims less valuable (e.g., claims on residual assets where owners can sell the firm’s real
4
property in case of business failure). To explicate the dynamics of ownership and its
expansion into the employment relationship, this essay is divided into four parts:
1. Overview of the challenges in understanding ownership
and its privileges in the context of contemporary
employment;
2. Development of the construct of firm ownership with
respect to its multiple privileges and the ways these are
parceled out among and exercised by investors, managers,
and workers;
3. Specification
of
mechanisms
by
which
ownership
privileges enter the employment relationship. We address
why employers are motivated to share, why workers are
motivated to participate in the rights and privileges of firm
ownership, and the role that sharing in these rights and
privileges plays in creating congruent psychological
contracts
between
employers
and
highly
mobile,
economically valuable workers.
4. A research agenda to guide investigation into how
allocating ownership and its privileges to workers impacts
the interests of investors, managers, and the workers
themselves.
CHALLENGES IN SPECIFYING OWNER, MANAGER, AND WORKER ROLES
5
To set the stage for theory building, it is first necessary to examine the nature of
the three traditional roles that form the essential building blocks of firms: owners,
workers, and managers. Owners have been defined as those parties who have a rightful
legal title to the firm (Hart, 1995). Typically, owners are construed to be the
entrepreneurs who establish and operate firms and their financial investors. Managers
contract to make decisions in the absence of owners regarding how the firm's assets
should be deployed. A manager’s duty includes supervising workers, who exert mental
and physical effort in using those assets on the firm's behalf (Alchian & Demsetz, 1972).
Although the three terms can be readily defined, challenges arise in trying to detail these
roles, and their functionality, duties, and rights in a way that can be generalized across
nations, firms, and time.
First, across nations, the duties and rights possessed by owners, managers, and
workers vary considerably as a function of societal institutions. In some societies, such
as the United States and Great Britain, laws protect stockholders who invest money in the
firm to a greater degree than they protect workers (Stinchcombe, 1986; Ritter & Taylor,
2000). In the United States, it is not unusual for outside investors to acquire a firm over
the objections of its management and workers (Hirsch, 1987). In contrast, countries such
as France and Germany afford workers greater legal protections and can constrain the
actions that investors might take. In Germany, for instance, workers' councils have voting
rights and can stop a firm’s sale (Nutzinger, 1988).
Individual firms differ in the roles owners, workers, and managers play.
Employee Stock Ownership Plans (ESOPs) where workers and managers invest in their
employer (Pierce & Furo, 1990; Rosen, Klein, & Young, 1986) and cooperatives where
6
workers are the owners (Berman, 1967; Pierce & Furo, 1990) yield varying combinations
of owner/manager/worker roles, rights, and responsibilities. Workers in firms with such
practices can hold anything from a nominal stake to full collective ownership, and they
may or may not also participate as managers making strategic decisions. Because
workers, managers, and investors all can participate as owners, it is more appropriate to
refer to each role specifically rather than to lump all “owners” together. We refer here to
those having ownership stakes because they have made a financial investment as
investors. Since workers can self-manage and both managers and workers can make
direct financial investments in their employer, workers, managers, and investors often
play multiple roles.
Over time, the changing nature of work has altered the roles of investor, manager,
and worker. During early industrialization, centralized factories gave “owners” -financial investors who typically also managed the firm -- almost full control over the
time and efforts workers contributed (Dickson, 1974). As owners diversified their
interests, absentee ownership created a role for managers to control the work process and
promote surplus production from fixed and expensive capital assets (machinery, power
sources, and facilities; Veblen, 1923). More recently, the trend toward more decentralized
work practices has given rise to self-management, reducing the role of managers as
supervisors and frequently substituting information technology and sophisticated
accountability systems for direct supervision (Pfeffer & Baron, 1988). These changes cooccur with the reduced the value of non-human capital -- those expensive fixed assets of
yesteryear -- as factors of production (Coff & Rousseau, 2000).
7
Taken together, these challenges make it necessary to develop theory regarding
the roles of investors, managers, and workers that allows for societal and firm variations
and changes in work processes.
THE CONSTRUCT OF OWNERSHIP
Ownership is defined as a rightful claim to property (Oxford, 1970) and brings
with it certain privileges. A property right is a claim that is legally enforceable and
socially supported. Property rights benefit individuals in the form of gains such as rent
payments and in the security they give to owners. They benefit society by avoiding the
instability that comes from exploitation or unfair appropriation of property. But as has
often been acknowledged, "ownership is not a simple concept" (Tannenbaum, 1983:
236).
Ownership is complex because it can be divided and disaggregated in many ways.
It can be divided among individuals or entities who share legal rights to the property
(e.g., minority and majority equity stake holders). As a rightful claim to property,
ownership brings with it several subsidiary privileges (e.g., accessing rents or profits,
inspecting the property’s condition, or deciding what uses to put it to). These privileges
can be entrusted to and exercised by others who are not legal owners (Berle & Means,
1933; Coleman, 1990). For instance, the privilege of benefiting from a firm's profitability
can be shared between investors, managers and workers, while investors alone might
retain rights such as the ability to sell their shares. Managers and workers cannot sell their
organizational positions, though they might sell their shares if they also participate as
investors. Although workers may exercise ownership-related privileges without having
any legal ownership of the firm, we will discuss below how both the value of their jobs
8
and the asset value of the firm can be substantially altered where they hold equity stakes
in their employer.
This essay’s treatment of ownership draws upon the work of scholars in several
fields. Economists deal largely with corporate governance (e.g., Hart, 1995; Shleifer &
Vishny, 1997). Entrepreneurship researchers address attitudes toward ownership and risk
(e.g., Krueger & Brazeal, 1994). Scholars in organizational behavior (e.g., Rosen, Klein,
& Young, 1986; Klein, 1987; Pierce, Rubenfeld, & Morgan, 1991) and industrial
relations (e.g., Hammer & Stern, 1980) focus upon employee ownership and its
psychological consequences. These perspectives recognize one right of ownership,
residual control, and three related privileges, these being profit sharing, access to
financial information, and decision-making regarding the use of assets (see Table 1 for
exemplars in each literature). We review next the value and opportunity to exercise each
of these as influenced by economic trends and changes in the employment relationship.
