I see that under the terms of the reorganization, Chrysler will be 55% owned by the UAW (the workers). This is a very interesting situation-I wonder how the workers will react to the need for reducung job classifications, seniority, etc.-all of the stuff that the UAW tightly controls.
Are there any studies that compare the financial performance of publicly owned companies, vs, firms that are employee-owned? I would suspect th employee-owned firms would be better run, as the employees have a direct interest in performance.
Anybody know of any such study?
I don’t know of any study but a little meta-analysis of various company rankings may or may not give some hints.
List of largest USA employee-owned companies (ranked by # of employees, not by revenue): The Employee Ownership 100: America's Largest Majority Employee-Owned Companies | NCEO
The Fortune 100 does not have any companies with 51%+ employee ownership. If employee-ownership is clearly superior in performance, there’s something preventing that ownership structure from shooting up to the top the Fortune ranks.
In the longer list of the Fortune 500, you have SAIC with revenue of $10 billion. (They are also in that nceo.org list above.) The label of “employee-owners” of SAIC is a little deceptive because they are highly-educated with expectations to sell business. Sort of like saying a law firm of 10 partners are “employee-owned” – it’s technically true but that answer is not comparable to UAW workers.
As far as “employee-owners” being blue-collar with no responsibilities for bringing in new business, I’m not aware of any company like that in the Fortune 500. I didn’t check the whole list so I may be wrong.
An employee-owned business is certainly viable and may be optimal but it is not a slam-dunk that it’s the best model.
Employee-owned business can be quite effectivek, but by nature they don’t become very large. They cannot raise capital assets, and therefore must borrow money to finance expansion, which is neccessarily limited (even successful companies have credit limits). Since public stock offerings are the big-huge method of raising capital financing, that puts a limit on their competitiveness in the national and global marketplaces.
Secondly, as a practical matter most employee-owned business are family-owned or otherwise very small. The owners know each other and can work together. Past a certain size, and this starts becoming very difficult, even assuming that the employees possess the neccessary management know-how or special skills required. And if any and every employee automatically becomes an owner, the company will not expand at all if it expects profitability per dollar invested to be lower than current operations. An ordinary business will generally invest and expand up to the point that they gain no marginal advantage from doing so; that is, when the next dollar invested does not return them any net profit (after accounting for costs and alternative investments like T-bills). The fact that they do so is essentially is the basis of the modern economy. However, wmployee-owned businesses can compete in limited businesses, or those where smaller size is an advantage. Many skills-heavy industries, like custom glassware and such, are employee-owned.
One very successful employee -owned company here in the UK is the John Lewis Partnership. It operates a very successful and upmarket chain of department stores and supermarkets and is owned by all of it’s 69,000 employees:-
I don’t believe that SAIC is employee owned anymore. They went public in 2006. Yahoo says 70% of the shares are owned by institutions.