The Potential Benefits of Employee Equity Funds in the United States

Journal of Participation and Employee Ownership. Vol. forthcoming

30 Pages Posted: 17 Sep 2020 Last revised: 20 Jul 2021

See all articles by Lenore Palladino

Lenore Palladino

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics

Date Written: August 4, 2020

Abstract

A crucial decision for large corporations is how profits created by corporate activity should be distributed among different corporate stakeholders. This article posits that public policy should recognize employees as key contributors to corporate value-creation. One approach is to require the creation of Employee Ownership Funds (EOFs), mandatory employee equity ownership trusts established at large corporations, which would pay employees dividends and establish a collective employee voice in corporate governance. The EOFs may reduce economic inequality while improving firm performance and macroeconomic stability. This article provides an original estimate of employee dividends, illustrating the potential of Employee Ownership Funds. Based on historic dividend payments and employee counts in public 10-K filings, I find that, if EOFs held twenty percent of outstanding equity, the average employee dividend across this sample would be $2,622 per year, while the median is $1,760. This indicates that employee dividends can be a small but meaningful form of redressing wealth inequality for the low-wage workforce, though it should emphatically not be seen as a replacement for fair wages.

Keywords: Corporate Governance; Dividends; Employee Ownership; Employee Ownership Funds; Employee Participation; Wealth Inequality

JEL Classification: J54; G33; K22

Suggested Citation

Palladino, Lenore, The Potential Benefits of Employee Equity Funds in the United States (August 4, 2020). Journal of Participation and Employee Ownership. Vol. forthcoming, Available at SSRN: https://ssrn.com/abstract=3667152 or http://dx.doi.org/10.2139/ssrn.3667152

Lenore Palladino (Contact Author)

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics ( email )

Amherst, MA 01003
United States

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