----Insert Table 1 about here---Residual control rights
Residual control rights, commonly referred to as equity shares in the firm, permit
holders to assert control over the property itself (Pierce et al., 1991; Hart, 1995). Having
the legal right to take possession of – or even sell – a firm’s tools, procedures, client lists,
and other assets affects others’ ability to access them. If the employment relationship
breaks down, the owner (for simplicity, we speak here of the owner as a single entity) can
walk away with all the non-human assets, including the firm’s name and reputation, its
equipment and processes, and its intellectual property (Hart, 1995). Employers who
control non-human assets have leverage over their (non-owner) employees, who are more
9
likely to do what employers want if they can be cut off from the work settings, tools, and
information that enable them to earn a livelihood. Residual control typically constitutes
legal ownership from which subsidiary privileges (described below) derive. These
privileges can be transferred to others but typically are not irrevocable.
The meaning and value of residual control claims have changed in the transition
from industrial firms with substantial assets in real estate and capital equipment to
increasing proportions of knowledge-based firms (a shift well under way by the 1980s,
e.g., Naisbitt & Aburdene, 1985). Investors’ residual control claims are more difficult to
enforce when the resources they claim are intangible (Aoki, 1984). In technology and
service-oriented firms, the most valuable assets can reside in the unique capabilities that
firms derive from the collective skills of their members, relationships among people, and
interactions between workers and processes (Naphiet & Ghoshal, 1998; Coff &
Rousseau, 2000). Under such conditions, investors may have difficulty finding a market
for their shares unless the firm’s workers are committed to contribute to and remain with
their employer. Though no individual worker or manager may readily control these less
tangible assets, neither can entrepreneurs and other financial investors, who depend on
the good will of workers to keep these collective resources intact. The partner in a
consulting practice who quits to take a job with a rival firm, taking along a majority of
the first firm's employees (and clients), exemplifies the difficulty of controlling residual
assets where a firm’s central production function involves knowledge-based work (Leana
& Rousseau, 2000).
The changing value and enforceability of residual control have implications for
the employment relationship. Investors may obtain greater benefits from shares in those
10
firms where workers themselves participate in the benefits of ownership (e.g.,
shareholding giving them residual control and profits; Shperling, Rousseau & Ferrante,
2002). Such firms are in a better position to motivate worker contributions that enhance
firm assets. They do so by aligning worker interests with investors in much the same way
that agency theory prescribes for managers and investors (Alchian & Demsetz, 1972)
Sharing in the profits
Sharing in any profits the firm realizes after its debts and obligations are paid is a
subsidiary privilege of ownership. Residual control rights typically entail a claim on the
firm’s financial returns, which in turn can be transferred to others, wholly or in part
(Alchian & Demsetz, 1972). Claims on profits, nonetheless, can be difficult to enforce.
Managers typically have more direct control over profits than do investors, and in some
cases the clout of large investors is required to induce managers to distribute a company’s
profits (Hart & Moore, 1994). Dividend payouts tend to be highest in countries where
laws limit managers’ ability to retain profits within the firm (Clemens, 2000; LaPorta,
Lopex-DeSilanes, Shleifer & Vishy, 2000). In some cases, employees can become legal
owners through privatization without sharing in the firm’s profits. As part of the
transition from total state ownership of firms in Croatia for example, the banks and the
State own substantial portions of privatized firms and hold first claim on profits (Goic,
1999). In the knowledge economy characterized by high technology firms and start-ups,
sometimes profits have been downplayed. Investors may be less interested in current
dividends than they are in share-price gains (Clemens, 2000). Start-ups often realize no
profits, attracting workers whose market wages they cannot pay by offering shares in the
firm instead.
11
Profit sharing enters into the employment relationship in several ways. Consistent
with the divisibility of ownership’s subsidiary privileges, workers and managers can
participate in profit sharing without having residual claims (i.e., equity). By itself, profit
sharing is positively related to employee contributions to the firm (e.g., Brown, Fakhfakh,
Sessions, 1999), a finding consistent with instrumental theories of work motivation (e.g.,
Vroom, 1964). Moreover, holding equity stakes in a firm in which one also shares in the
profits can have a synergistic impact enhancing the value derived from one’s employment
and attachment to the organization as a whole. One argument for a synergistic effect is
the existence of greater manager and investor commitment to worker ownership when
profit and equity sharing are combined (Pierce & Furo, 1990). Introducing profit sharing
has been found to have a more positive effect where workers already hold equity shares
than where they do not (Brown et al., 1999). Profit sharing can take various forms with
profit-based bonuses provided to workers to align their interests with financial investors,
supplementing the dividends worker/owners receive.
Access to information
Access to information regarding the firm's activities is another of ownership’s
subsidiary privileges (Hart, 1995). Owners have the right to inspect their property and
evaluate whether those using it have adhered to the terms of their agreement. A firm’s
legal owners thus are entitled to review corporate records and managerial activities.
Competing forces influence owners' access to information regarding the firm's
activities. One is the incentive for managers to manage earnings both to create and meet
investor expectations regarding profitability (e.g., to declare steady growth in profits over
time while masking wide fluctuations in short-term earnings). When managers have
12
broad control over information regarding the firm's activities, they can block financial
investors’ control attempts by filtering the release of information
(Hart, 1995;
Lowenstein, 1996). On the other hand, the move toward standardized global accounting
practices somewhat limits managerial discretion in reporting financial information by
promoting more transparent reporting regarding the firm’s financial state.
