The Size of Employee Stakeholding in Large UK Corporations

Bruce Rayton and Jonathan S. Seaton
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Jonathan S. Seaton: Loughborough University

Labor and Demography from University Library of Munich, Germany

Abstract: The existing debate about policies designed to foster the development of a stakeholder economy have largely avoided a fundamental question. How large is the financial stake employees currently hold in their companies? This paper addresses this question using data from the Datastream database, and finds that there is already a significant link between the pay of rank and file employees and the performance of their firms. We find that a doubling of firm value increases employee pay in these firms by approximately 14 percent. Firms with explicit profit- sharing arrangements have a performance elasticity of approximately 0.32, while firms without explicit profit-sharing arrangements have a performance elasticity of only 0.11. This indicates that flexibility of pay is not limited to the explicit profit-sharing awards. This is further substantiated by the finding that even after controlling for the levels of profit-sharing pay, the performance elasticity in the profit sharing firms is 0.27. These estimates are by no means a complete measure of the stakeholding relationship, but they do quantify the financial relationship between firms and a group of primary stakeholders: the workers.

Keywords: stakeholding; incentives; agency costs; profit-sharing; pay-performance sensitivities (search for similar items in EconPapers)
JEL-codes: J33 L14 (search for similar items in EconPapers)
Pages: 17 pages
Date: 1996-12-11, Revised 1999-01-28
New Economics Papers: this item is included in nep-fmk
Note: Type of Document - MS-Word 7.0; prepared on IBM PC; to print on HP; pages: 17; figures: included
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The size of employee stakeholding in large UK corporations (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpla:9612001

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