The Productivity Effects of Employee-Stock Ownership and Bonuses

The Productivity Effects of Employee-Stock Ownership and Bonuses
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Abstract
This research paper explores the impact of employee stock ownership plans on an organization’s overall operations. Based on research findings, employee turnover, employee motivation, and job commitment are the key variables underpinning employee stock ownership plans. Based on research findings, managerial implications are critical in expediting the attainment of set goals. The paper will provide rigorous evidence on the implication of bonuses and ESOP incentives on employees’ overall productivity and motivation. Organizations can utilize the findings by making a relevant decision regarding involving employees in ownership of an organization. Considerably, employee stock ownership plans (ESOPs) are effective strategies for helping organizations obtain the needed capital for investment. The government and policymakers alike encourage firms to adopt ESOPs to accommodate employee’s investment in their stock.
Keywords: Employees stock ownership plans, incentives, motivation, productivity, alignment of interests, decision making, and collaboration
The Productivity Effects of Employee- Stock Ownership and Bonuses
Introduction
Organizations worldwide utilize Employee Stock Ownership Plans (ESOPs) as one of the practical tools of expediting corporate efficiency and growth. Since the 1980s, most companies have realized significant growth in information technology. Profit-sharing and employee stock ownership plans are significant factors that have expedited the attainment of the set goals. In the current era of increased business competitiveness, profit sharing, especially employee stock ownership plans (ESOPs), have spread in highly industrialized and industrializing countries from a global perspective. The two aspects have gained popularity over the recent decades, resulting in accumulating theoretical and empirical research of the two incentives. The prior research in the area focuses on the impact of employee stock ownership and profit-sharing on productivity.
The creation of Employees Stock Ownership Plans (ESOP) is one of the practical aspects of an organization, especially in the current era of the proliferation of new technology forms. The research on the impact of bonuses and ESOP is critical for stakeholders, market regulators, and various institutional investors. According to Athar (2020), the development of regulation and policy enhances an investor’s level of confidence to invest in the stock market. The research will be critical in helping institutional investors and market regulators in expediting investment decisions. The study can help investors decide on investments, portfolios, and other strategies for obtaining an investment base. The impact of the Employee Stock Ownership Program is critical in expediting effective economic solutions since employee stock proprietary programs play a crucial role in stimulating economic growth. Therefore, research that focuses on developing job placement is critical in facilitating the growth and expansion of organizations.
Compensation systems and incentives have been shifting rapidly from a fixed wage contractual payment in different parts of the world. Over the years, most organizations have embraced employee financial schemes, such as employee stock ownership, team incentive plans, and profit-sharing. Based on the prominence of employee financial participation schemes, researchers have explored their impacts on enterprise performance. Considerably, most organizations embrace employee stock ownership plans as an effective strategy of establishing trust with employees and enhancing their commitment to attaining set goals (Athar, 2020). Over the years, organizations involve non-executive employees in the incentives to facilitate faster attainment of anticipated objectives. In the major industrialized nations, such as the United States, compensation schemes’ effect is limited.
Besides, employee stock ownership plans (ESOPs) are an effective strategy for helping organizations obtain the needed capital for investment. The government and policymakers alike encourage firms to adopt ESOPs to accommodate employee’s investment in their stock. Formal economic theory is ambiguous on the expected impact of employees’ participation in financial schemes (Kruse, 2016). The positive effects of productivity stem from an organization’s success, as reflected in higher stock prices and increased wealth for employees. If a firm aligns its interests with that of employees, it is likely to attain higher productivity and profitability (Croce, Marti, & Martinez-Lopez, 2018). In most instances, the employees who receive incentives and bonuses are likely to commit to an organization’s operations. ESOPs significantly impact an employees’ overall productivity, thus resulting in higher profitability and sustainable operations.
Literature Review
The studies on Employee Stock Ownership Plans are capacious. According to Xiao, Shi, and Varma (2019), the core objective of ESOPs is allowing employees in an organization to purchase shares or part of the interest from the entire organization’s interest. According to the administration’s point of view, the strategy effectively aligns the objectives of top executives with that of the employees. As such, the employees commit themselves to make relevant decisions regarding administration and performance. If employees invest their funds in an organization in the form of shares, they are likely to commit to their investments’ security in a significant way (Xiao et al., 2019). Considerably, ESOPs contribute to increased productivity of employees in fear that any healthy loss can have devastating impacts on the entire organization.
Therefore, one of the core objectives of bonuses and employee stock ownership plans is to encourage the employees to purchase shares as part of an organization’s investment. Most researchers have realized that the employee stock ownership plan effectively increases overall productivity in an organization. Although some researchers postulate that employee stock ownership has no direct relationship to productivity, it is apparent that the connectedness between the two is conditional. According to the research findings in developed countries, employee stock ownership plans is one of the effective alternatives to pensions since it consists of composite governance issues. On the contrary, ESOPs in China is based on an outline of enticements. However, the employees in the country do not participate in the process of making relevant decisions regarding decision making.
According to research conducted in China, the stock’s higher market value can expedite a meaningful and increased organizational performance. Aubert, Kern, and Hollandts (2017) postulate that employee incentives such as employee stock ownership plans motivate employees resulting in higher productivity from the motivated workforce. Market reaction is positive if an organization adopts long term performance centeredness on the incentives plan. However, affected organizations are likely to encounter increased capital expenditure. However, employee stock ownership plans can result in dilution on the value of ownership and shares. If an organization implements the plan, the number of shares in the market will likely increase, which would need the shareholder to benefit from dividends.
Employee stock ownership has a significant influence in minimizing the overall rate of turnover in an organization. As such, the incentive is one of the effective strategies for enhancing an organization’s performance. In most instances, ESOPs positively impact job commitment and satisfaction among employees (Aubert et al., 2017). Equally, the incentive can have positive impacts on collective behavior, individual behavior, and organizational performance. Over the years, most organizations have recorded higher equity and wealth prices for the employees after implementing ESOP as part of their operations. I...