As economic advantage comes to reside more in how a firm’s human assets are
deployed, this push for transparency coincides with greater sharing of financial data
across all levels of management and workers (Case, 1995; McCoy, 1996). This broader
distribution of financial information often reflects the desire for a common frame of
reference among managers and workers in making business decisions (e.g., Semler,
1993). Wider availability and use of financial data in day to day decisions leads to more
workers who are “business literate,” able to understand and use financial information.
One result of this wider distribution of financial information is that investors and
managers no longer have unique claims to such information.
From an employment perspective, access to financial information can provide a
basis for enhancing worker job performance, where level and direction of worker effort
are guided by knowledge of its impact on firm outcomes (Ferrante & Rousseau, 2001).
Sharing financial information with workers is typically bundled with practices promoting
their participation in decision-making (discussed below; Pierce & Furo, 1990; Case,
1995). Information sharing is reinforced by managerial beliefs that workers can be trusted
to use such information to the firm’s advantage (Miles & Creed, 1995), and that financial
information -- accompanied by such incentives as equity and profit sharing -- can
motivate workers to act appropriately on the firm’s behalf (Case, 1995). Sharing financial
13
information with workers can also signal that their employer both trusts them and is
trustworthy, enhancing worker attachment to the firm (Ferrante & Rousseau, 2001).
Participation in decision making regarding use of firm’s assets
Having authority to make decisions is perhaps the most politically sensitive and
complex aspect of ownership. A capitalist enterprise has been defined as one in which
ultimate decision-making authority is external to those producing goods and services
(Putterman, 1982). Ownership typically entails a right to influence decisions (Rhodes &
Steers, 1981), particularly regarding the use to which a firm’s assets are put. For example,
stockholders typically have the right to attend an annual meeting with top management
and to participate in board elections. Nonetheless, investor/owners often do not
participate in the firm’s decision-making (Klein, 1987; Pierce, et al., 1991). For example,
preferred stock owners and participants in employee stock option programs and pension
funds are often required to leave decision making to trustees. When ownership is
distributed among many investors, stockholders may be less inclined to participate,
allocating this responsibility de facto to managers (Alchian & Demsetz, 1972).
Investor/owners’ failure to attempt to influence decisions may be due to low expectations
of successful influence.
Participation in decision making can take many forms, ranging from operational
decisions affecting day-to-day work practices (e.g., process improvements) to strategic
choices impacting the firm as a whole. The core decision relevant to owners is how the
firm’s assets are used (e.g., regarding customer focus, relations with suppliers). The
more intangible assets provide a basis for a firm’s wealth, the more its competitive
advantage rests in how effectively its human, intellectual and relational assets are used.
14
(Pfeffer, 1994). Workers possess tacit knowledge that when used to make both strategic
and operational decisions enables the firm to use its assets more productively. Globally
competitive firms share strategic and operational decisions with workers to a greater
extent than do their less competitive counterparts (Kanter, 1995). Decentralization of
both strategic as well as operational decision making is driven both by the broader work
roles knowledge workers perform as well as recognition that asset value is enhanced
where workers are able and willing to make decisions on the firm’s behalf (Pfeffer,
1994).
Integrating participation into the knowledge worker’s employment role is more
than just a means for pushing decisions to the level of relevant knowledge and
competence. Participation in decisions with strategic implications (e.g., customer
relations, technology and infrastructure investments) can motivate workers to share the
tacit information they would otherwise withhold to protect themselves from cutbacks or
increased, uncompensated performance demands. When coupled with equity and profit
sharing, expanded worker participation moves the firm closer to solving a fundamental
problem identified by early scholars of the modern corporation. Separation of ownership
and control has long been identified as a root cause of mis-aligned of interests among
investors, workers, and managers (Veblen, 1923; Berle & Means, 1933). Consistent with
arguments for realigning ownership and control, the earnings of firms where workers
hold equity shares are found to be enhanced by their participation in decisions (Rosen &
Quarrey, 1987; Pierce & Furo, 1990).
15
Implications
Our discussion of the construct of ownership has addressed legal ownership and
its subsidiary privileges. In particular, we have focused upon the divisibility of legal
ownership and its privileges, from each other and across a firm’s stakeholders. Building
on existing literature we have highlighted the trend toward sharing both ownership and its
privileges with workers. This trend is rooted in the increasing value investors and
managers gain when workers share ownership in an employer whose collective assets
(e.g., shared skills, worker knowledge) often are more economically valuable than its
physical assets (e.g., equipment, real estate). In effect, many contemporary firms have
few assets to share aside from those workers provide.
As ownership’s privileges have been disaggregated, not only are the privileges of
legal owners no longer unique, they are often difficult to exercise. An essential feature of
ownership is control of the property itself (Pierce, et al., 1991; Hart, 1995). However, the
complex array of assets that often comprise modern firms can make control by any single
group of stakeholders difficult. Distributing legal ownership and its subsidiary privileges
across investors, managers, and workers is a means of aligning their interests where
control of the firm is inherently diffuse.
The divisibility of ownership’s privileges raises the issue of whether legal
ownership (e.g., equity stakes) plays a special role in motivating workers in comparison
with profit-sharing, participation in decision making, and access to financial data without
legal ownership. Since these privileges can be combined in various ways, it is an
empirical question whether any of them dominates another in shaping the motivation of
workers. While financial investors seek returns on their investment in the form of
16
dividends and increasing stock prices, the interests of managers and workers are more
complex since they are embedded in the organization and can obtain socio-emotional as
well as economic benefits from it (Castanzias & Helfat, 1991). The evidence suggest that
equity stakes in and of themselves need not be sufficient to motivate either high worker
performance or strong attachment to the firm (e.g., Brown, et al., 1999; Rosen &
Quarrey, 1987). Nonetheless, profit sharing and/or participation in decision making also
might need to be combined with equity to effectively motivate workers. Profit sharing
and other ownership-related privileges have typically been studied in the context of firms
sharing some equity with workers (e.g. Keef, 1998). However, in contrast to investors
whose involvement in firms is linked to the size of their equity stake, size of share in
itself has no influence on a worker’s motivation or commitment to his or her employer,
while having any stake at all often does (e.g., Hammer & Stern, 1980). Moreover, what
equity stakes are combined with seems to be pertinent (Keef, 1998). Having raised issues
regarding the changing dynamics of ownership, we now examine ownership’s link to the
employment relationship.
