Employee Perspectives On Employee Ownership Commerce Essay

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The current financial and ensuing economic crisis has had negative impacts on the majority of enterprises around the world. This has led to massive public bail-outs of private, investor-owned businesses which in turn have led to an economy-dip in many parts of the world. The most visible consequences of these events have been waves of large scale job shedding (with profoundly different regional impacts) accompanied by persistently high unemployment rates. This time period has also seen steeply rising small and large firm failure rates, a major reshuffling in the ownership of many businesses and a crisis of consumer confidence (Geroski and Gregg, 1993).

Employee-owned businesses have often been the strategy that governments and enterprises resort to during times of economic crisis (INTERNATIONAL LABOUR ORGANISATION, 2007). Deputy Prime Minister of the UK, Nick Clegg earlier this year said "We don't believe our problem is too much capitalism - we think it's that too few people have capital. We need more individuals to have a real stake in their firms. More of a John Lewis economy, if you like and what many people don't realize about employee ownership is that it is a hugely underused tool in unlocking growth" (BBC, 2012). Employee-owned businesses are commercial enterprises owned by the people who work for it (Farlex, 2012). The most common motives that make firms convert to employee-owned businesses are to: provide additional remuneration to employees, take advantage of tax breaks, protect the firm from take-over and dismemberment on the exit of the owner and also 'paternalist' sentiment that employees should share in the cake they had helped to make (Pendleton, 2001).

Employee-owned businesses grew to prominence in the 1970s and early 1980s in Europe due to a restructuring industry that led to mass unemployment. The response of employees was a wave of takeovers through employee-owned cooperatives and businesses that managed to get the unemployed people back to work (Birchall and Ketlison, 2009). There are definite benefits to having an employee-owned business such as being more risk-averse to profits because of no pressure from external stakeholders to maximize profits at the expense of the employees (Street, 2012). When the purposes of the firm are aligned with the employees who are both owners and employees of the organization, the results are loyalty, commitment, shared-knowledge, participation, underpinned by strong economic incentives (International Labour Organisation, 2007). These are the kind of qualities any business would want which the investor-owned business can only achieve by mimicking the idea of membership.

The employee-owned business model has comparative advantages but it is not a panacea to every economic problem today. As with any business, if an employee-owned firm is badly managed or has serious weaknesses in its business strategy it will fail (Birchall and Ketlison, 2009). Some of the obvious arguments against the employee-owned business model have been that it is an outdated model which cannot provide enough incentives to attract the best managers and raise enough capital to compete in global markets (Pendleton, 2001). Another argument is that employee ownership dilutes incentives and control rights in an organization which can make decision making at times cumbersome especially when the purposes of the business are not aligned with that of the employees. (cf. Jenson and Meckling 1979)

Employee Ownership in Nigeria

Nigeria gained independence from Great Britain in 1960, joined the Organisation of the Petroleum Exporting Countries (OPEC) in 1971 and with it brought the right for Nigeria to exercise permanent sovereignty over its natural resources in the interest of national development. Military dictatorship over the years and the over reliance on crude oil have made Nigeria's economy a predominantly state-owned economy. Thus by 1990, there were over 1500 public sector enterprises in Nigeria, 600 of which were owned by the Federal Government and the rest by State and Local Governments ( see Jerome, 1995). This event limited employee ownership in Nigeria to certain types.

However, in 1988 the Technical Committee on Privatization and Commercialization (TEPC) was set up to implement a SOEs reform process of which 101 Public utilities were slated for privatization and another 35 commercialization (Jerome, 2002). The Nigerian Telecommunications Limited (NITEL), the Nigerian Postal Services, the Nigerian Airways and the Nigerian Electric Power Authority (NEPA) among others were restructured for higher efficiency. The privatization process allowed for other forms of employee ownership to be available in Nigeria.

The Telecommunications Industry in Nigeria has also witnessed deregulation with the Nigerian Communications Commission (NCC) licensing a wide variety of telecoms operators. The Nigerian services telecoms market at the end of 2002 was worth USD 1.1 billion and also experienced an annual growth of 37% (Africa Analysis, 2003). The deregulation of the communications industry has afforded greater employee ownership in the Nigerian Telecoms Industry through the many operators that now offer share schemes to its employees.


The aim of the research is to investigate employee ownership in Nigerian companies. It considers the employee's perspective on employee ownership in Nigeria which has to do with employees' awareness, attitude, and feelings about employee ownership. The research then looks at the main factors for promoting employee ownership such as Government Policy and company-level objectives for the employees. The study will focus primarily on the Telecommunications Industry in Nigeria.


