Employee Stock Ownership Plans (ESOPs) and Workplace Productivity
Project/Area Number |
04803002
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Research Category |
Grant-in-Aid for General Scientific Research (C)
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Allocation Type | Single-year Grants |
Research Field |
一般理論
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Research Institution | Osaka University |
Principal Investigator |
MIYAZAKI Hajime Institute of Social and Economic Research Osaka University, Professor, 社会経済研究所, 教授 (10229833)
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Project Period (FY) |
1992 – 1993
|
Project Status |
Completed (Fiscal Year 1993)
|
Budget Amount *help |
¥1,300,000 (Direct Cost: ¥1,300,000)
Fiscal Year 1993: ¥600,000 (Direct Cost: ¥600,000)
Fiscal Year 1992: ¥700,000 (Direct Cost: ¥700,000)
|
Keywords | Employee Stock Ownership Plans / Stock Purchase Plans / Profit-Sharing / Work Incentives / Free Rider / Corporate Governance / Residual Control / Agency Theory / 従業員持ち株制度 / ESOP(Employee Stock Ownership Plan) / 勤労インセンティブ / 従業員参加 / 労働生産性 |
Research Abstract |
Nearly all Japanese firms listed in the Tokyo Stock Exchange have adopted ESOPs (Employee Stock Ownership Plans). While ESOPs are defined-contribution retirement plans in the U.S., Japanese ESOPs are essentially firm-subsidized stock purchase plans for employees. Furthermore, unlike U.S.ESOPs, there are no apparent tax advantages with Japanese ESOPs. Since employees must meet significant vesting requirements before ESOP shares can be converted to individual stock ownership, however, Japanese ESOPs still function as deferred compensation schemes that depend on corporate performance. Since a deferred compensation scheme promotes accumulation of firm-specific human capital and reduces turnover costs, an ESOP can endirectly raise employee productivity, Economic theory also predicts that any performance-based compensation scheme such as an ESOP directly motivates employees better than fixed compensation. Nevertheless, empirical studies, based mostly on U.S.ESOPs, indicate little causal relat
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ionship between ESOPs and corporate performance. I identify two major potential causes for the lack of such empirical evidence. First, ESOPs might be effective in motivating employees, but employee motivation may not be translated into firm productivity unless the internal workplace structure implements employee participation in operational decision making. This consideration suggest the potential importance of employees' residual control in the day-to-day operations of the Japanese firm. Second, since work monitoring is imperfect, individual employees have incentives to free-ride on others effort. Such group moral hazard results in subpart performance of the firm. Mitigation of group moral hazard requires overall corporate governance, which penalizes underperformance to ensure proper ex ante effort incentives. Since Japanese firms are usually shielded from shareholder discipline, ability of the main bank to enforce contingent corporate governance is critical to the firm's overall performance. The bank is a silent partner when the firm performs well but takes control if it underperforms. The concept of employees' residual control and bank-based corporate governance reconciles the Japanese corporate modus operandi wherein employees have considerable autonomy inrunning the firm but management is extremely keen on profit maximization. Further, residual control and corporate governance can be understood and analyzed within the principal-agency paradigm. Theoretically, however, the residual-control aspects necessitates significant modifications of standard principal-agency models. To bring out positive correlations between per capita ESOP shares and labor productivity, the empirical measurement of ESOP effects must include data on the governance ability of banks, labor-management relations, internal age-earnings structures, and retirement systems as well as conventional ESOP data. Less
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Report
(3 results)
Research Products
(4 results)