OWNERSHIP PARTICIPATION BY WORKERS
In this section, we develop propositions regarding the increase in workers’
participation in ownership and its privileges in the firms that employ them. We examine
what motivates employers to share and workers to partake of ownership and related
privileges, and the resultant impact upon the employment relationship.
Worker mobility and the changing value of jobs
Worker mobility, the opportunity for and willingness to seek employment
elsewhere, is tied to the changing value a worker attaches to a particular job. Job loss and
17
voluntary moves increasingly characterize employment relationships (Cappelli, 1999;
Jacoby, 1999). Erosion of the seniority systems that traditionally tied workers to firms is
both a cause and an effect of this mobility. Seniority-based practices make jobs more
valuable to workers over time, motivating workers to contribute more than the present
value of their compensation in anticipation of higher future wages (Lazear, 1981).
Without seniority-based rewards, workers have less reason to believe they will benefit
from their contributions to the firm’s long-term success, particularly given the difficulties
firms have in effectively compensating for actual productivity (Alchian & Demsetz,
1972). The reduced value of jobs from erosion of seniority systems is exacerbated by the
disadvantages that long-term employment in a single firm can have for a worker, where
too long a stay can signal out-of-date skills and reduce external marketability.
Greater mobility among high-skilled workers shifts the power balance between
those workers and the firms that desire them (Arthur, Inkson & Pringle, 1999). Mobility
often brings monetary or career-enhancing benefits. Employers who are dependent upon
mobile workers need to provide incentives both for retention and productivity. Incentives
that make a job with an employer more valuable than one’s current salary can include
sharing in profits and/or equity. Of course, profit sharing works best when a firm has
profits to share (MacDonald, 1999). For this reason, companies with more variable
profits are likely to implement both profit sharing and employee stock-ownership plans
(Kruse, 1996).
Owners are also more willing to share their privileges when these are less
valuable to them. Residual control over assets is less valuable where non-human assets
constitute only a small portion of a firm's total assets (e.g., professional service firms).
18
However, a firm’s total value can be an expanding pie, actually increasing as it is shared
with workers. This is because the firm’s value is enhanced as it gains a competitive
advantage from motivating and retaining qualified workers. In such a circumstance,
workers contribute to what can be called complementary assets. Complementary assets
are those which, when held together, create value. Such assets are best suited to common
ownership (window and house, lock and key, engine and chassis, client names and
addresses). The value of complementary assets is evident in the competitive advantage
firms derive from stable relations between customers and workers. Goodwill between the
firm and its workforce brings repeat business with customers (Fichman & Goodman,
1996), as well as greater flexibility (Leana & Rousseau, 2000), ease of coordination,
familiarity, and shared learning among the workforce (Goodman & Leyden, 1991;
Goodman, 2000). When significant portions of a firm's assets (e.g., intellectual,
relational, and human) cannot be separated from its workers’ skills and collective work
practices, sharing ownership and its privileges with workers makes it possible to create
and retain complementary assets and their economic value.
Proposition 1: Workers are more likely to have residual control rights (a) and
profit sharing (b) when the firm’s competitive advantage depends on
intellectual, relational, and human assets than where the firm’s competitive
advantage comes from its physical or financial assets.
Firms composed of large numbers of highly mobile workers face a need to
institutionalize their ownership arrangements, rather than face the equity issues
associated with individualized, idiosyncratic employment agreements (Rousseau, 2000;
2001a). The larger the number of mobile workers in a firm, the more likely it is that their
19
ownership arrangements are visible to less-mobile workers, making it more difficult to
maintain a sense of equity and justice within the firm (Rousseau, 2001a). In firms with a
highly marketable workforce, we expect employees generally to hold equity stakes in
their employer (e.g., The Economist, October 10, 1998). These arrangements are likely to
be offered to non-mobile workers as well as mobile ones in order to avoid inequity (see
Gerhart & Milkovich, 1992) and foster a collective sense of organizational identification.
Similarly, firms are more likely to offer profit sharing broadly to workers as the
proportion of highly mobile workers increases in the firm.
Proposition 2: The likelihood that workers lacking mobility hold residual
control rights (a) and profit sharing (b) increases with the proportion of highly
mobile workers in the firm.
Negotiating a mutually understood employment agreement. Sharing property
rights to the organization promotes an array of mutual interests (Pierce et al., 1991) and
increases the likelihood that investors, managers, and workers will share a common frame
of reference (Case, 1995). The alignment of worker interests with those of the firm
requires a shared understanding regarding the psychological contract that underlies the
employment relationship. The psychological contract refers to beliefs each party has
regarding a reciprocal agreement between worker and the employer (Rousseau, 1995).
Mutuality of understanding influences how well workers and employers fulfill
each other’s psychological contract. Management writers as long ago as Chester Barnard
(1938) have advocated mutuality as the basis for an effective employment relationship.
Economists often assume that managers and workers are inclined to deliberately violate
the terms of their employment agreement (i.e., "shirk" their duties) unless sanctions are in
20
place (e.g., threat of losing valued incentives, Alchian & Demsetz, 1972). In contrast,
evidence in organizational psychology suggests that people typically are motivated to
keep their commitments, as they understand them (Shanteau & Harrison, 1991; Rousseau,
1995; Coyle-Shapiro & Kessler, 2000). A psychological perspective suggests that a good
deal of behavior economists read as "shirking" actually occurs because of incomplete
information, miscommunication, or misunderstanding. At issue is how congruent the two
parties’ understandings are. Rather than focus on creating sanctions to keep people from
breaking agreements, a psychological perspective asserts that there is value in increasing
the potential of each party to understand one another and, when needed, to renegotiate
these understandings in order to maintain mutually acceptable employment conditions.
