Download May 15, 2013, The Citizen`s Share: History, Research, Policy

The Citizen’s Share:
History, Research,
Policy Highlights
Professor Joseph R. Blasi
Keynote
J. Robert Beyster Professor of Employee Stock Ownership
Rutgers University School of Management and Labor Relations
E*Trade Share Plan Client Conference
May 15, 2013
My Talk This Morning
 Where the idea of employee shares came from?
 Who has shares today?
 Why broad-based employee shares are a good idea?
 Some issues to consider.
The First Story of Employee
Shares in American History
The Founding of the United
States
The Cod Fishery: 1789
A World Market
One of Our Main Exports
George Washington
Thomas Jefferson
The First Evidence on Broadbased Shares
“The Captain and the Crew drew one half, and agreed
among themselves in what Proportion to divide the
fare. Sometimes the Owners hire the men by the
Month and give them Common Seaman’s wages….they
were generally found the most attentive when their
Dependence was on a Share of what they caught.”
--Joseph Anthony, the leading merchant in
Philadelphia, Letter to the Assistant Secretary of the
United States Treasury
The First Legislation on
Broad-based Shares
 Signed by President George Washington on February
16, 1792
 Gave tax incentives and tax credits to ships that used
broad-based shares in the cod fishery
 The tax credits went 3/8th to the shareholders of the
ship and 5/8th to the crew to encourage performance
Alexander Hamilton Oversaw
the Credits
Where Did The Share Idea
Come From?
 The Founders of the U.S. including Second President John
Adams and third President James Madison envisioned a
nation of self-employed farmers and artisans who
completely owned their own businesses and received the full
share of profits from their businesses
 They believed that a democracy could not exist without
broad-based ownership of business, in this case land and
craft shops and shipping.
 They believed that owners were more productive and more
likely to support a free market economy.
 The alternative reminded them of English feudalism where a
small group owned everything, however the idea had to be
extended to women and minorities.
President John Adams
Adams’ Words
The Balance of Power in a Society,
accompanies the Balance of Property in
Land. The only possible Way then of preserving
the Balance of Power on the side of equal
Liberty and public Virtue, is to make the
Acquisition of Land easy to every Member of
Society.
President James Madison
Madison’s Words
The United States have a precious
advantage… in the actual distribution of
property, particularly the landed property,
and the universal hope of acquiring
property…. (It) can generally inspire a like
sympathy with the rights of property.
The Founders Pushed Land
Shares for a Century
 The Northwest Ordinance of 1787. Encouraged land
shares and prohibited slavery in Ohio, Indiana, Illinois,
Wisconsin, Michigan, Wisconsin, and Minnesota - “the
most important law since the Declaration of
Independence”
 The Louisiana Purchase of 1803 – Jefferson bought the
land making up 15 states from France to encourage
land shares and “the empire of liberty.”
 The Homestead Act of 1862 – Lincoln offered grants of
160 acres including women and extended to the black
community after the Civil War.
The Homestead Act
The Principles
 Every citizen should own part of the economy and
receive income from this share so that they could be
economically and socially independent.
 They expected citizens who shared fully in ownership
and profits to create a more productive economy.
 This independence made small government, low taxes,
less corruption, and a healthier civil society possible.
The New Idea: Corporate
Shares, Once Land Ran Out
 Madison feared the country would run out of land for
citizens’ shares and worried about the alternative.
 Galusha Grow, the Republican Speaker of the U.S.
House of Representatives under President Abraham
Lincoln said shares of corporations were the way of the
future in order to achieve broad-based ownership.
 Corporate property would expand without limit.
Republican Speaker of the
House Galusha Grow
Who Has Shares Today?
 A national share census by the U.S. General Social
Survey in 2010
 18% of adults own shares in the company where they
work or about 19 million citizens
 9% hold stock options in the company where they work
or about 9 million citizens
Studying If Shares Are a
Good Idea?
 The three largest studies ever on employee shares.
 A study of a representative sample of the entire U.S.
population using the U.S. General Social Survey at the
University of Chicago
 A study of 40,000 employees in 14 corporations of all
sizes sponsored by the National Bureau of Economic
Research funded by Sage and Rockefeller
 A study of 300,000 employees in 800 companies from
2005 to 2006 from the Great Place to Work survey
funded by the Alfred P. Sloan Foundation
The Evidence on Shares
 Comparing employees in the same situation with shares
and without shares in the same company and across
companies
 Employees with shares: are more loyal, more willing to work
harder for the firm, & more willing to innovate.
 They make more suggestions, monitor each other more
closely, trust the company more, have a special kind of
supervision, and participate more in problem-solving.
 They have significantly lower turnover.
 A supportive company culture is essential.
 Fair fixed wages are a precondition to positive outcomes.
The Market Evidence
 Corporations with significant shares have meaningfully
higher Return on Equity when employee empowerment
is also high.
 Corporations with shares have higher productivity
based on definitive governmental studies conducted by
the British Treasury.
 It appears that lower supervisory costs, more
cooperation between workers, and more innovation
drive these results.
Issues to Think About
 Research on the level and the management of risk in
employee portfolios
 Presenting evidence to institutional investors more
forthrightly on the benefits of shares
 The need to speak up about government policy
because huge policy errors by the Federal government
are the rule not the exception
 Graduate students and young scholars who are
research fellows are interested in volunteering to study
your company and your share programs.
THE END
 Thank you for your kind attention!
 Any questions, please?