by: Faleye, Olubunmi; Mehrotra, Vikas; Morck, Randall
Source: MIT Sloan Management Review
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.
Link: Is Employee Ownership Counterproductive?
Publication Date: 2005-07-15