Congruence between the psychological contracts of employee and employer has been
found to be positively related to objective and subjective measures of individual job
performance (Dabos & Rousseau, 2002).
This focus on mutuality reflects a fundamental shift in assumptions in modern
firms, where a firm’s competitive advantage often stems from assets in which its
workforce is integrally involved. Shared distribution of the facets of ownership can
create and maintain mutuality by facilitating agreement based upon shared information,
common frames of reference, frequent interaction, and reduction in power distance
between the parties involved (Rousseau, 2001b).
Combining several privileges of ownership enhances employer and worker
agreement regarding terms of the psychological contract. Worker rights to residual assets
and/or profit sharing are, like other human resource practices, more likely to give rise to
coherent, mutually reinforcing messages and shared understanding when bundled with
21
the support practices of participative decision making and dissemination of financial
information. In high involvement work systems, bundling mutually reinforcing practices
has been found to surpass the impact of involvement alone by increasing worker
competence and motivation in performing the complex behaviors such systems entail
(MacDuffie, 1995; Ichniowski, Kochan, Levine, Olson & Strauss, 1996). Firms where
workers share in multiple privileges of ownership are more likely to provide consistent
cues regarding the role of workers as co-owners and to have structures and management
practices that utilize worker ownership arrangements to best advantage for both workers
and the firm generally (Pierce & Furo, 1990). Sharing in ownership’s multiple privileges
strengthens agreement through congruent frames of reference, interests, information, and
responsibilities.
Proposition 3: Agreement between employers and workers regarding the
terms of the psychological contract is greater with shared control over
residual assets (a) and profit sharing (b).
Proposition 4: Coupling residual control rights and profit sharing with
shared financial information and decision-making participation increases
employer-worker agreement regarding the terms of the psychological
contract, beyond the effects of any single facet of ownership.
Limiting conditions
Allocating ownership to workers can also create difficulties. We focus here on
the limiting conditions that arise in consequence of transition in established forms of
employment and firms and in the institutional arrangements supporting them.
Introducing ownership into the employment relationship departs from long-standing
22
institutionalized roles of workers as labor and owners as investor/entrepreneurs. In one
sense, worker participation as owners in the firms that employ them is not new. Workers
in professional service firm often also are owners (e.g., physicians and lawyers, Gaynor,
& Gertler, 1995).
Numerous other firms are employee-owned
(e.g., Mondragon;
Greenwood & Gonzalez Santos, 1992) while partial ownership arrangements such as
retirement plans tied to company stock ownership have existed since the early 20th
century (e.g., Berle & Means, 1933). What is different is the scope of this shift and the
numbers of workers and firms involved. In the context of marked change with past
employment conditions, we address two of the potential difficulties for workers in
blurring the owner/worker boundary.
These include the conflict between newly
introduced employee ownership roles and individual beliefs regarding the owner/worker
relationship, and the new forms of risk faced by worker/owners as liabilities once
absorbed by entrepreneurs and investors are reallocated to include workers.
Internal conflict experienced by worker/owners. A worker whose employment
relationship changes to include greater exercise of ownership-related privileges, in
particular an equity stake making him or her a legal owner of the firm, can experience
internal conflict depending on his or her beliefs regarding ownership. Individual beliefs
regarding ownership arise from a variety of interrelated influences based upon family
background, occupation, cultural socialization, and legal factors. Note these beliefs often
arise prior to the worker’s actual ownership participation in a given employer. These
beliefs take a variety of forms including the meanings ascribed to the roles of owner
(capital) and worker (labor), and whether these roles are construed to have divergent
interests, and the perceived likelihood of positive outcomes from ownership. Positive
23
beliefs regarding ownership are more likely among workers from families having
entrepreneurial experience and among self-employed professionals (Krueger & Brazael,
1994; Green & Pryde, 1990; Walstad & Kourilsky, 1998). In contrast, beliefs that are at
once negative with regard to owners and positive regarding workers are tied to unionism
or identification with the historical position of labor as a political cause (Gordon, Philpot,
Burt, Thompson, & Spiller, 1980; LeBlanc, 1993). An individual's status as a worker, in
opposition to his or her role as an owner, can be a significant aspect of personal identity
when reinforced by identification with the labor movement (Newton & Shore, 1992;
LeBlanc, 1993). Certain ethnic and religious groups, moreover, see wages as honorable
while profiting from ownership is viewed as exploitive (Savage, 1979; Tropman, 1995).
Over time, workers who have participated as owners in some fashion (e.g.,
operating their own business on the side) and experienced its benefits are likely to form
more positive beliefs regarding the role (Green & Pryde, 1990; Pierce et al., 1991).
Business-related training also enhances attitudes toward ownership (Walstad &
Kourilsky, 1998). Further, professional education in business or economics predisposes
individuals toward an owner’s perspective (e.g., a market-oriented view, Frank, Gilovich,
& Regan, 1993), reinforced by the rise of market-related thinking as a popular ideology
(Cox, 1999). It is not surprising that the broad-scale American participation in financial
markets has led to Americans in all social classes identifying with their asset holdings
(Nadler, 1998). In contrast, a survey of European firms offering workers ESOPs reported
that stock options had a negative image due to their historical granting to senior managers
only, and the common belief that these were open to abuse (Thompson, 1999). Thus, the
24
introduction of participation in ownership and its privileges can engender internal conflict
among some workers based on their prior beliefs regarding ownership.
Proposition 5: Prior unfavorable beliefs regarding ownership are related to the
experience of internal conflict by worker/owners in the transition to this dual role.
