Employee-owned Firms – Pros and Cons - a review

Journal of Participation and Employee Ownership – 2021, vol. 4, no. 2, pp. 136-173

https://doi.org/10.1108/JPEO-08-2021-0003

The article gives an overview over the theoretical predictions and the main empirical evidence of the effects of employee ownership. The pros are greater identification and increased productivity reinforced by increased participation. Other advantages are quite stable employment and a more equal distribution of wages. However, the motivation effects may be smaller for large firms and lack of capital may lead to lower levels of investments.

In spite of the advantages there are very few employee owned firms especially in Denmark. However, experience from other countries show that the barriers for employee ownership can be softened by specific legal formats, support organizations, models for takeovers by employees and special financial institutions serving employee owned firms. The paper outlines a specter of possible models from worker cooperatives to the American ESOP model worth considering for political initiatives in Denmark.

Earlier version presented at the 11th Beyster Symposium, Rutgers University, USA, June 2021. Discussants: Professor Gregory Dow (David Fraser University, Canada) and Louis Putterman (Brown University, USA) Link to recording of the session: (duration 1:27 hours) https://online.brushfire.com/beystersymposium/beyster2021/qy7pd5bd9g