Equal amongst Unequals: Comparing the Employee share ownership experience in the UK and Korea

Employee Share-Ownership (ESO) schemes have survived since their conceptualisation in the 1920s as a tool for broadening the distribution of wealth in the US by enabling employees to participate in the financial prosperity of the firm and fostering a feeling of ownership amongst them. The most widely held perspective is ‘the golden path’ approach which suggests that ESO schemes aligns employee interests with that of the organisation thereby reducing the ‘them and us’ feelings between management and employees and fostering higher commitment amongst the employees. The alternative view suggests that share ownership schemes are primarily an effective worker retention tool, and reduce labour turnover by making it financially lucrative for workers to remain in the firm and financially expensive for workers to leave it (Marsden 1999; Morris et al. 2006) – the “golden handcuffs” hypothesis. More recently a nationally representative study (Sengupta et al. 2007), drawing on the 1998 Workplace Employee Relations Survey (WERS98), challenged the dominant ‘golden path’ view by suggesting that while ESO schemes had a positive impact upon performance, the intermediate mechanism seemed to be lower employee turnover rather than higher affective commitment. Fundamentally, this research highlighted the role of contextual factors in understanding the mechanisms through which these schemes benefit the organisation. However, there is a paucity of research which explores the role of contextual factors in influencing the impact of employee share ownership schemes in achieving its intended objectives. Therefore, this paper seeks to address this gap by testing the ‘golden handcuff’ and ‘golden path’ perspectives in contrasting socio economic and political contexts i.e. UK and Korea.

For the analysis of organizations and employees in the United Kingdom, Workplace Employee Relations Survey (WERS) was utilized. For the analysis of organizations and employees in Korea, Human Capital Corporate Panel (HCCP) was utilized. Both surveys contain nationally representative matched employer employee data for organizations and their employees. The starting point of the most recent recession due to the global financial crisis is often viewed as the second half of 2008 when Lehman Brothers has collapsed (e.g. Economist, 2013). Therefore the WERS 2004 and HCCP 2007 were used to reflect periods of economic upturn whereas the WERS 2011 and HCCP 2011 datasets were used to compare periods of economic recession. The comparability in terms of the measures of organisational commitment influences the decision to compare WERS 2004 with HCCP 2007. The final sample for analysis of 2004 WERS consisted of 1,014 organizations (in the model for predicting turnover rate) and 10,496 employees (in the model for predicting employee commitment), 2011 WERS consisted of 866 organizations and 8,708 employees, 2007 HCCP consisted of 423 organizations and 10,481 employees, and 2011 HCCP consisted of 404 organizations and 8,421 employees. The results show that the effect of employee share ownership in increasing employee commitment is stronger in a co-ordinated market economy i.e. South Korea while its effect in decreasing employee turnover is stronger in the liberal market economy i.e. United Kingdom.