Positive Impacts Of Employee Ownership And Representative Participaiton

1310 words - 6 pages


In response to intensified global and domestic competition, many worldwide companies have sought to improve company performance through more efficient use of their work forces. One of the prime ways of utilizing workforces efficiently is by involving employees in various business propositions and activities (Cooke, 1994). Employee involvement is defined as “a participative process to use the entire capacity of workers, designed to encourage employee commitment to organisational success” (Cotton, 1993). A major topic of debate in recent times is to what extend an efficient employee involvement programme helps an organisation to prosper and grow, rather than having an adverse effect on its performance. This essay focuses on the impact of two specific employee involvement programmes i.e. employee ownership and representative participation on an organisations performance by drawing data from several empirical studies.

Employee Ownership refers to workers becoming part owners of a company by being allocated shares in their respective firms in addition to their wages. Having a direct link between their effort and reward, employees are motivated into putting in greater effort as they have a larger interest in their employee’s profitability ( Bennett, 1997). A study of Polish Cooperatives was conducted in 1993 to derive the effect of employee ownership on a firm’s productivity. Information was gathered in a survey on three industries, clothing, printing and construction. The survey revealed that these industries were characterised by a fixed percentage of shares owned by employees. The productivity was calculated on the basis of the amount of production and the bonuses earned per employee. The results of the survey indicated a positive productivity effect found with respect to sharing in company profits and collective capital ownership by employees (Jones, 1993).

Another study conducted in 1992, compared the corporate performances of companies where employees owned more than 5% of the company’s stock and all other companies. Corporate Performance was measured on the basis of profitability which was calculated using various indexes like return on equity, price earnings ratio and profit margin. The survey conducted revealed higher levels of performance amongst employee owned firms. Such companies had 18% higher sales per employee and a 34% higher value added per employee (Blasi, Conte & Kruse, 1996).

Adding to the above two studies, were two more cases which supplemented the above conclusions. A study in 1981 discussed the relationship between employee equity in a company and company work attitudes. The survey conducted was a questionnaire sent to all employees of a particular firm, who had been distributed a certain number of shares of the...

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