Aside commentaries from multilateral institutions such as the World Bank and International Labour office, there have been little research on the development and effects of employee ownership schemes in Nigeria (Wright et al., 2000). Most of the research available is about employee ownership in North America, Europe and Japan. In this study, the researcher will investigate whether employee ownership is a more sustainable way of doing business. The research will look at the development and drivers for employee ownership and also employees' awareness, attitude and feelings of employee ownership. The report will help companies conduct business in a more sustainable way and help Nigerian companies to find out about employees' attitudes on employee ownership, employee participation and company performance.


The research problem in this study is to investigate a sustainable business model which has been successful in North America and Europe and now apply the findings to the Telecommunications industry in Nigeria. Given the little amount of research available on employee ownership in Nigeria, the proposed strategy here is twofold.

First, it is essential to use existing economical and financial data available from other parts of the world to investigate employee ownership as a whole. This would highlight the drivers necessary for employee ownership to take place successfully in an organization. It would also reveal the strong points of employee-owned businesses and the procedures to take when engaging in employee ownership. Second stage is to use a set of interviews and questionnaires with employees and stakeholders in the telecommunications industry to provide a detailed analysis of the strategies needed to promote employee ownership in Nigeria and the issues to address in dealing with employee-owned organizations.

Primary objectives of the study are:

Why is the employee-owned business model considered to be a more sustainable way of doing business?

What type of employee ownership structure exists in Nigerian companies?

What are the factors necessary for encouraging employee ownership in Nigeria?

What are the effects of employee ownership on employee performance, employee participation and company performance?

What are the differences in performance between organisations involved in employee ownership and those not involved in employee ownership?


The topics to be reviewed in this study are defined as

Employee Ownership

Government Policy

Employee Participation

Employee Ownership

In the first section, some basic concepts of employee-owned businesses or employee ownership are introduced; definitions, benefits, motives and factors that affect employee ownership in an organization.


Employee ownership or Employee-owned firms as it stands today are businesses in which the majority of the shares are owned directly by employees, or owned on behalf of all employees in some sort of special purpose legal entity, such as an Employee Benefit Trust (EBT) (Employee Ownership Association, 2012).

Development of Employee ownership

Employee ownership refers to any commercial enterprise owned by the people who work for it. The earliest form of employee ownership was the Cooperative model (Pendleton, 2001; Birchall and Ketilson, 2009). A Cooperative according to the International Labour Organisation (2002) is defined as an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations, through a jointly owned and democratically controlled enterprise. This usually entails employees to be involved in the ownership and governance of the firm. The workers' cooperative came about in the early nineteenth century as a result of the dehumanizing characteristics found in the factory system of the industrial revolution (Wright et al, 2011). This led to labour movement struggles for better working conditions' for employees. The workers' cooperatives created the avenue for employees to be owners of the work organizations and in turn direct the overall policies of the firm. The Cooperative form of organisation allowed employees basic human needs such as housing, schooling etc just as the International Labour Organisation describes the cooperative model as a way to meet fundamental human needs (Birchall and Ketilson, 2009). Examples of the earliest cooperatives are the retail consumer cooperatives among textile workers in the UK in the 1840s and the agricultural cooperatives set up during the Great Depression in the 1930s in the USA.

The core principles of cooperative operation were derived from the Rochdale Society of Equitable Pioneers in 1844. It was the first successful cooperative enterprise and is often used as a model for modern cooperatives. These principles are currently set out in a statement of principles emanating from the International Co-operative Alliance (ICA). They are listed below

Voluntary and Open membership

Democratic member control

Member economic participation

Autonomy and independence

Education, training and information

Cooperation among cooperatives

Concern for the community

The first four are core principles without which a cooperative loses its identity; they guarantee the conditions under which members own, control and benefit from the business. The education principle is seen to make membership effective and in turn promote democratic control. The cooperation among cooperatives may be viewed as a business strategy to protect cooperatives from being economically vulnerable while concern for the community relates to a common niche for members of the cooperative.

The Cooperative Federation of Nigeria (CFN) was formed in 1945 and was registered in 1967. It currently has more than 50,000 registered cooperatives. Most cooperatives in Nigeria stay true to the core principles as stated by the ICA unlike other countries such as the UK and USA where supplementary requirements allow for assets of companies to be owned collectively rather than individually (Hobbs and Jefferis, 1990).

Although cooperatives have enjoyed growth globally which indicates a degree of success for this form employee ownership and organisation, there are in fact many shortcomings of the cooperative model (Pendleton, 2001). The first is that cooperatives often find it difficult to raise capital from financial institutions because of doubts that debts can be repaid. Since one of the core fundamentals of cooperatives is autonomy and independence, they are often excluded from raising finance by issuing equity to outsiders. They instead depend on the financial resources of their members which may be limited. Thus, cooperatives are often under captialised and display low levels of capital productivity (Abell, 1983).

