A New Index of Employee Ownership Companies

Long-standing research suggests that the combination of employee ownership and participative management results in better-than-expected company performance. Much of the research on this topic has been on private companies, and to extend it systematically to public companies, it's necessary to create objective criteria to serve as a screen. No one to date has attempted to create such a screen, which requires criteria for broad-based ownership and also for employee engagement.

The NCEO has now created an index of public companies that have both a broad-based equity plan and a strong score on an outside measure of employee engagement. We will track the performance of this index over the long term to see if these companies demonstrate the performance advantages the research suggests.

The index consists of 26 companies that have (1) broad-based equity compensation programs (ESOPs with an average account balance of $30,000 or more and/or stock option/restricted stock grants for a majority of full-time employees) and (2) high-engagement work practices, as measured by appearing on the Best Companies to Work For list created by the Great Place to Work Institute, the Gallup High Engagement Index, or the Engagement Alliance Index.

The NCEO is not an investment advisor, and this index is not intended as a recommendation for investment. The purpose of this index is tracking the future course of a set of companies. We hope that the index will shed some light on the employee ownership in public companies and about how useful these measures of employee engagement are as a proxy for ownership culture.

The Employee Ownership Index exists and can be tracked at Motif, a web-based brokerage site that allows people to create their own investment portfolios. At this point, Motif is available only to individual investors with accounts at Motif; you can invest in the Index either through a regular Motif account or in an IRA established at Motif, but you cannot buy the Index through a non-Motif account elsewhere. To find the Index, search for the Employee Ownership Index at motifinvesting.com or go to this link.

Disclaimer: This index is not a recommended investment, and anyone choosing to invest money in it does so entirely at their own risk. The NCEO makes no representations about the wisdom of investing in these companies, none of which have been analyzed by any criteria other than described above.

Disclosure: The NCEO will receive $1.00 for each trade made on this index in Motif. All such revenue will be used to support special projects.