EO can enhance company performance, as it creates a closer tie between employee performance and rewards. Employees are effectively “working for themselves,” productivity-reducing conflict is minimized and productivity-enhancing cooperation and innovation encouraged.
According to Rutgers University research, employee ownership can enhance company performance, as it creates a closer tie between employee performance and rewards. Employees are effectively “working for themselves,” and by sharing the overall economic “pie” more widely, the incentives of workers and owners can become aligned so that productivity-reducing conflict is minimized and productivity-enhancing cooperation and innovation encouraged.
This is particularly so when employee ownership is combined with employee participation in decision-making and other high-performance work practices.
According to a meta-analysis of existing studies, with 102 samples covering 56,984 firms, researchers found that EO has a small but significant positive relation, on average, with firm performance. This is consistent with other reviews and meta-analyses, including one which finds that two-thirds of 129 studies conclude that employee ownership is positively related to performance or employee attitudes, while only one-tenth find negative relationships.
As an example, a study sponsored by the UK Treasury analyzes data from confidential tax records on tax-advantaged share schemes at over 16,000 UK firms and finds that broad-based employee ownership is linked to improved firm performance measures, such as value-added and turnover.
In addition, a study of French cooperatives finds that employee-owned firms are at least as productive as conventional firms.