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The size of employee stakeholding in large UK corporations

Author

Listed:
  • Bruce A. Rayton

    (School of Management, University of Bath, Bath, UK)

  • Jonathan S. Seaton

    (Department of Economics, Loughborough University, UK)

Abstract

The existing debate about policies designed to foster the development of a stakeholder economy has largely avoided a fundamental question. How large is the financial stake employees currently hold in their companies? This paper addresses this question using data from the Datastream database, and finds that there is already a significant link between the pay of rank and file employees and the performance of their firms. It is found that a doubling of firm value increases employee pay in these firms by approximately 14%. Firms with explicit profit-sharing arrangements have a performance elasticity of approximately 0.32, while firms without explicit profit-sharing arrangements have a performance elasticity of only 0.11. This indicates that flexibility of pay is not limited to the explicit profit-sharing award. This is further substantiated by the finding that even after controlling for the levels of profit-sharing pay, the performance elasticity in the profit sharing firms is 0.27. These estimates are by no means a complete measure of the stakeholding relationship, but they do quantify the financial relationship between firms and a group of primary stakeholders: the workers. Copyright © 1999 John Wiley & Sons, Ltd.

Suggested Citation

  • Bruce A. Rayton & Jonathan S. Seaton, 1999. "The size of employee stakeholding in large UK corporations," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(5), pages 259-266.
    • Handle: RePEc:wly:mgtdec:v:20:y:1999:i:5:p:259-266
    DOI: 10.1002/(SICI)1099-1468(199908)20:5<259::AID-MDE937>3.0.CO;2-2
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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