The second shortcoming deals with problems in management. Generally it is seen that cooperatives do not function efficiently due to lack of managerial talent (Birchall and Ketilson, 2009). The members (employees) or elected representatives are not experienced enough to manage the firm; even when the firm has a cadre of professional managers, the ideals of the cooperative are often lost when these group of managers emerge (Meister, 1984; Pendleton, 2001). Limited capital also means that cooperatives are able to get the benefits of professional management.

There is also the problem of pay differentials in cooperatives. The underdevelopment of the managerial function, coupled with an emphasis on equality, means that managerial pay is lower than in 'conventional' firms. (Robinson and Wilson, 1993) found that pay differentials were significantly lower in cooperatives than in small private firms, and that the average managerial pay was significantly lower in cooperatives than other firms. This has led to the phenomenon that managerial incentives are weak in cooperatives and that they cannot attract the best managers. It reinforces the underdevelopment of management in cooperatives.

However, despite the flaws in the cooperative model, there are quite a few successful large cooperatives still around today. Rabobank in the Netherlands is an example which has 50% Dutch citizens in membership, and is the world's third safest bank (Global Finance Magazine, 2007).

The second contextual influence that affected the development of employee ownership is the 'Paternalist' common ownership. Common ownership involves the conversion of a firm to form a collective ownership by the paternalistic owners (Pendleton, 2001). The key feature in this form of employee ownership resides in the use of Trust structures to bring about employee ownership in a firm. The most well known example of this form of employee ownership is the John Lewis Partnership in the UK. The John Lewis Partnership has following features - it has been owned by its employees through a Trust since 1929, its employees or partners receive all of the profits after retentions in the form of a partnership bonus and it has a constitution that encourages employee participation including the power to elect their own board representatives (Street, 2012). The main objective of this form of employee ownership is not to distribute equity to individual employees who might subsequently choose to sell their shares to outsiders for profit but to rather maintain the equity on the employees' behalf in perpetuity (Wright et al, 2003). Unlike the workers' cooperative, common ownership firms do not aspire to be labour managed firms (Cohen, 2006). The employees have rights of representation in corporate governance but are not directly involved in management as such. There is a distinct managerial group responsible for the managerial functions of the firm unlike the cooperatives where employees are both the owners and managers. Employee ownership in this sense deals with representation in governance rather than in the day-to-day management of the firm.

The problem with this model is that conversions to common ownership are heavily dependent on the goodwill and initiative of the owners of the firm. The transfer of equity from the owner to employee trusts is usually a donation (Taylor, 1989). Few business owners are able to follow the example of John Lewis either because of the need to secure their own financial future by selling the firm or the inheritance claims of their descendants (Pendleton, 2001). The other alternative would be for the owners to sell directly to the workforce but this is rarely a practical option due to the limited capital resources amongst the workforce. In order for this form of employee ownership to grow, a lot of enlightenment on the benefits of common ownership has to be put in place. This kind of employee ownership doesn't yet exist in Nigeria today.

The third contextual influence in the development of employee ownership is the employee share ownership schemes (ESOS) which became widespread in the US and UK in the 1980s. Government legislation passed in the late 1970s resulted in the privatization of state-owned enterprises (SOE) (Bradley and Nejad, 1989). This allowed for the public and employees of SOEs to participate in personal share ownership during the public flotation of public corporations (Pendleton, 1995). They encouraged awareness of employee ownership amongst workers and trade unions. Some of the Acts which encouraged employee ownership in the US and UK are

The United States:

The Employee Retirement Income Security Act of 1974 (ERISA) to help assure economic security in retirement

The Revenue Act of 1978 which gave employees certain limited voting rights to their trust accounts (Murphy, 2005).

The United Kingdom:

Approved Profit Sharing (1978 Finance Act) which gave tax benefits to employees for buying shares in a company.

Company Share Option Plan (CSOPs) (1995 Finance Act) which gave employees the option to buyout shares in their employing company at up to 80% discount on current market values.

ESOS in Nigeria came about in the 1980s following the successful privatization process which occurred in the UK (Jerome, 1992). The most famous case in the UK is the National Freight Consortium (NFC), which combined an employee buyout with privatization of the National Freight Company in 1989 (Taylor, 1989). The NFC was floated on the London Stock Exchange with considerable success. The resort to privatization/commercialization in Nigeria was informed by several considerations. First, the quantum of resources required to sustain the SOEs had become an unbearable burden on the Nigerian Treasury. Secondly, privatization was seen as a way of improving operational efficiency, broadening share ownership and attracting foreign investment to the poor SOEs (Jerome, 2002). Finally, the efforts of multilateral organisations such as the World Bank and the International Labour Office which gave endorsement to privatization policies further aided the Nigerian Government to commence the privatization process. (INTERNATIONAL LABOUR ORGANISATION, 2007). The aim was to allow to the private sector which had better capabilities to operate the SOEs more efficiently (White and Bhatia, 1998). In view of this, the Government set up the Privatization and Commercialization Decree of 1988 which allowed for up to 10 percent of equity to be made available for employee purchase (see Etukudo, 1997).

