Hello. I'm Douglas Kruse, professor of human resource management, labor studies and employment relations at the Rutgers School of Management and Labor Relations. And I'm also associate director of the Institute for the Study of Employee Ownership and Profit Sharing. I'm an economist by training. I've been researching employee ownership and similar approaches to sharing wealth and profits with employees for several decades. There have been over 100 studies about employee ownership published across numerous countries and by numerous scholars. I want to tell you about three major findings that we see when we look at this body of research as a whole. In other words, I want to give you the bird's eye view of what we know about employee ownership from the research. Then in the videos that follow this one, my colleagues will share with you in detail about some of the interesting questions they have asked and specific answers they have found in their own research. First, here's the big picture. Over 100 studies across many countries indicate that employee ownership is generally linked to good outcomes for both firms and workers such as better productivity, pay, job stability, and firm survival. The causation can be difficult to firmly establish, and there can be a lot of dispersion around those good results. Overall, the evidence shows first of all, that employee ownership is linked to better company performance. This pattern holds across studies in the United States, the UK, France, and elsewhere. Correlation does not prove causation of course, that is, the fact that employee ownership is associated with higher performance does not prove that employee ownership is the cause of that higher performance. Still, it's a very strong correlation and it holds up when researchers try to rule out other explanations, such as by doing pre post comparisons, which find that the relationship is not simply due to higher pre-existing productivity among firms that convert to employee ownership. On average, employee ownership is associated with higher, not lower company performance, and performance does tend to go up after firms adopt employee ownership. Note that there's no simple automatic relationship between employee ownership and better performance. While the average performance effect of adopting of adopting employee on the ship is positive, there is a lot of dispersion. Some firms do much better and some firms adopting employee ownership do not see improvements. The research suggests that stronger performance may depend in part on having other workplace policies that encourage cooperation, employee involvement, and job security in combination with employee ownership. Well, I'll return to that point in a moment. A second major finding, employee owned companies have more job stability, and fewer layoffs, both in recessions and non recession periods. They also have higher survival rates. During the early stages of the pandemic downturn in 2020, when the economy contracted dramatically and many companies were laying off their employees. Companies with broad based employee ownership were 3 to 4 times more likely to retain staff compared to conventional firms. According to a 2020 study by the Employee Ownership Foundation and the Rutgers School of Management Labor Relations that I co-authored with Joseph Blasi. This finding that employee owned companies provide better job stability in the face of economic downturn is consistent with studies from previous recessions that we've done. In a biannual survey of adults in the United States called the General Social Survey, employees who own stock consistently report experiencing layoffs at lower rates than survey respondents who are not stock owners. Employee ownership is not of course a magic pill, and employee ownership firms can fail like other firms, but they do appear to have a higher survival rates, which gives workers additional job security on top of the lower layoffs. The studies suggest that both stock market US companies and closely held companies with employee ownership are less likely to go bankrupt or closed down. Internationally, studies of worker cooperatives have found high survival rates compared to conventional firms in the UK, France, Uruguay, and other countries. The greater job stability and higher survival rates are not just good for the firms and workers, but are also good for communities and the economy as a whole. Greater job security means more stable worker incomes, and purchasing power, so helps decrease the chances of recession. If it helps preserve jobs, there will be positive spillover effects of employee ownership. A third major finding, employee owners are more likely to report receiving company sponsored training and participating in workplace decisions. And they tend to give companies higher ratings on management, employee relations. Employee ownership, worker training and worker voice and participation appear to go together. This makes sense as combining them gives them play owners the means to increase their skills and have opportunities for input. The synergy between these complementary practices maybe one part of what explains improved company performance. Quite simply, if you want positive effects from employee ownership, you have to make employees feel like owners by giving them more, say, information, and training. So, those are all positive things. Are there any negative impacts of employee ownership? The main potential negative impact relates to financial risk. I'm a very risk averse person myself, so I pay a lot of attention to this issue. In some types of stock sharing programs, workers may be exposed to excessive risk, especially when employee ownership represents a large share of workers wealth. If it substitutes for other pay and benefits, or if employees themselves purchase the stock out of their regular wages. Financial risk is an important concern, particularly since if a firm fails, a worker can lose both their job and part of their wealth. The research suggests that risk is minimized by the fact that employers stock tends to come on top of, rather than substitute for a regular employee pay. This practice of sharing stock with employees on top of their wages without reducing wages or other benefits is an important practice for employers to follow, in order to buffer workers from excessive financial risk, and reap the most financial benefits from sharing ownership. The research also suggests that financial risk is offset by better average company survival and job stability rates and employee owned companies. We find that the majority of even the most risk averse employees say they would like some employee ownership, profit sharing or stock options in their pay package. So there you have an overview of several major takeaways from decades of accumulated research. Next, my colleagues will share with you in more detail, important findings from their work.
