Despite thousands of employee-owned companies demonstrating faster growth, higher profits, and greater resilience, many firms fail to leverage these benefits. The business case for making employees partners through equity is now clear. However, simply granting stock doesn't guarantee success. To realize advantages, firms must evolve culture to align with an ownership mentality. Employees must see themselves as owners, running the business differently. Unless these three elements are present - equity, culture shift, and employee-leadership - ownership won't transform companies. Still, properly implemented employee ownership comprehensively boosts ordinary firms, with many influential, high-growth companies combining ownership and participatory management.
Employee ownership has become a widespread business phenomenon, with about 39% of all employees being share owners and a further 17% being option holders. In the United States alone, around 11,000 companies have employee stock ownership plans covering about 8.8 million workers. A further 2,200 companies offer 11 million employees participation in 401(k) plans which primarily invest in company stock. Additionally, around 4,000 companies provide stock option plans to 10 million employees and another 4,000 offer plans for 15.7 million employees to purchase discounted stock. Similar patterns of employee ownership exist internationally as well. Countries like the United Kingdom, Spain, and Italy have long had worker cooperatives that own companies. Experiments with employee ownership models are already underway in countries spanning multiple continents, including Australia, Egypt, Jamaica, Kenya, and South Africa. Many post-communist countries privatized state-owned companies by offering shares to employees, as seen in Poland, Russia, Slovenia, and Hungary. China has also transitioned ownership of thousands of businesses from the central government to employees. The prevalence of employee ownership among highly successful companies is notable too. Around 80% of the companies on Fortune’s “100 Best Companies to Work For” list have some form of broad employee ownership program. About one-third of the fastest-growing private companies recognized by Inc. magazine do the same. Research by Professor Joseph Blasi and Douglas Kruse of Rutgers University indicates employee equity ownership boosts business performance rather than detracting from it. In studying companies over a 30-year period, they found: - Companies adopting an employee stock ownership plan experience a 4-5% productivity increase that continues in future years. - Employee-owned companies have greater stability and are less likely to conduct layoffs in economic downturns. - Employee ownership correlates with faster employment growth and higher survival rates. - Public companies that implemented broad-based stock option plans covering 75% of employees saw productivity rise by 17% over 3 years. Despite these benefits and success stories, misconceptions about employee ownership persist: - Occasional failures of prominent employee-owned companies lead some to conclude the model itself is flawed, rather than recognizing no business model universally prevents failure. - Some believe employee ownership relies entirely on favorable tax and accounting policies, but growth has continued despite regulatory changes. - Following Enron's collapse, some suggested employee ownership jeopardizes retirement security, but most plans now diversify assets rather than solely owning parent company stock. - Many employee ownership plans fail to excite workers or improve performance due to missed opportunities in training and implementation.
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