ESOS are almost the polar opposite of cooperatives in their distribution with many of them being concentrated in large, multi-site, financially successful firms (Gonzalez-Menendez et al. 2000). In contrast to cooperatives, employee share schemes are primarily a form of remuneration rather than a means of fostering employee partnership and employee ownership (Pendleton, 2005). ESOS do not provide the rights or the basis for employees to take the responsibility for the management of firm (Pole, 1988), there are other mechanisms available in ESOS to facilitate employee participation such as team briefing, quality circles, work teams etc. (Gonzalez-Menendez et al. 2000). These 'high performance work practices' - team briefing, quality circles etc are designed to promote information sharing and give a sense of involvement to the employees (Pendleton, 2001).

The limitation of ESOS is the amount of equity that is usually available for employee to purchase as stipulated by legislation (Wright et al. 1989). The amount of equity available for employees under ESOS rarely exceeds 10%, as a result of this, employees have limited governance rights and management responsibility within the firm.

Following the encouragement given to share ownership by the government in the US in the 1970s, employee ownership campaigners such as Louis Kelso lobbied for further legislative support for full employee-owned firms (Blasi 1988: 18-28). Kelso's argument was that capitalism would benefit from much wider ownership of productive assets and saw employee ownership as a means of overcoming fundamental divisions between capital and labour (Gates, 1998). The result of this was the Employee Share Ownership Plan (ESOP) which is very popular today in US, UK and China (National Center for Employee Ownership, 2012). ESOPs are different from ESOS in the sense that they allow the facilitation of massive transfer of equity to employees and the public (Pett, 1994). They involve the use of financial and legal institutions called Trusts to acquire, hold and distribute equity to employees (Employee Ownership Association, 2012). Most ESOP firms normally have more than 10% equity reserved for employees to purchase which is to serve as an aid to increase employee participation in governance and management responsibilities in the firm (Pendleton, 2001).

However, research by Blasi and Kruse (1991) has found that employee participation in management and governance in public sector ESOP firms in the US are very similar to the conventional ESOS firms. On the other hand, Logue and Yakes (1999) found worker directors to be involved in 17% of management and governance cases within private sector ESOPs.

As in the case of the development of share schemes, ESOPs rely not just on supportive legislation but also on good financial institutions which are so designed for the purpose of acquiring or holding equity on behalf of the employees. ESOPs in Nigeria are not common because of the lack of use of financial structures - Trusts that have become common in the USA and to a lesser extent in countries such as the UK and China (Wright et al. 2000). This has made equity purchases by employees in Nigeria to rarely exceed 10 per cent. In Nigeria today, there is just one case of employees having more than 10% equity share and it is found in the National Cargo Handling Company where 60% of the equity was sold to its managers and employees. For ESOP forms of employee ownership to be common in Nigeria, legislation supporting wider ownership has to be made and there also has to be in place the necessary financial institutions to support employee ownership.


The development of employee ownership can be seen arising from the conjunction of several trajectories. The first was the development of cooperatives and the perception in the trade community that this form of organisation was either inefficient or inappropriate. The second was the minority appeal of common ownership with firms like the John Lewis Partnership trying to persuade departing owners to pass their business onto their workforce. The last factor was the encouragement given to share ownership and financial participation by governments following the privatization of state-owned enterprises.

Theoretical Basis of Employee Ownership

Principal-Agent Theory

The principal-agent theory is the most fundamental theory for employee ownership, which shows the relationship between owner and employee (Cao, 2008). The central theme of the principal-agent theory revolves around how to get the employee (agent) to act in the best interest of the owner (principal) when the employee has an informational advantage over the owner and has different interests from the principal (see Jensen and Meckling, 1976). This theory is also known as the separation of 'ownership and management'. Employee ownership can be seen as a motivational mechanism which based on this theory aims to make the interests of employees consistent with that of the owners of the firm.

Since the 1980s, there has been a growing interest among researchers about the management styles that take place in an employee-owned business whether this model of business encourages greater commitment and enterprise from the workforce.

Human Capital Theory

The human capital theory is another fundamental theory for employee ownership (Cao, 2008). This concept was first mentioned by Theodre W. Schultz in 1961, he described human capital as the skills and knowledge gained by an employee through education and experience to produce economic value. He further added that the economic prosperity and functioning of a nation depends on its human capital.

The development of employee ownership led to a shift in how employees are perceived which is based on the Human capital theory. Prior to the theory, employees were seen as a source of physical labour only (Pole, 1988). However, following the advent of employee ownership via the cooperative model, workers were seen as not just a source of physical labour but also of economic value to the organisation (Cotton, 1993; Kruse and Blasi, 1997). Employee ownership can be seen as a development tool for firms on the basis of this theory through the education and welfare of workers thereby motivating them to work harder to improve company performance.

