What Types of Firm Use Minority Employee Share Ownership Plans, and Why Do They Do so?

If a firm physical exercises a minority divvy up willpower plan, external overlapholders own it with a minority of employee owners, usually no more than 5% of the firm. Management or the board of directors exercises chasten of the firm and there is confineed employee participation. While a hearty number of employees may own shares in the firms they work for, some all of this stock is in firms that are only minority employee-owned. In this essay I intend to explore the causes and consequences of firms choosing to use minority employee share possession plans. Firms using minority share ownership plans tend to be larger and birth steep levels of employment, greater levels of sales and are capital intensive. These firms all move over complex tasks in industries such as finance, retail and communication. This leads onto the starting reason employee share ownership plans are used. Agency possibleness (Jensen & Meckling 1976) implies that firms that have a sole owner will have the lowest agency be. The opportunity for agency be to find out arise because there is not a sole owner and individuals become agents. The person who delegates work in the firm is called the dealer sum and the person to whom work is assigned is called the agent.

Firms use minority share ownership plans because the risk preferences by the agents differ to those of the principals and that leads to inefficient decisions be made. Agency theorists explain the use of minority employee share ownership plans as a way of delaying compensation to motivate employees and limit the risk of employees shirking their responsibilities. The primary source of agency costs is the separation of ownership and control (Berle & Means, 1991), which becomes more apparent as the ownership of firms shares is wide spread and this is principally the case in large firms. To eliminate the agency costs and the agency problems, firms use minority share ownership plans as a way of monitoring because this reduces the gap between principal and agent... If you want to get a full essay, order it on our website: Orderessay

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