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Theories of employee ownership implicitly assume that its essential features are the same in all countries. In fact, employee ownership varies considerably across institutional environments. In this paper, I compare its development in the United States, Germany, and Sweden to show that the institutional background - in particular, the existing bodies of corporate and labor law - against which a program of employee ownership arises determines its course. Background institutions determine the cost of worker control over management, the cost of collective decision-making, and the expected gains from risk-bearing. Those consequences of corporate and labor law in turn determine whether employee ownership legislation transfers, or creates incentives for firms to transfer, a share of profits to workers (residual income rights); or whether legislation instead empowers workers to raise the present and/or deferred price of labor in proportion to profitability (control). Workers and their representative organizations push (or allow) only those employee ownership programs that secure what is absent but feasible in light of their existing range of tools. Even when employee ownership is a viable program, employee ownership legislation can only augment, not revise, the present institutional resources of organized labor.


employee ownership, background institutions, worker control, collective decision-making, incentives, profit sharing, residual income rights

Publication Title

University of Pennsylvania Journal of International Business Law

Publication Citation

10 U. Pa. J. Int'l Bus. L. 305 (2008)