Internal conflict arising from the dual role of worker/owners can be exacerbated
in buyouts where workers acquire ownership of their employer through arrangements
designed to keep troubled companies from going out of business (Hammer & Stern,
1980). The goal of worker buyouts often is to create job security by keeping a company
or facility operating and in its current location (Stern & Hammer, 1978; Hammer &
Stern, 1980). Recent strikes waged by pilots of employee-owned airlines such as United
indicate the impact of such conflict (Crain's Chicago Business, 2001). Workers in such
conditions are likely to have substantively different interests from financial investors,
focusing more upon keeping their jobs or securing their wages than on increasing stock
price or dividends.
This potential conflict of interest parallels that experienced by
managers who own stock in firms subject to hostile takeovers (Hirsch, 1987; Auerbach,
1988). Manager/owners have been known to fend off takeovers that would have benefited
shareholders generally in order to keep their own jobs. Workers, managers, and investors
can differ in the benefits they seek from ownership because they value job security,
autonomy, and financial returns differently (Hammer & Stern, 1980). The different
motivations with which workers themselves enter into shared ownership arrangements
may account for the inconsistent financial results worker ownership has yielded to date
(see Shperling & Rousseau, 2001).
25
Proposition 6: Job insecurity is positively related to internal conflict experienced
by workers/owners where ownership arises through worker buyouts.
Job security is not a motive for all workers. Nor is it the typical reason contemporary
workers purchase stock in their employer. However, where job security is sought via
employee ownership, it can engender internal conflict for the worker and differentiate his
or her interests from those of other stakeholders especially in decisions having adverse
worker outcomes (e.g., layoffs).
Internal conflict worker/owners experience may
undermine the mutuality of interests shared ownership otherwise promotes.
Psychological ownership, a concept distinct from firm ownership, occurs when a
person believes that a thing or entity, or a piece of it, belongs to him or her. Psychological
ownership directed toward the firm can occur without any ownership privileges, but is
enhanced where workers enjoy them (Pierce et al., 2001). It can motivate workers to
monitor the work of others to stimulate their efforts on behalf of the firm, and it is closely
tied to the concept of identity (Belk, 1988). Identity, beliefs one holds regarding one’s
self, can be expanded to include other social objects, such as one’s organization.
Psychological ownership has the capacity to shape individual identity (Pierce et al.,
2001). When directed toward one’s employing organization, psychological ownership
can shape beliefs individuals hold regarding the content of and distance between the roles
of workers and owners, and in doing so reduce the experience of internal conflict.
Proposition 7: Psychological ownership directed toward the firm decreases the
internal conflict worker/owners experience in the transition to this dual role.
Risk. A singular characteristic of contemporary employment is the re-allocation
of risk from investors to workers (Rousseau & Greller, 1994; Rousseau, 2000). A
26
common dictionary definition of risk is the “possibility of loss.” In its broadest sense, risk
refers to the volatility in a situation where alternative outcomes can occur, positive as
well as negative, each with measurable probability (Yates, 1992, pp. 4-5). The
traditional source of entrepreneurial wealth is the premium employees willingly pay for a
guaranteed wage (Aoki, 1984, Garud & Shapira, 1997). This wealth premium is the
difference between the worker’s actual economic contribution to the firm and the
compensation he or she receives. Seniority benefits motivate workers to accept wages
lower than their current economic contribution to the firm in anticipation of both security
and higher wages in future. Workers absorbing risk without benefit of seniority might
expect to receive some portion of that wealth premium typically reserved for
entrepreneurs and financial investors. Extending ownership privileges to workers can be a
means of balancing risk and reward among investors, entrepreneurs and workers where
job security no longer exists.
Because they have fewer guaranteed conditions of employment and greater
exposure to market volatility, employees are increasingly conscious of risk (e.g., Leana &
Feldman, 1992; Herriot, Hirsch & Reilly, 1998/). Risk refers not only to the possibility of
job loss, but also to variability in pay and benefits experienced through performancebased pay and promotion systems. Workers in industrialized nations manifest
increasingly what have been termed “hybridized” psychological contracts (Rousseau &
Schalk, 2000). The modal employment relationship following World War II had been a
relational one offering workers job security and internal career opportunity with little risk
exposure (Rousseau & Schalk, 2000). Indeed, workers with relational agreements
demand less pay than their non-relational counterparts, effectively giving that wealth
27
premium to the firm and its investors (Garud & Shapira, 1997). Since the 1990’s,
however, ever-increasing performance pressures and market contingencies have been
introduced into the employment relationship along with some continuing relational
features such as career development (Rousseau & Schalk, 2000). These hybrid
psychological contracts combine relational factors with terms contingent upon firm
performance such as profit sharing. These hybrids are evidence that risk is an accepted
condition of employment for some employees.
Firms that create mutual expectations of risk-sharing in employment are
characterized by human resource practices that promote worker understanding of markets
and develop worker resilience, that is, the capacity to adapt to changing market demands
(Rousseau & Arthur, 1999). These supports offer workers ways to actively participate in
both the organization and in the management of their careers. In effect, workers share
with managers and investors, not only in the returns and the risk, but also in the controls
exerted to manage risk.
Proposition 8: Worker hybrid psychological contracts are positively related to
attitudes regarding ownership participation in the employing firm.
Risks are more likely to be acceptable where workers expect to manage both their
careers and their own financial assets (e.g., retirement funds, investments; Rousseau &
Arthur, 1999). A growing segment of the workforce in industrialized countries can be
construed to have inter-organizational or "boundaryless" careers (Arthur & Rousseau,
1996; Arthur, Inkson, & Pringle, 1999). Such individuals often are self-employed for
significant periods of time and combine the perspectives of worker and owner through a
market-related view of both employment and firms (Rousseau & Arthur, 1999). Indeed,
28
having an equity share in one’s employer may be a required condition for retaining
workers pursuing boundaryless careers. Sharing in the employer’s equity and profits,
where the worker has business information and exercises some control over how the
firm’s assets are used, creates conditions another employer may not be able to match.
