Working Paper: NBER ID: w14236
Authors: John W. Budd
Abstract: The potential of shared capitalism to improve individual and organizational performance through financial incentives depends on employees knowing about and participating in compensation plans that link rewards to performance. This paper therefore analyzes a survey of employees from multiple companies to assess the extent to which employees are ignorant about company, group, and individual-based incentive pay plans and ESOPs. The findings reveal significant amounts of employee ignorance in both under- and overstating the extent to which such plans apply to them individually.
Keywords: shared capitalism; employee ignorance; incentive pay plans; employee stock ownership plans
JEL Codes: J33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| employee ignorance (D83) | underutilization of incentive plans (M52) |
| mismatch in employee perceptions and employer reports (J63) | employee ignorance (D83) |
| employee ignorance (D83) | lower motivation and engagement (D29) |
| better-informed employees (J24) | higher participation in incentive plans (M52) |
| younger, less experienced, and lower-paid employees (M51) | higher risk of misunderstanding coverage (G52) |
| employee beliefs about performance-based pay plans (J33) | willingness to work hard and loyalty (M54) |