Major New Research Confirms Interactive Power of Ownership and Involvement

On October 6-7, the Russell Sage Foundation and the National Bureau for Economic Research (NBER) held a two-day session in New York to discuss the results of a multi-year NBER research project on "shared capitalism" (employee ownership, profit sharing, and gainsharing). Richard Freeman of Harvard and Joseph Blasi and Douglas Kruse of Rutgers led the research project. Additional papers on other data sets were also presented. The meeting was keynoted by Daniel Kahneman, a Nobel prize winner for economics, who helped developed "prospect theory," a major breakthrough in economics that shows, among other things, that people are much more concerned about a dollar's loss than a dollar's gain and are willing to sacrifice economic gains to assure fairness between parties, concepts that violate classical economic principles of economic "rationality." (The NCEO has often discussed the importance of these concepts to understanding how employees view employee ownership.)

The common theme running throughout the research findings was that employee ownership, as well as other forms of "results sharing" (i.e., rewarding employees based on positive corporate performance), affects employee attitudes and corporate performance primarily when it is paired with employee involvement programs such as work teams, open-book management, and similar practices. The NCEO identified this pattern in our first major research project in the 1980s, and it has subsequently been confirmed in other work. Organizational behavior scholars such as former NCEO keynoter Ed Lawler also made these arguments many years ago, but economists and the investment community, by and large, have paid them little heed, paying precious little attention to how organizations treat ordinary employees as predictors of corporate success. Given the prestige of the Harvard-based NBER, this conference may be an initial step in gaining more academic credibility for an alternative view.