uction employees share in the profits; however, they are not required to share in operational losses.
A second method of profit sharing for production employees involves employee stock ownership. While any production employee is always free to go into the market to purchase stock in his or her publicly held employing firm, this method of profit sharing involves formal organizational programs which encourage and assist employees in the purchase of company stock. These programs (and this approach to profitsharing) are generally referred to as employee stock ownership plans ESOPs (Doyle, 1991, p. 77). Under this method, employees share in the profits of the firm both through dividends paid and through increased market values of stocks held. Employees do not participate directly in operational losses; however, declines in market values may be the result of such losses.
In a very few instances prior to 1981, employees gained ownership/control of a firm. The most notable example of such an arrangement is probably Lincoln Electric in the Midwest (Graham Moore and Ross, 1990, p. 117). When employees own sufficient equity in their firm to control it, they, of course,
can exercise control over how they share in profits, and, thus, tend to have more to lose, in the event of losses.
The severity of the economic recession in the first years of the first term of the Reagan Administration, the desire of corporations to close plants considered to be inefficient, changing industrial patterns, and other factors combined, in the early 1980s, to cause the occurrence of a significant increase in the number of firms whose employees gained ownership/control (Rosen, 1984, pp. 434 438). In many of these instances (perhaps most), the initial incentive for such action on the part of labor was not profit sharing; rather, it was to attempt to save jobs (Aviation Week & Space Technology, 1984, p. 28).
The typical approach to a worker buy out ...