Corey Rosen, John Case, and
Martin Staubus Equity: Why Employee Ownership Is Good for
Business (
After decades of being largely ignored
by business schools, it is encouraging to see that Harvard Business School
Press has published a new and comprehensive book on employee ownership. It is
even more encouraging to see that this new book is so compelling.
Rosen is the long-time executive director of the
While the book provides an overview of the research
on employee ownership, as well as the mechanics of various plans, its focus is
on what the authors call the “equity model.” The authors chose the term
“equity” very intentionally. On the one hand, it refers to equity in the sense
of the many ways ownership can be shared: ESOPs, employee stock purchase plans,
401(k) and profit sharing plans invested in company stock, broad based stock
options, restricted stock, and similar plans. At least 25
million U.S, workers now own stock in their company in one way or
another (and often in multiple ways in the same company).
This enormous growth has largely been under the radar of
much of the business press and almost all business schools. This has been very odd indeed since the very
same business schools bring in the CEOs of highly innovative and successful
companies like P&G, Cisco, EBay, Amgen, SAIC, and others who showcase
employee equity ownership inside their companies. It is odd that the business
schools and the leading business magazines themselves choose to focus on a
“personality cult” version of success in re-telling these stories, while
avoiding laying out a more nuanced picture. The book, Equity, changes all of this. It looks at
small, medium, and very large corporations in a variety of businesses, so it is
a good handbook for individuals in many different kinds of companies.
“Equity” also is
used by the authors in the sense of fairness. Companies following the equity
model both spread ownership broadly and create an
organization that shares financial and other performance information widely and
deeply; provides employees with structured and meaningful opportunities for
input into decisions affecting their jobs; and gives employees the needed
training not just in their jobs, but also in how to be better business people.
Extensive research is cited to show that companies following this model perform
much better than would otherwise have been expected and create more wealth for
employees.
Much of the book makes this case through stories.
The book opens with the tale of Stone Construction Equipment Corporation in
The book looks at dozens of other examples, often
in-depth, ranging from the small hardware store (Jacksons
Hardware in San Rafael, CA) whose profits increased after Home Depot and
West-Coast chain Orchard Supply moved in next door to such major companies as
W.L. Gore and Associates (maker of Gore-Tex), Science Applications (with 41,000
employees), Southwest Airlines, and Whole Foods. Different as they are in many
ways, all share a passion for getting people involved in finding ways to
improve the company.
But
the book is not an uncritical argument for employee ownership. One chapter
looks at the implosion at United Airlines, pointing out that United never chose
to follow the lessons of other equity model companies. Instead, after a brief
and successful experiment with employee involvement, both union and management
leaders knowingly chose to revert to more comfortable adversarial roles.
Employees owned a lot of stock, but they were treated as owners only
fleetingly. United never implemented a cash profit sharing plan to share the
new productivity gains with employees. United never implemented a serious
attempt at employee involvement or management training recommended by experts.
And the United Board of Directors did not try to manage the corporate culture
of the company as a key strategic asset. The authors do not view the ownership
of company stock as an unmitigated blessing. They say that companies need to
make sure employees investing heavily in company stock in 401(k) plans, for
instance, need to be very aware of the risks involved. They are also critical
of companies that share
token amounts of ownership through options or similar means while
front-loading executives with obscene amounts of ownership.
Rosen, Case, and Staubus have
written a much-needed book. It is, without a doubt, the best book of case
studies yet done on employee ownership. The authors brilliantly tell the
stories of how equity model companies have generated high-performance through
employee ownership. This is, in short, the most practical, down-to-earth, and
insight packed book on how to create and implement equity systems that work.
But the book goes beyond this. It integrates the philosophy of ownership, the
social science behind an ownership culture, and the important politics of
having senior management support, into a very readable whole. I strongly
recommend this book. It is a great read and is also a good choice to give to
employees, managers, and students.—Joseph Blasi,
Blasi is Professor in the School of Management & Labor
Relations,