Study Indicates Majority-Owned ESOP Firms Enjoy Greater Productivity

June 18, 2008 (PLANSPONSOR.com) - Recent research by Brent Kramer, a doctoral candidate at the City University of New York, "provides strong evidence that majority employee-owned businesses have a significant advantage over comparable traditionally-owned businesses in sales per employee."

A news release from the ESOP Association said the research indicates the average advantage, $44,500, means that a typical 200 person employee stock ownership plan (ESOP) firm could be expected to have an almost $9 million annual sales advantage over its non-ESOP counterpart. Sales per employee is the total of a company’s sales divided by the number of employees, and is a commonly used measure of a company’s productivity, the ESOP Association explained.

Highlights of the study, according to the release, include:

  • Using standard statistical methods, the average sales advantage for the ESOP firms in the study was $44,500, or an average of an 8.8% sales per employee advantage over their non-ESOP counterparts in the same industry and of the same size;
  • Firms that ask for non-management employee input into innovation in work processes have a greater employee-owned advantage in sales per employee; and
  • The sales per employee advantage for the 50% plus ESOP companies compared to non-ESOP companies is less for larger employers.

The study, Employee Ownership and Participation Effects on Firm Outcomes, analyzes a total of 328 ESOP firms and over 2,000 matching non-ESOP firms.

«