Motives/Objectives of employee ownership

It is clear that modern forms of employee ownership (ESOS and ESOP) are inextricably bound up with the privatization of state-owned enterprises or assets (Wright et al, 2011). This means that government objectives have a critical impact on the forms of employee ownership found in different countries. Many observers suggest that government encouragement of financial participation via legislation and tax concession is the single most important factor encouraging the take-up of employee ownership (Uvalic, 1991; Organisation of Economic Cooperation and Development, 1995; Vaughan-Whitehead, 1995). While some American observers such as Gordon and Pound, 1990 may have expressed doubts concerning the role of tax concessions in financial participation, the importance of legislation seems unquestionable in the development of employee ownership (Pendleton, 2001).

Employee share ownership has often been associated with many contexts like changes in employee attitudes/behavior and improvement in company performance within the American and European literature, it is however possible to discern additional objectives in Nigerian companies to those identified in European and American contexts. Employee share ownership have at times been perceived in the Nigerian context as a vehicle for redistributing wealth to disadvantaged ethnic groups (e.g. the south south zone in Nigeria). Another major attraction of the Nigerian government to employee share ownership is that employee share ownership apparently provides a means of retaining some localized control or participation while allowing for majority ownership by foreign companies and investors (Wright et al. 2011)

Objectives of international agencies such as the World Bank and the International Monetary Fund (IMF) must be added to those of the Nigerian government in the reasons for employee ownership advancement in Nigeria. Their influence on privatization in Nigeria has been great because of its weak economy and financial position (Birchall and Ketlison, 2009). The World Bank favors employee share ownership because of its ability to encourage competition, improve company performance and develop capital markets. Furthermore, it has the advantage of inhibiting re-nationalisation should government policy change (Gates and Saghir, 1995).

The evidence above suggests that employee share ownership in Nigeria has a mix of social and economic objectives. However, in practice employee share ownership is usually a subordinate objective in privatization programmes to those of raising capital, reducing state debt and improving company efficiency (Wright et al. 2011). The result of this is a low incidence level of employee share ownership in Nigeria.


The objectives for employee share ownership in Nigeria range from government legislation to widen ownership and retain some form of localized control while still allowing for foreign participation in ownership to the influence of international agencies like the World Bank and the IMF in promoting employee ownership for increased competition and improved company performance.

Financing employee ownership

There are two main types of financing methods for securing employee ownership. The first requires the employees to purchase shares directly themselves in much the same way as other individual investors (Pendleton, 2001). There are situations at times where shares are specifically earmarked for employees purchase. The second financing method involves the purchase of shares on employees' behalf on the basis of present or future profit streams (Wright et al. 2001). The first method often requires the employee to bear the cost of share ownership directly and immediately, this is usually at a discount rate on the market value of the shares. The second method on the other hand involves zero or minimal costs to the employees.

The first method of financing employee ownership is what is prevalent in Nigeria today. The reason for this is that the trust structures which are necessary for purchasing and owing equity on employees' behalf do not exist in law and hence are not recognized as appropriate by financial institutions (Wright et al. 2011). A major benefit of using the first method in Nigeria led to the development of Nigeria's share capital market which as at 1999 had 262 listed securities worth about 1.8 billion US dollars (Nigerian Stock Exchange, 2011). Another benefit of using the first method is the degree of risk and financial commitment on employees' part which is thought to more likely lead to responsible employee-shareholder behavior than other forms of employee ownership conversion (Pendleton, 2005). This is because in the second method, most of the risk is shouldered by the trust firm and, given the uncertain performance prospects of many firms; many are unwilling to take this risk (Wright et al. 2011).

The downside to this method of financing is whether it meets the objectives of policy makers. It is often perceived that most share option schemes have mainly been taken up by managers, which means that low income groups within the workforce force are least able to take advantage of share schemes (Smith, 1988). The result is that the social objective for redistributing wealth to the south south people of Nigeria has not succeeded.

The second method of financing employee ownership is popular amongst developed countries. The reason being the existence of loan providing financial institutions aided by legislation which purchase and own shares on employees' behalf (see Pendleton, 2001). The result of this is that ownership by employees in Nigeria rarely exceeds 10%. The second method helps to achieve this by acquiring and holding equity on behalf of the employees which means employee ownership exceeding the 10% value usually found in Nigerian enterprises.


Financing employee ownership is either done by the employees directly purchasing shares like individual investors or by financial institutions called trusts which acquire the shares of behalf of the employees.

