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ESOP Fables: The Impact of Employee Stock Ownership Plans on Labor Disputes

dc.contributor.authorCramton, Peter
dc.contributor.authorMehran, Hamid
dc.contributor.authorTracy, Joseph
dc.identifier.citation"ESOP Fables: The Impact of Employee Stock Ownership Plans on Labor Disputes," (with Hamid Mehran and Joseph Tracy) Working Paper, University of Maryland, September 2005.
dc.description.abstractBy the early 1990s employee stock ownership plans (ESOPs) had become more prevalent in unionized firms than in nonunionized firms. However, little research has been devoted to examining the implications of ESOPs for collective bargaining. Ben-Ner and Jun (1996) model ESOPs as a buyout option for the union. The ownership share of the typical union ESOP, though, is significantly below 50%. In this paper, we extend the signaling model of Cramton and Tracy (1992) to allow partial ownership stakes by the union. We demonstrate that ESOPs create incentives for unions to become weaker bargainers. As a result, the model predicts that ESOPs will lead to a reduction in the fraction of labor disputes that involve a strike. We examine these predictions using U.S. bargaining data from 1970-1995. The data suggest that ESOPs do increase the efficiency of labor negotiations by reducing dispute rates and shifting the composition of disputes from more costly strikes. Consistent with improved bargaining efficiency, we find that the announcement of a union ESOP leads to a 50% larger stock market reaction as compared to the announcement of a nonunion ESOP.en
dc.format.extent176288 bytes
dc.subjectemployee stock ownership plansen
dc.subjectlabor disputesen
dc.subjectcollective bargaining
dc.titleESOP Fables: The Impact of Employee Stock Ownership Plans on Labor Disputesen
dc.relation.isAvailableAtDigital Repository at the University of Marylanden_us
dc.relation.isAvailableAtEconomics Departmenten_us
dc.relation.isAvailableAtCollege of Behavioral and Social Sciencesen_us
dc.relation.isAvailableAtUniversity of Maryland (College Park, Md.)en_us

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