Employee Co-Ownership: A Reaffirmation

In this paper we explore the norm of shareholder primacy with the aim of identifying
its applicability in companies with employee ownership. We pose the following research question: Can companies with employee ownership respond better to the demands of society, or do they instead reaffirm the norm of shareholder primacy? We argue that companies with employee ownership are better positioned to generate a greater benefit for society because compared to other kinds of companies they can achieve a better strategic alignment and their employees have an incentive to care more about their actions, to develop a greater awareness of social identity, and to be more willing to share the benefits that accrue from their improved performance. However, for this surplus value to be transferred to society, at least in part, these companies must adopt corporate governance structures that enable employees to exercise their rights as owners, including participation in company decision-making.