Is employee ownership so senseless ?

Nicolas Aubert (), Bernard Grand, André Lapied () and Patrick Rousseau
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Bernard Grand: CEROG - Centre d'Etudes et de Recherche sur les Organisations et la Gestion - Université Paul Cézanne - Aix-Marseille 3
Patrick Rousseau: CEROG - Centre d'Etudes et de Recherche sur les Organisations et la Gestion - Université Paul Cézanne - Aix-Marseille 3, AMU IAE - Institut d'Administration des Entreprises (IAE) - Aix-en-Provence - AMU - Aix Marseille Université

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Abstract: Since Enron and the ruin of thousands of its employees, employee ownership is harshly criticized. Investing savings in employer's stock would be equivalent to bet on only one asset. Moreover, employee ownership's debated efficiency would not justify employers to grant company stock to their employees. Still, employee ownership is put in place by thousands of companies and withhold by millions of employees throughout the world. This paper considers a moral hazard setting where a risk neutral entrepreneur grants company stock to its risk averse employee as an incentive. We show that there is an optimal transfer of employee ownership that satisfies employee's risk preference and has an incentive effect. We thus bring about rational argument in favor of employee ownership.

Keywords: moral hazard; Employee ownership; company stock; perfect Nash equilibrium in sub-game; Actionnariat salarié; aléa moral; équilibre de Nash parfait en sous-jeu (search for similar items in EconPapers)
Date: 2009
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00454017v1
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Citations: View citations in EconPapers (4)

Published in Finance, 2009, 30 (2), pp.5-29. ⟨10.3917/fina.302.0005⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00454017

DOI: 10.3917/fina.302.0005

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