Employee shareholding and decision making

Any modern forward-looking business would not keep its employees in the dark about vital decisions that affects them. It trusts them and involves them in decision making at all levels (Kuye and Sulaimon, 2011). "Command and control" is no longer an adequate model for decision making, decision making in firms now involve a much more open and collaborative framework which will exploit the talents of all employees (Hewitt, 2002). A core rationale of often conversion to employee ownership is the advancement of employee involvement in decision making (Wright et al. 2011). There is a substantial body of literature from observers in the USA which indicate that for the performance benefits of ownership to be realized, there needs to be participation in decision making (see Conte and Svejnar, 1990).

Employee ownership on its own conveys two sets of rights. The first is the right to enjoy the benefits emanating from ownership (i.e residual earnings) and the second is the right to control the use to which assets are put, including the right to dispose of it and to exclude non-owners from using it (Pendleton, 2001). This means employee participation caters for two sets of roles; one in work decisions and the other in governance decisions. Employee participation in employee ownership often contrasts with classic labour ideals in Marxist and economic accounts where employees sell their labour power and in return lose their independent power to direct themselves (Pendleton, 2005). In practice, however, employee participation in form of direct involvement is common in most advanced industrialized nations because of the need to enlist cooperation to turn labour power into work outcomes. The case of employee involvement in governance is much rarer because most formal governance rights are usually held by the capital providers in Anglo-American systems (Dow and Putterman, 1999). The result is that capital providers hire labour rather than involve them in governance of the firm.

Employee participation in decision making can be viewed as all forms of activity whereby employees have some involvement in either the formulation or communication of decisions about work relations, employment relations and industrial relations (Gospel, 1992; Marchington et al. 1992). Recent studies on employee participation have been concerned about the impact of participation on individual and organizational performance. According to Levine and Tyson (1990), there are two main arguments about the impact of participation to organizational performance. One is that participation can counter asymmetries in work-relevant information. An instance is found in complex organisations where workers are likely to have knowledge about production processes and services that are not held by managers and other workers. Employee participation provides a forum for sharing this information, which can then be used to improve the quality of goods and services. The second argument focuses more on motivation and discipline to the end that participation encourages co-operative modes of working amongst employees. An important point to note about employee participation is the role incentive structures play in their success (Weitzman and Kruse, 1990). Economists are of the notion that employees need a pay-off from participation; otherwise information sharing will be underdeveloped or ineffective.

The effect of conversion to employee ownership on employee participation leads to an increase in direct forms of participation. These forms range from information provision to task discretion, as employee owners seek to take more control of their working lives and to find ways of improving the performance of their firm (Pendleton, 2001). Firms can either have a high degree of involvement in decision making from the employees or a low degree of involvement from the employees (Barringer and Bleudorn, 1999). A high degree of involvement means that all categories of employees are involved in the planning process while a low degree of involvement refers to a fairly exclusive involvement in the planning process of the firm. The act of conversion to employee ownership may in itself encourage co-operation, participation and information sharing within the firm. This may be due to increased employee rights as they are now able to influence the outcomes of the participation process (Chang and Lorenzi, 1983; Pendleton, 1995)

Employee participation in decision making as it relates to corporate governance deals majorly in the control rights of employees as shareholders of the company (Blair, 1995). The result is that decision making is limited to a right to vote on company resolutions and also, the right to attend an Annual General Meeting (AGM) of shareholders. These AGM's in practice however, rarely deal with matters affecting governance and the strategic direction of the company (Pendleton, 2001).

Employee participation in decision making and Culture

Employee participation in decision making cannot however be meaningful without embedding it in a national culture context (Hofstede, 2001). Researchers such as Sagie and Aycan (2003) proposed a framework that links various types of employee participation to a cultural context. The framework dealt with two dimensions: Power distance and individualism-collectivism because of their strong link to participation in firms as compared to other cultural dimensions (Heller et al., 1998).

Power distance refers to how individuals regard power differentials within the society (Menzel et al., 2006). This has a major influence on how employee participation is practiced within the firm. Therefore it can be assumed that in a high power distance culture, decision making is the sole responsibility of management and employee participation is considered an infringement to management rights. This type of culture is typical of investor-owned firms. Whereas in a low power distance culture, every employee has the potential to contribute to the decision making process like in the cooperative business model (Sagie and Aycan, 2003).

Individualism-collectivism (I-C) on the other hand deals with identifying with the person or groups responsible for decision making within a firm (Kuye and Sulaimon, 2011). This culture trend deals with how an individual aligns himself within an organisation either as an individual agent or part of a collective group. Cultures which are high on individualism but low on collectivism emphasize the welfare and interest of an individual within an organisation. The result is an employee's participation in decision making is not necessarily the business of anyone else. Conversely, cultures which are high on collectivism but low in individualism emphasize collective participation in decision making (PDM).

There are four different participation approaches that can arise as result of a combination of power distance and individualism-collectivism in a firm (Sagie and Aycan, 2003).

