At first glance it seems like a great idea for businesses to have employees participate in the ownership of that enterprise.
The term should be sharing, not giving back as some claim. The latter implies that something is being returned that may not have been properly taken. Employee ownership should be called sharing.
Conventional wisdom extols the virtue of sharing. That urges us to be charitable and is the basis of philanthropy. The maxims of religion justify sharing, consideration of others. All of us could use help.
Profit sharing enables others to participate in a good company’s operations. Populists like it as it gives workers participation in the capitalist system. For the same reason others are interested as it is a satisfactory replacement for defined pension plans, where workers and employers put money in a pot with no guarantee of how much it eventually will pay out.
Employee ownership is a good example of magnanimity in action.
It should be noted that a survey confirms that where employees have some involvement in their employer’s company, they are more productive and are less inclined to switch to another organization.
Still, there are some drawbacks to this plan. If one has all the resources in that one business, it could be hazardous if it failed. Also, with employee ownership, management could become entrenched. It could prevent the infusion of new ideas or the takeover of the business by a more enterprising company.
Too, employee owners may infer that they are entitled to extra consideration and benefits. In addition, an employee may opt for work at a smaller company where a shareholder may have greater input. Also, at a smaller enterprise, employee owners can more easily monitor other workers and prod them to be more productive.
An employee-owned company is more able to avert a break between management and workers and improve labour relations which, of course, would be beneficial to generate profits.
It is worth noting that in Japan employers often work directly with workers, even on assembly lines, and that has proved to be very satisfactory. An employee-owned company is more likely to be on the lookout for ways to improve operations, to take advantage of techniques that will enhance efficiency. Observant employees cannot but help to facilitate that organization in every way.
In general then, employee ownership is a good thing, but nevertheless there are potential pitfalls.