NCPA - National Center for Policy Analysis

Benefits Of Employee Ownership

November 4, 1997

Companies benefit from programs making it easier for employees to own stock and have input in decision-making processes, according to data from the National Center for Employee Ownership (NCEO).

For instance, such plans tend to boost the value of the company's stock.

  • About 15 percent of private-sector workers own some stock in their companies -- up from 8 percent or 9 percent in 1990.
  • That figure is expected to double in the next decade.
  • The share price of companies with 10 percent or more employee ownership climbed 133.5 percent between 1990 and 1996, compared to a 124.9 percent increase in the S&P 500 index, reports the investment banking firm of American Capital Strategies.
  • NCEO found that companies with employee stock ownership plans realized sales growth rates 3.4 percent higher than rivals after they adopted their benefit plans.

Experts say that stock ownership plans must be accompanied by greater employee participation in decision-making before such results can be realized.

Sales at firms with the most worker involvement grew 8 percent to 11 percent a year faster than they otherwise would have, according to management analysts. Firms with the least worker participation showed a small drop in performance.

In addition to stock ownership plans, companies can offer employees stock options -- an increasingly popular benefit since the Financial Accounting Standards Board changed its rules in 1995. The FASB decided corporations did not have to take a charge against earnings for such plans, only disclose the cost of the plans in a footnote to their annual report.

This year, 53 percent of companies with stock-option plans are offering them to rank-and-file workers.

 

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