Cultural Dimensions


Power Distance





Figure 1 Cultural dimensions and approaches to employee participation in decision making (Adapted from Sagie and Aycan, 2003)

The characteristics of the typical approaches are given in the table below


Face-to-Face PDM

Collective PDM

Paternalistic PDM

Essence of participation

Direct Leader-member interaction

Indirect participation(by representatives

Duality; PDM collides with directive values

Rationale for PDM

Organisational outcomes: maximizing profits

Socialistic Ideology and legal requirements

Reinforce loyalty and compliance


Individual (experienced, talented) employees

Employee representatives

Senior employees (if any)

Typical issues for decision making

Work-centered: tactical and operational issues

Employee-centered: rewards and work conditions

Everything (defacto: very little)

PDM main process




Table 1 Typical Characteristics of participation approaches in firms

In relation to employee participation in employee-owned firms, participation processes tend to mirror a hybrid form of collective and face-to-face decision making processes. However, there is little research done on the participation approaches that occur in employee owned firms in Nigeria, one of which is the aim of this research.


The conversion to employee ownership offers increased employee participation in decision making. This often confers on the employees two sets of rights. The first is the right to enjoy the benefits of ownership of the company. The second deals with governance rights as it relates to the managing of the firm.

Employee Ownership on performance

Employee ownership as it relates to performance deals with three perspectives. One deals with the influence of employee ownership on organisational performance, the second deals majorly with individual performance while the last deals with employee voluntary turnover (Cao, 2008).

The improved organisational performance was given credence by Sesil (2007) who collected data from 490 companies with employee share plans and showed that they had higher levels of labour productivity, employment growth and sales growth than otherwise-similar firms. The perspective on organisational performance deals with the notion that an increase in employee participation can increase job satisfaction which in turn will increase motivation and improve performance (see Rose, 1988). Further studies have also shown that employee share ownership plans compared to other forms of remuneration is an effective way of motivating people (Zhang and Chen, 2002).

Voluntary turnover as explained in human resource contexts deals with an employee's decision to terminate an employment relationship. In simple terms, it refers to how long employees stay on in a particular company (Dess and Shaw, 2001). Voluntary turnover is a research area of its own, but in relation to employee ownership it has to do with more of job satisfaction and retaining the best talents in employee owned firms (Trautwein and Vandepeear, 2008). Research has shown that companies involved in intellectual activities such as research and development, process design and product design tend to spend more money than other companies as a result of voluntary turnover (Quinn et al. 1996). Evidence from Balsaam (2007) has shown that employee share ownership is an effective method to reduce voluntary turnover in firms.


Employee ownership has recently witnessed a huge growth in many parts of the world today and the reasons for this are inextricably tied to the severe problems affecting the economy globally (Davies, 2011). These problems arose as a result of the failures of private sector ownership (International labour organisation, 2007). An independent Ownership Commission was set up in the United Kingdom (UK) to find out the reason for these failures and found out that excessive profit chasing, failures of accountability and low levels of employee engagement had damaged a lot of British business which further undermined their capacity to deliver value to customers and high quality jobs to their employees (Davies, 2011). Employee ownership is a business model that offers a different path for businesses by putting long term development of value ahead of short term demands for dividend (Employee Ownership Association, 2011). It is also seen as a way of shifting from the centrally provided public service sector and achieving coalition commitments for rebalancing the economy with improved corporate diversity (Michie, 2012). In the same vein, employee ownership is seen as a way of introducing more responsible capitalism to businesses which has also led to its increase globally.

The current banking crisis has also played a part in the case for employee ownership due to the widespread suspicion that companies are being run in the interests of certain elites, be they executives swelling their own remuneration or financial deal-makers focused majorly on finding new ways of charging fees as it relates to the financing, buying and selling of companies (Davies, 2011). An annual analysis carried out by the High Pay Commission in the UK revealed that the average CEO pay of FTSE 100 companies rose by 6.7% a year to £3.4m, while the average earnings per share fell by 1% over the same period (High Pay Commission, 2011). It was also noticed that Chairmen's fees and boardroom pay increased by a staggering 49% in the year leading up to October, 2011 (IDS, 2011). Research by Abugu (2012) has found these developments of executives running companies strictly for maximising profits at the expense of shareholders as true in Nigeria as they are in the UK. These developments have led to the notion that corporations mainly exist to serve particular minority elites. Employee ownership helps to curb this by being more risk averse to profits due to the absence of pressure from external stakeholders to maximize profits (Street, 2012).

