I am therefore I own: Implications of organization‐based identity for employee stock ownership

• Date: 01 March 2020
• DOI: http://doi.org/10.1002/hrm.21985
• Published date: 01 March 2020
• Author: Ted A. Paterson,Theresa M. Welbourne

ORIGINAL ARTICLE

I am therefore I own: Implications of organization-based

identity for employee stock ownership

Ted A. Paterson

1

| Theresa M. Welbourne

2

1

Department of Management, College of

Business, Oregon State University, Corvallis,

Oregon

2

Department of Management, Culverhouse

College of Commerce, Tuscaloosa, Alabama

Correspondence

Ted A. Paterson, Department of Management,

College of Business, Oregon State University,

374 Austin Hall, Corvallis, OR 97331.

Email: ted.paterson@oregonstate.edu

Abstract

Most research on employee stock plan participation investigates the effects of such

forms of ownership on employee attitudes, leaving our understanding of the individ-

ual differences that contribute to employee ownership largely unknown. Drawing

from the consumer behavior literature, our study explores the effect of organization-

based identity on the decision to participate in an employee stock purchase plan. The

study was conducted in a newly public firm where we examine the effect of

organization-based identity on the purchase decision in two time periods. The first

point in time was the initial public offering (IPO), when the employee has little infor-

mation on how the firm's stock will perform in the market. The second point in time

was the first quarter following the IPO, when employees have market data to help

them with decision-making. Results indicate that, as predicted, organization-based

identity is associated with participation in an employee stock purchase plan, at both

points in time, above and beyond the influence of several economic and psychologi-

cal predictors reported in prior studies.

KEYWORDS

employee stock ownership, identity, IPO, roles

1|INTRODUCTION

Over the past several decades, a revolution has quietly taken place

among the ownership of American corporations. This change is the

result of a rapidly expanding number of companies with substantial

employee ownership of stock. This ownership has come about primar-

ily through company-sponsored employee stock ownership plans

(ESOPs) replacing defined benefit plans (such as profit sharing). How-

ever, the true revolution may be the result of companies “creating

share-purchase programs, which encourage employees to buy stock

directly on favorable terms underwritten by the corporation and by

including greater numbers of employees in stock-option plans”

(Blasi & Kruse, 1991, p. 243). Despite a dip in their popularity from

2009 to 2011 after the financial crisis, equity compensation is

rebounding, and more and more companies are adopting the approach

as part of their benefits package (PricewaterhouseCoopers & National

Association of Stock Plan Professionals, 2015).

The adoption of such plans has been widespread and has penetrated

most major industries including retail (e.g., Publix Super Markets and

WinCo foods), manufacturing (e.g., W.L. Gore a nd American Cast Iron

Pipe), and engineering (e.g., CH2M Hill and Black & Veatch) (National Cen-

ter for Employee Ownership, 2016). It is hoped that stock options will

prove a powerful incentive to aid in bringing the best people to the corpo-

ration and to halt the “brain drain”(to high-tech startups) experienced in

recent years by older, established corporations. In addition, the benefits of

employee shareholders aligning their interests with those of outside share-

holders and management are also added advanta ges of these programs.

It is not just large, established companies that see their stock as a

means of attractingand retaining top talent;new startups and high tech-

nology firms have trumpeted the potential of stock purchase plans for

many years. In these firms, turnover is a constant dilemma, and for

employees,the risk of joining at an earlystage in the company's lifecycle

is relatively high. Promises of large salaries and bonusesare impossible

because of initial cash flow problems. “That coupled with the need to

DOI: 10.1002/hrm.21985

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