The Effects Employee-ownership on Operational & Financial Performance

In the automobile industry, profit sharing agreements are written into collective bargaining contracts (Bureau of Labor Statistics, 1984, p. 54). Under arrangements such as the a single found in the automobile industry, companies share profits with their production employees at predetermined rates, as soon as the minimum level of profits specified from the collective bargaining agreements have been attained. In such arrangements, the production employees share in the profits; however, they are not required to share in operational losses.

A second process of profit sharing for production employees involves employee stock ownership. Although any production employee is always free to go to the marketplace to invest in stock in his or her publicly held employing firm, this procedure of profit sharing involves formal organizational programs which encourage and aid employees from the obtain of business stock. These programs (and this process to profitsharing) are normally referred to as employee stock ownership plans##ESOPs (Doyle, 1991, p. 77). Under this method, employees share from the profits in the company each through dividends paid and via elevated industry values of stocks held. Employees do not participate directly in operational losses; however, declines in industry values will be the result of these kinds of losses.

 

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