In contrast to those with boundaryless careers, other workers typically have
limited resources outside of their employing firm. When a worker in a start-up firm
accepts stock options rather than a salary based on his or her market-value, a substantial
portion of that worker’s financial future can be tied up in the firm (Shperling &
Rousseau, 2001). The same is the case for workers whose pensions are funded by
employer stock. Although, many financial investors can diversify risks, workers/owners
whose primary assets are attached to their jobs cannot.
Garud and Shapira (1997) argue that effective coping with the possibility of losses
from risk taking requires more than appropriate incentive contracts: “dealing with the
issue of residual risks in market transactions goes beyond the domain of a formal contract
to the domain of trust” (p. 248). The building blocks of trust are shared understanding
and convergent expectations among company stakeholders, including workers, managers,
and investors, where risks, returns, and controls are aligned. Managers often have to be
induced to take risks (Milgrom & Roberts, 1992), often out of fear of being held
responsible for poor firm performance (Garud & Shapira, 1997). Board and investor
support for managerial risk taking is often more powerful than incentive contracts per se,
particularly when these create shared expectations and mutual support for informed risktaking as embodied in the organization’s culture (Garud & Shapira, 1997). Similarly, an
organization’s culture can support effective worker exercise of ownership’s privileges.
29
Such support promotes active, informed worker participation (Semler, 1993) while being
compensated via shareholding and profit sharing.
Conclusion
Managers and management theorists have sought to answer the question “why
should workers work harder for the firm than they actually are paid to do?” The
traditional answer has been the promise of future benefits from the upward-sloping wage
curve of a seniority-based incentive system. The erosion of seniority and greater worker
mobility necessitate new answers to this question. To successfully start new firms or
enhance growth in existing ones, workers must generate value greater than their current
compensation. Sharing ownership privileges can provide appropriate incentives to
generate this value, particularly among highly skilled workers contributing substantially
to the firm’s competitive advantage. Bundling equity and profit sharing with financial
information and participation in decision-making can enhance worker contributions to the
firm by creating employment relationships based upon congruent psychological contracts.
Such a bundle can form the basis of trust and aligned interests between workers and
employer.
RESEARCH AGENDA
There are several contexts in which the propositions above can be particularly
helpful in understanding the dynamics of ownership in the employment relationship.
Managerial motives in worker ownership
Managers are likely to share equity and other ownership-related privileges to
attract, retain, and motivate those workers they view as critical to the organization’s
success. Although some shared ownership in the form of equity and profit sharing arises
30
due to worker power in the formulation of the employment relationship, it is not
synonymous with power sharing in decisions regarding the firm itself. Even in employeeowned firms, managers often have a great deal over power over key organizational
decisions, while workers have relatively little (Hammer & Stern, 1980). We have made a
case that equity and profit sharing will be more effective when they combine multiple
privileges of ownership in a true power sharing arrangement. Whether these privileges
are limited to stock options or profit sharing, or reinforced by worker participation in key
business decisions, is likely to be attributable to the beliefs and motives of a firm’s
managers. Creation of an ownership culture bundling an array of ownership practices is
linked to managerial factors (Pierce & Furo, 1990). Research is needed into the
managerial beliefs, interests, and incentives that give rise to sharing ownership and its
privileges with workers and the efficacy of its implementation.
Investor motivation in worker ownership
Most research on ownership and corporate governance focuses upon alignment of
risk, returns, and controls among entrepreneurs, investors, and managers.
Far less
attention has been given to this alignment where workers are included as owners. We
have proposed that shared ownership-related privileges foster congruence between
employer and worker psychological contracts. Research suggests that high technology
start ups financed through venture capital (i.e., by outside financial investors other than
the entrepreneur) are more likely to distribute equity stakes to workers than are
entrepreneur-financed start ups. By sharing equity with workers, venture capitalists try to
ensure that valued human assets are motivated to behave in ways that ensure financial
returns, offsetting the sometimes more particularistic motives of entrepreneurs
31
(Shperling, Rousseau, & Ferrante, 2002). Nonetheless, we know relatively little about
investor motives in sharing ownership with workers.
One issue in understanding how financial investors approach their rights and
responsibilities is whether they have a short-term focus or espouse "patient capital."
Patient capital refers to investments by stakeholders who are willing to take a long-term
view (Smith, Pfeffer, & Rousseau, 2000). Where higher returns are anticipated over
time, as in the case of investments in research and development, workforce development,
and organizational infrastructure, patient capital can benefit a broad spectrum of firm
stakeholders. Investors espousing patient capital are likely to view sharing ownershiprelated privileges with workers more positively than those with a short-term focus. It is
important to study how investor motives and interests shape various allocations of
ownership privileges to employees.
Worker motivation to participate as owners
Ownership can be a mixed blessing for workers. While it can make a worker’s
job more valuable, it can also create conflict with traditional roles and beliefs. For all
owners, ownership comes with liabilities. Stakeholders with all their assets tied to the
firm can suffer devastating losses from business failure. The set of practices that help
offset losses vary with an owner’s relationship to the firm. Financial investors can offset
negative firm outcomes by diversifying their portfolio. Diversification is more difficult
for managers and workers, particularly those receiving compensation or retirement
benefits in company shares. Managers can offset this through golden parachutes (Garud
& Shapira, 1997), less commonly available to workers. Workers might offset losses by
securing their employability through continued skill development and market visibility
32
(Arthur & Rousseau, 1996). However, where workers have difficulty diversifying their
assets (e.g., stock options that have not yet vested), employability may be costly to
exercise. Research is needed regarding the objective and subjective risks worker/owners
experience and how these impact worker/owner attitudes and behavior.
