Employee Ownership and Profit Sharing as Positive Factors in the Reform of Chinese State-Owned Enterprises

Abstract

The situation for China’s urban state workers has eroded in recent years as failing state-owned enterprises (SOEs) have closed in large numbers and those that remain solvent are cutting employee benefits. In this context, employee stock ownership and profit sharing should serve both firm and worker by providing capital for the former and greater job security and financial compensation for the latter. This theory was tested using data from traditional SOEs and SOEs that had undergone employee ownership (EO) reform in Shangdong province. Econometric modeling revealed a performance advantage due to EO reform. Employee participation in governance exhibited a negative relationship to performance but participation in management at the shop-.floor level was significantly positive.