Leader values, the structure of employee stock ownership plans, and organizational outcomes

Although it has been established that employee-owned companies exhibit superior financial performance (Kruse and Blasi 1997), the etiology of that relationship is not clear. Previous research documenting the association between employee stock ownership plans (ESOPs) and performance has typically treated the company as a black box. The purpose of this research was to illuminate the interior of that box.; To do so, I proposed casual model of an ESOP company, beginning with management philosophy. Fligstein (1990) observed that in the course of the twentieth century, the conception of control guiding managers has evolved from that of production to marketing to finance. I proposed that in ESOP companies the guiding philosophy has advanced to a human resource conception of control (Ulrich, 1997, Lawler, 1986). Also, the values and beliefs (management philosophy, conception of control) of an organization's leader (Schein, 1985) have a powerful effect corporate culture, and therefore on the reason why a company chooses to create an ESOP and on the structure of that ESOP. Structural elements in an ESOP, analogous to Huselid's high performance work practices (1995), evidence a human resource conception of control. I further proposed that companies with an ESOP in which the chief executive officer reports a human resource conception of control would experience lower turnover and higher productivity. Finally, the model predicted that lower turnover and higher productivity would be associated with superior financial outcomes.; To obtain data to test this model, I sent two separate surveys to 1,335 companies with employee stock ownership plans (ESOPs), one to the chief executive officer and the other to the human resource director. The Theory Y (McGregor, 1960) portion of the Competing Values Instrument (Quinn, 1988) was the measure of a management philosophy consistent with a human resource conception of control.; None of the statistical tests of the data supported the hypotheses, with the exception that (1) companies reporting a strong belief in employee ownership as a reason for establishing an ESOP also reported comparatively higher communications and training activity related to employee ownership and that (2) such programs were associated with greater productivity. Adapting Popper's (1968) notion that scientific knowledge is advanced not by means of confirmation but rather disconfirmation of theory, I concluded that the results tended to disconfirm the methodology used to test the model and that the model should be refined and retested.