One of the main causes of all this suffering is that actual employees are not involved in planning company policy nor sharing in its profits. Many of these posts highlight the cases where a company will make record income and then turn around and fire its workers, cut sick days, or limit pay. In a tight labor market, bosses rely on the fact that people may struggle to find a new job so they won’t quit even as conditions worsen.
One proposal suggested primarily by workers is more ownership in the company they work at. Unsinspiringly named employee ownership, the idea is that each employee would own a stake in the company they work at. If the company does well, the employee would also benefit directly, not at the discretion of managers. Even further, certain decisions could be voted on, limiting upper management's ability to use abusive policies. So how does it work in practice? Quite well.
A study put together by the Harvard Business Review found that most companies that operated an employee stock ownership plan (ESOP) reported greater financial success for their workers as well as faster growth, relative to other, similar companies that do not have an ESOP. Surprisingly, given how much rich people run away from taxes, ESOPs are actually given tax benefits in the United States. For example, Businesses can deduct contributions to ESOPs from corporate income taxes.
In general, US companies have a lot of incentives to pursue employee stock ownership plans, but a combination of personal greed and lack of knowledge holds many back from embracing employee ownership. If a manager can make a bit more at the cost of all employees making less, most will simply choose to keep the profit. An ESOP also takes some power away from upper management, which leaders may not like.
While the idea of an ESOP may create the image of some sort of hybrid democracy-corporate entity, the reality is that even the high-functioning companies listed in the study earlier tend to not be majority employee-owned. In most cases, ESOPs hold between 10-40% of control of a company, enough to protect the workers and ensure that profits do trickle downwards, without compromising the control of upper management. But, as older siblings and team leaders around the world know, democracy can be frustrating to deal with, so ESOPs still remain uncommon.
However, this research brings up an interesting conundrum for governments. Studies show that companies that operate an ESOP or similar scheme if it’s outside the US, tend to grow faster than those that don’t. On the whole, setting aside individual workers, this is good for the entire economy. The only thing keeping both the economy as a whole and the welfare of employees back is the greed of a few at the top.
And to managers that remain unconvinced, companies that use an ESOP also have significantly better worker engagement, retention, and productivity. After all, if your hard work translates directly into more income, you will work harder, this is so common sense that a child can figure it out, even if many managers can’t. Participation plans resulted in three to four times faster growth in companies with an ESOP, compared to those that don’t have one. Those sorts of numbers in a startup would be considered phenomenal.
