Creating a more engaging employee stock ownership plan through literature and physics

Abstract

Employee stock ownership plans (ESOPs) are federally governed tax-incentivized plans that distribute equity shares of the business to its employees. These plans are growing in popularity, and the academic literature currently underserves them (Blasi, Freeman, & Kruse, 2013). The core belief is that these plans create a highly engaged workforce, which drives increased firm performance; this is still disputed in the literature (Kim & Patel, 2017). This research examined the ESOP phenomenon to determine if ESOPs truly impact employee engagement through the ownership mentality construct. This dissertation utilized social exchange theory and alignment theory to theorize that ownership mentality partially mediates the employee engagement model. Further, using critical mass theory from physics, this study postulated that firm size negatively influences the relationship ownership mentality has with the antecedents of employee engagement. The research model was tested using three models: a) a primary literature model, b) a primary National Bureau of Economic Research (NBER) model, and c) a secondary NBER mode. The secondary research model consisted of data from a survey funded by the NBER from 2002 to 2005. Testing of the primary research models used a 2020 survey, conducted for this dissertation, of employee-owners and non-employee owners to show that employee ownership has a direct correlation to an employee ownership mentality. Employee ownership mentality was then tested utilizing Saks’s (2006) antecedents and outcomes of employee engagement model for partial mediation of the employee engagement relationship. Lastly, critical mass theory explains a moderation effect on the ownership mentality relationships based on firm size. The research found support for all its hypotheses: ESOPs do lead to ownership mentality; ownership mentality partially mediates the employee engagement model; and as firm size increases, there is an impact on the ownership mentality relationships. Findings from this study have important implications for research and practice. The study provides the framework for all future ESOP research, and it provides better guidance to ESOP managers on how to maximize their most valuable resource, their team.