Incentives, monitoring, and employee stock ownership plans: New evidence and interpretations

Andrew Pendleton

doi:10.1111/j.1468-232X.2006.00450.x

Incentives, monitoring, and employee stock ownership plans: New evidence and interpretations

Andrew Pendleton

The York Management School

Research output: Contribution to journal › Article › peer-review

Abstract

This paper reviews the theory and evidence for agency theory-based explanations for employee stock ownership plans found in the financial participation literature. The UK Workplace Employee Relations Survey 1998 is used to test whether share plans substitute for direct monitoring and individual incentives. Contrary to some predictions in the literature, individual incentives are found to be complements of share plans, while other measures of monitoring costs provide mixed results. However, it is found that monitoring costs and a wide range of performance targets explain the conjunction of stock plans and individual incentives. It is suggested that share plans are used to mitigate dysfunctional effects of individual incentives by engendering cooperation and trust, and by broadening the range and time frame of desired performance outcomes.

Original language	English
Pages (from-to)	753-777
Number of pages	25
Journal	Industrial Relations
Volume	45
Issue number	4
DOIs	https://doi.org/10.1111/j.1468-232X.2006.00450.x
Publication status	Published - Oct 2006

Keywords

FINANCIAL PARTICIPATION
PERFORMANCE-MEASURES
PAYMENT SCHEMES
PUBLIC-SERVICE
ECONOMY FIRMS
OPTION PLANS
PAY
DETERMINANTS
COMPENSATION
INVOLVEMENT

Access to Document

10.1111/j.1468-232X.2006.00450.x

http://dx.doi.org/10.1111/j.1468-232X.2006.00450.x

Cite this

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title = "Incentives, monitoring, and employee stock ownership plans: New evidence and interpretations",

abstract = "This paper reviews the theory and evidence for agency theory-based explanations for employee stock ownership plans found in the financial participation literature. The UK Workplace Employee Relations Survey 1998 is used to test whether share plans substitute for direct monitoring and individual incentives. Contrary to some predictions in the literature, individual incentives are found to be complements of share plans, while other measures of monitoring costs provide mixed results. However, it is found that monitoring costs and a wide range of performance targets explain the conjunction of stock plans and individual incentives. It is suggested that share plans are used to mitigate dysfunctional effects of individual incentives by engendering cooperation and trust, and by broadening the range and time frame of desired performance outcomes.",

keywords = "FINANCIAL PARTICIPATION, PERFORMANCE-MEASURES, PAYMENT SCHEMES, PUBLIC-SERVICE, ECONOMY FIRMS, OPTION PLANS, PAY, DETERMINANTS, COMPENSATION, INVOLVEMENT",

author = "Andrew Pendleton",

year = "2006",

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AB - This paper reviews the theory and evidence for agency theory-based explanations for employee stock ownership plans found in the financial participation literature. The UK Workplace Employee Relations Survey 1998 is used to test whether share plans substitute for direct monitoring and individual incentives. Contrary to some predictions in the literature, individual incentives are found to be complements of share plans, while other measures of monitoring costs provide mixed results. However, it is found that monitoring costs and a wide range of performance targets explain the conjunction of stock plans and individual incentives. It is suggested that share plans are used to mitigate dysfunctional effects of individual incentives by engendering cooperation and trust, and by broadening the range and time frame of desired performance outcomes.

KW - FINANCIAL PARTICIPATION

KW - PERFORMANCE-MEASURES

KW - PAYMENT SCHEMES

KW - PUBLIC-SERVICE

KW - ECONOMY FIRMS

KW - OPTION PLANS

KW - PAY

KW - DETERMINANTS

KW - COMPENSATION

KW - INVOLVEMENT

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DO - 10.1111/j.1468-232X.2006.00450.x

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JO - Industrial Relations

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