Summary
This study attempts to answer questions about the success of companies with employee stock ownership plans (ESOPs) in getting more wealth and income into the hands of employees. By comparing retirement assets and wages in Washington State ESOP companies with those in matched similar non-ESOP firms, the analysis shows that ESOP companies provide significantly higher retirement benefits than comparison firms. The average value (per participant) of all retirement benefits in ESOP companies (in 1995) was approximately $32,000, whereas the average value in the comparison companies was about $12,500. None of the independent variables in the analysis eliminated or significantly diminished the ESOP as an explanation for higher asset values. A large percentage of comparison companies (between 5-8% and 71 % ) had no retirement plan at all, and in those that did, employee participation rates in the plans were lower than in the ESOP companies. Furthermore, companies with ESOPs contributed on average about 10% of pay to all retirement plans, while the comparison companies contributed on average about three percent. Whereas in those comparison companies that have retirement plans, approximately 70% of the value of the assets was in stock offered through 401(k) plans ( and presumably diversified), in ESOP companies about 60% of retirement assets take the form of company stock The company stock held in the ESOP does not appear to come at the cost of wages. The median hourly wage of $14.72 in the ESOP firms was 8% higher than the median hourly wage in the comparison companies. At the 10th percentile of wages, hourly wages were 4% higher in the ESOP companies, while at the 90th percentile, ESOP company wages were 18% higher. Therefore, the ratio between the 90th and 10th percentiles was higher in the ESOP companies than in the comparison firms. Unions, in both ESOP and control companies, had the effect of raising wages at the 10th percentile and lowering them at the 90th, with the result that median wages for unionized control companies are significantly higher than for non- union controls. On average, the ESOP firms in this study provide a significantly higher total compensation to their employees than do their competitors, but the ratio of 90th to 10th percentile wages suggests that they do so within the framework of rewards already established in the economy.