Is Employee Ownership Counterproductive?

Posted: 24 May 2013 Last revised: 30 May 2013

See all articles by Olubunmi Faleye

Olubunmi Faleye

Northeastern University - Finance Group

Vikas Mehrotra

University of Alberta - Department of Finance and Statistical Analysis

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Date Written: July 23, 2004

Abstract

Turning workers into shareholders improves corporate performance, or so advocates of employee ownership maintain. Their logic is simple: workers with a stake in their company's future are more likely to take a long-term view, which translates into higher productivity and other gains. But new research from the National Bureau of Economic Research casts doubt on those claims. In their April 2005 working paper, "When Labor Has a Voice in Corporate Governance," Olubunmi Faleye, an assistant professor of finance and insurance at Northeastern University, and Vikas Mehrotra and Randall Morck, both members of the finance faculty at the University of Alberta, report that companies with significant levels of employee control systematically underperform — in large part because workers can hold management hostage to their short-term concerns.

Suggested Citation

Faleye, Olubunmi and Mehrotra, Vikas and Morck, Randall K., Is Employee Ownership Counterproductive? (July 23, 2004). Sloan Management Review 2005; University of Alberta School of Business Research Paper No. 2013-222. Available at SSRN: https://ssrn.com/abstract=2269304

Olubunmi Faleye

Northeastern University - Finance Group ( email )

Boston, MA 02115
United States

Vikas Mehrotra (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

School of Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2976 (Phone)
780-492-3325 (Fax)

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governence Institute ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Asian Bureau of Finance and Economic Research ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

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