Tuesday, April 10, 2007

Remember the magical "Ownership Society"?

Despite much enthusiasm for the purported efficiency-alignments of the "ownership society", I haven't seen much support cropping up for Sam Zell's reported proposal to take the Tribune companies private using an ESOP plan.

Becker-Posner tow a hard line on ESOPs, in general. Others, like Mankiw, probably won't say, one way or the other. Becker might include studies that look at significant non-ESOP ownership, including restricted-stock and incentive-stock option plans.

I think that the truth is that employee ownership within companies can be a powerful force, if and when other incentives are aligned within the firm such that people feel that they will 'unlock wealth' by this or that action. There are cultural aspects to 'ownership' within a company. If managers tolerate each other running departments as fiefdoms whose inefficiencies and brand-consuming behaviors (rather than brand-building) accrue to their benefit, then putting ownership interests in the lower echelons will probably just create conflict.

Sam Zell is no chump. It's an experiment worth watching, IMO.

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