مالکیت کارکنان: بررسی نظری و تجربی از جبهه گیری مدیریت در مقابل مدیریت پاداش

Employee ownership is often used not only as a reward management tool but also as an entrenchment mechanism. The literature suggests that good managers use employee ownership as a reward management tool, whereas bad managers implement it for entrenchment, thus suggesting the existence of an equilibrium level of employee ownership. The contributions of this paper are both theoretical and empirical. Theoretically, this paper fills a gap in the published research by taking into account both positive and negative outcomes of employee ownership. Our model produces three main conclusions: (i) Low-performing managers use employee ownership as an entrenchment mechanism (ii) that increases the signaling cost of employee ownership for high-performing managers. (iii) We suggest that employee ownership should not be left only to the management's discretion because both types of managers have an incentive to implement employee ownership. Our empirical study investigates how employee ownership affects management tenure. This study takes into account the two main motives for employee ownership examined by the model (i.e., management entrenchment and reward management). We find a positive relationship between employee ownership and management tenure. This result provides new evidence that employee ownership can be used as an entrenchment mechanism.

The academic literature regards employee ownership as a two-edged sword. On the one hand, employee ownership is often used as a reward management tool to enhance corporate performance through its incentive effects. On the other hand, employee ownership is also used as a management entrenchment mechanism that results in poor corporate governance because of the potential collusion between employee owners and management. In the case of a hostile takeover bid, employee owners usually vote to maintain the incumbent management team. The hostile takeover bid by Shamrock Holdings on Polaroid in the late 1980s triggered the use of employee ownership as an anti-takeover device. According to Rauh (2006), this strategy was later imitated by many other US companies. Defensive employee ownership plans were also used in Europe by Société Générale against BNP Paribas in 2000 and by Gucci against Louis Vuitton Moët Hennessy in 1999. Several motivations exist for managers and employees to favor employee ownership, and these motivations will be analyzed in the next section. Blasi (1988) remarked that employee ownership could be regarded as a revolution or as a rip-off. Employee ownership could be regarded as a revolution when it improves corporate performance and leads to better workplace satisfaction. However, employee ownership is a rip-off when it is used as a management entrenchment mechanism. The decision of implementing and developing employee ownership always lies with management. Managers would have two motivations to offer company stock to employees: to incentivize the employees or to keep their job. These conflicting points lead us to investigate management's motivations to offer company stock to employees. Although these motivations are unobservable, they can be inferred by observing corporate expenditures dedicated to employee ownership. These expenditures can take the form of a discount on company stock prize or of matching contributions in company stock. The latter mechanism is widely used in the US 401(k) plan, for instance where employers make their matching contributions conditional on employees investing in the company stock. Matching contributions are responsible for a substantial amount of own-company stock in 401(k) plans. Benartzi (2001), Holden and Van Derhei (2001) and Brown et al. (2006) find that employees' investment in company stock is higher in firms where the employer directs matching contribution into company stock; in particular, the fraction of employees' own contribution allocated to company stock is calculated to be nearly 10% higher on average. Benartzi (2001) argues that employees tend to consider management's matching contribution in company stock as an implicit investment advice and calls this phenomenon the “endorsement effect”. In this paper, we consider that matching contributions can reveal management type. From this standpoint, management discloses its management type by choosing the amount of company stock granted to employees. Some managers use employee ownership to reward their employees, whereas others use it as an entrenchment mechanism. Our paper thus provides theoretical and empirical findings. From a theoretical standpoint, it fills a gap by taking into account both positive and negative aspects of employee ownership, which are empirically emphasized. The theoretical model generates three main conclusions: (i) Low-performing managers use employee ownership as an entrenchment mechanism, and (ii) the low-performing managers' strategy increases the signaling cost of employee ownership for high-performing managers. Employee ownership thus used as an entrenchment mechanism by low-performing managers and as a signal by high-performing managers. These conclusions imply that low-performing managers have an interest in imitating the high-performing managers and vice versa. (iii) To solve this problem, we include prior commitment in the model which means, from an empirical point of view, that employee ownership should not only be left to management's discretion. By taking into account the two motives of employee ownership examined in the model (i.e., management entrenchment and reward management), our empirical study investigates how employee ownership affects management tenure. Whereas other empirical studies show that employee ownership is a powerful tool to deter takeover (see Brown et al., 2006 and Rauh, 2006 for recent evidence) or a powerful reward management tool (Kruse et al., 2010 and Kruse et al., 2012), our empirical study considers both sides of employee ownership and how employee ownership affects management tenure. We collect data on managers who were in their position between 1998 and 2011 in a sample of French listed companies. Controlling for several variables, we find a positive relationship between employee ownership and management tenure. This result provides new evidence that employee ownership can be used as an entrenchment tool. This paper proposes a sequential game where a risk-neutral manager grants company stock to his risk-averse employee. The remainder of the paper is organized as follows. Section 2 analyzes the literature on incentive effects of employee ownership and its implication for corporate governance. Section 3 presents the model set-up. In Section 4, we identify the circumstances in which employee ownership is used as an entrenchment tool and as a reward mechanism and consider several extensions. Section 5 presents comparative static analyses. Section 6 displays the results of an empirical study investigating the relationship between employee ownership and management tenure. The data cover all managers' tenure in companies listed in the French SBF 120 from 1998 to 2011. Section 7 offers concluding remarks. All proofs are presented in the Appendix A.

In this paper, we set up a model that regards employees compensation in company stock as an imperfect signal of management quality. This viewpoint significantly differs from the existing literature in behavioral finance, which assumes that employees invest their money in their firm because they consider their employer's contribution in company stock as implicit investment advice. However, employee ownership is often analyzed as an entrenchment mechanism in the corporate governance literature. The contributions of this paper are both theoretical and empirical. Our model presents three main conclusions. First, we show that employee ownership can be used by managers to compensate their actual management skills. This first result is consistent with Pagano and Volpin (2005), who argue that managers can protect their own control by setting up employee stock ownership plans. Second, we demonstrate that employees demand higher contributions in company stock to the good managers than to the bad managers. This situation is similar to an adverse selection problem where the presence of bad managers makes it costly for good managers to signal themselves. However, this phenomenon presents another problem because it incentivizes both types of managers to hide their actual type; it is valuable for the bad managers to appear to be good managers. Similarly, appearing to be a bad manager can also be profitable for good managers. To solve this problem, we introduce commitments, which leads us to our third main result, which has a normative thrust. To prevent managers from hiding their actual type, our model suggests that compensation mechanisms involving employee ownership should be defined before the manager's type is known. In other words, managers should not interfere with employee ownership policy. The comparative statics section highlights several main results. First, in a situation where employees believe that they face good managers, they ask for a higher amount of company stock. Second, for a given level of μ, the employees are more sensitive to the company's performance when the company is led by a good manager. Third, as the productivity of the effort increases, the amount of company stock granted to the employee decreases. Finally, considering the two main motives of employee ownership examined by the model (i.e., reward management and management entrenchment), we determined a positive relationship between employee ownership and management tenure. This result provides new evidence that employee ownership can be used as an entrenchment mechanism. Additionally, this empirical conclusion could be moderated by certain limits. As a matter of fact, it can be argued that this conclusion is sensitive to the institutional context. Moreover, the model predicts that the signaling effect depends on the cost of employee ownership. However, high-performing managers can choose to signal themselves through other best practices. In contrast, poorly performing managers can use other, less costly means to stay in position, depending on each country's legislation. From an empirical point of view, further investigation is clearly needed to incorporate alternative entrenchment and signaling strategies.