How attractive an equity stake in one’s employer is relates to the risk exposure it
brings. Risk tolerance differs across people and settings (Yates, 1992). Although
economists postulate that workers are risk-averse (e.g., Alchian & Demsetz, 1972;
Miyazaki, 1984), no systematic empirical support exists for that position (see Das &
Teng, 1997, for a review). Willingness to take risks is affected by the would-be-risk
taker’s resources (March & Shapira, 1987). In the early years of Microsoft, after original
company workers had made millions as their stock values rose, Bill Gates asked them to
sell off a substantial proportion of their Microsoft shares. By diversifying their assets,
these workers were then in a better position to dispassionately take risks on Microsoft’s
behalf. As this incident suggests, resilience in the face of financial downturns is enhanced
through financial diversification and the presence of reserves and safety nets.
The attractiveness of ownership and its privileges to workers varies with their
ability to understand, manage, and cope with potential losses. Along with other scholars
(e.g., Busenitz, 1999), we have made a case for the importance of worker sophistication
regarding financial information in their interpretation of risk. There is a need for research
into how workers understand risk, both in the context of using financial information to
make job-related decisions and with regard to worker ownership participation more
broadly. Risk tolerance is likely to be greater in workers who are business literate, not the
least of which because they may have a better sense of their personal finances and more
33
personal wealth. Moreover, supports that make risk acceptable (e.g., pension security,
diversification of personal assets) are important considerations for expanded worker
ownership. Ideological issues regarding worker vulnerability in relation to capital (e.g.,
Braverman, 1974) might surface in a new form with more experience regarding the
consequences of workers participating as owners over time and across economic cycles.
Legal and societal influences on worker ownership
The theory we have developed here assumes that ownership and its accompanying
privileges operate within an institutional framework akin to that which prevails in
relatively well-developed, market-oriented economies. Where such a framework is weak
or non-existent, or where legal and social institutions significantly differ, the arguments
and propositions advanced here may not hold.
As a result, the final recommended research domain is the role of legal and
societal factors. The availability and attractiveness of worker ownership arrangements is
a function of broad societal and economic forces. Employees (workers and managerial
employees in this case) are increasingly viewed as investors (or in some cases,
bondholders) in their employers through the use of such practices as deferred
compensation and those seniority systems that remain (Shleifer & Summers, 1988; Ritter
& Taylor, 2000). As investors, workers bear substantial risk from poor firm performance.
However, workers differ from other investors both in terms of how their rights are
protected and in what they risk. Laws regarding corporate governance deal with the ways
in which stockholders -- typically investors supplying finance to corporations -- ensure
they receive a return on their investment (Shleifer & Vishny, 1997). In the United States,
laws protect the rights of investors over those of workers (Ritter & Taylor, 2000). Legal
34
factors contribute to the different risks financial investors, workers, and managers face in
attempting to assert their claims upon the firm. For instance, Japanese firms view
employees as stakeholders with claims on the firm comparable to those of investors
(Aoki, 1984; Garud & Shapira, 1997). The rights societies accord workers can impact the
motivations associated with worker ownership. Contextual supports such as job property
rights, worker-oriented governance mechanisms (e.g., works councils), and social welfare
programs (e.g., government-supported pension funds) can supplement or substitute for
particular privileges of ownership.
A LOOK AHEAD
Participation in ownership and its privileges is proliferating among highly mobile,
skilled workers, and especially in firms deriving substantial competitive advantage from
their workforces. This trend leads to a hybrid form of employment relationship whose
features cut across the traditional roles of owners, managers, and workers. The popularity
of stock options as a form of compensation coincided with growing high technology
sectors and expanded knowledge economies of the United States and the European Union
in the 1990s. If the popularity of these practices continue in growth industries, the more
likely they are spill over into other sectors, as has been true for previous employment
innovations (e.g., flex-time, Ingram & Simons, 1995).
Some employment innovations have proven durable, others faddish and
ephemeral (Miles & Creed, 1995; Abrahamson & Fairchild, 1999). Whether the
expansion of the rights and privileges of ownership to workers continues depends upon
market forces, the nature of competitive advantage across firms, and appropriate societal
and legal supports. The continued migration and inclusion of ownership in the
35
employment relationship also depend on expectations regarding such arrangements.
Unrealistic expectations have been implicated in the limited success of organizational
democracy following World War II due to ignorance of necessary pre-conditions,
hyperbolic claims, and dismissed contingencies (Heller, 2001). Social science research
can aid formation of realistic expectations.
Scholarly attention is critical to
understanding how allocations of ownership and its privileges impact both the interests of
and the relationships among workers, managers, and investors.
36
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Table 1
Ownership Rights and Privileges across Four Fields
Economics
Entrepreneurship Organizational
Behavior
Industrial
Relations
Rights and
Privileges
Residual control
rights
Control of the
property itself
(Hart, 1995).
Investors’ residual
claims and
intangible resources
(Aoki, 1984)
Control of the
property itself
(Pierce, Rubenfeld
& Morgan, 1991).
Number of shares
held by employees
and perceived
ownership
(Hammer & Stern,
1980)
Profit-sharing
Managers’ control
over profits and
distribution (Hart &
Moore, 1994).
Profit sharing
promoting
organizational
change (Lawler,
1981)
Coupling equity
and profit sharing
to reduce absences
(Brown, Fakhfakh
& Sessions, 1999)
Access to financial
information
Access to
information
regarding the firm’s
activities (Hart,
1995).
Transparency and
greater sharing of
financial data via
"open book
management”
(Case, 1995;
McCoy, 1996).
Access to financial
data by unions as
well as workers
(Tannenbaum, et
al., 1974)
Participation in
decision making
Allocating decision
making to managers
(Alchian &
Demsetz, 1972).
Participation of
worker owners in
decision making
(Klein, 1987).
Right to influence
decisions (Rhodes
& Steers, 1981).
Profit-sharing
encouraging
entrepreneurship
(Johnson & Loveman,
1995)
49