Another dimension which has aided the development of employee ownership is the sustainability factor that employee ownership offers businesses. Most businesses actually make use of the 'shareholder value' ideology that depicts businesses as financial products to be exploited in the interests of shareholders. According to the shareholder value theory - executives should be remunerated in direct proportion to the value that they deliver to shareholders (BIS, 2010), but evidence shows that this theory has in fact worked better for executives and investment banks than for shareholders (Davies, 2011). The result of this has led to a focus on fees and maximization of individual remuneration by executives of companies which hinder the long term development of businesses. Research by Rappaport (2005) on listed companies shows that investors and managers hardly make any effort to value the company in terms of potential future earnings but base their decisions on fluctuations in recent earnings. It has also been observed by managers that they would avoid pursuing a project that offered long term value creation, if in fact it affected short term earnings (High Pay Commission, 2011). The result of this has led to an increased financial activity over the past decade but rapid business failures. These concerns were voiced by the Bank of England's executive director for financial stability, Andrew Haldane who said that "we urgently need to recognize delayed gratification as a necessary ingredient of economic growth, indeed of progress". Employee ownership helps to solve these problems by making executives more accountable for the decisions they take and allowing the employees which have a far greater insight into how value is created in the organisation to be part of the decision making process in the company.

The chartered Institute of Personnel and Development (2008) list the following as advantages of employee ownership.

Employee ownership affords the employees to gain a better understanding of the financial performance of the company

Employee ownership gives employees a stake in the future growth of the company and allows them benefit from the success they are creating

Employee ownership often acts a good recruitment and retention tool by the offering of shares to employees

Employee ownership encourages employee involvement and employee participation in the organisation

Employee ownership encourages loyalty and can improve company performance.

Employee ownership offers tax benefits from the government.

Disadvantages of employee ownership

Employee ownership can create an increased financial dependency on the company; if the company runs into difficulty employees risk losing not only their jobs but also much of the value of the shares held in the company's share scheme

Employee ownership can be time-related which means it can tie employees to jobs which they might otherwise prefer to leave.

There is often a high administration overhead associated with employee ownership both short term in getting the plan approved and communicating it to employees and long-term in managing the relevant records for performance related schemes.

There is also the risk of arousing unrealistic expectations in the company as a result of employee ownership (CIPD, 2008).


Privatisation has been the single most important factor in promoting employee ownership in Nigeria (Wright et al., 2011; Pendleton, 2001). However, there has been little research to investigate concrete policy objectives on employee ownership in Nigeria

Ho1: 'Privatisation policies have a direct impact on employee ownership forms available in Nigeria'.

There is growing evidence that organisational performance rests increasingly on the involvement of employees in decision making (Arthur, 1994; Deninson and Mishra, 1995; Spreitzer and Mishra, 1999). Employee ownership is a business model which aims to increase employee participation in decision making (see Conte and Svejnar, 1990). Therefore increase in employee ownership in a firm will lead to an increase in employee participation in decision making and hence an increase in organisational performance

H02: 'Employee ownership has a positive influence on employee participation in decision making within a firm'

H03: 'Employee ownership has a positive impact on employee performance in an organisation'

Spreitzer et al., (1997) argues that firms with employee ownership have lower voluntary turnover rates (Higher Job satisfaction) and improved performance than firms without a form of employee ownership. Sesil, (2007) also showed that companies with a form of employee share ownership have high productivity levels.

H04: 'There is a significant relationship between employee ownership and organisational performance.'

Latham et al., (1994) contends that there is less research evidence on the value of employee participation on organisational performance. Wagner, (1994) suggests that aside employees feeling good about their jobs and organisations, employee participation has little to do with an organisations performance.

H05: 'There is no significant difference between the performance of firms involved in employee ownership and the performance of firms not involved in employee ownership'.


Telecommunications Industry in Nigeria

The Telecommunication industry lies at the heart of the information economy. Any country without a good telecommunication infrastructure cannot compete effectively in the global economy (Jerome, 2002). The telecommunication sector in Nigeria was a typical public utility until the 1980s. The company responsible for telecommunication services was the Nigerian Telecommunications Limited (NITEL) which was acquired from the British government in 1972. In line with other state-owned enterprises in the 1980s, economies of scale combined with political sensitivity created an industry with large entry barriers and myriad of other problems (Jerome, 2002). These problems led to the suboptimal performance in NITEL's operations.

The telecommunications industry is a very dynamic sector often driven by unrelenting technological and market forces (Willenius and Stern, 1994; Saunders et al., 1994). It became apparent to the government that a restructuring of the sector was necessary hence NITEL was among the state-owned enterprises stated for commercialization in the Nigerian economic reform process of 1988. Following the commercialization process of NITEL, the telecommunications industry was also deregulated in 1992 to increase the efficiency of the sector in two ways. Firstly, is to increase competition in the sector by lowering the entry barriers which would improve products and services. Secondly, is that rents accruing as a result of groups benefiting from regulation would be dissipated by a more competitive market environment (Winston, 1993).

The Nigerian Communications Commission (NCC) was created in 1992 to regulate the telecoms industry. The Nigerian government through the promulgation of Nigerian Communications Commission (NCC) Decree No. 75 of 1992 introduced private participation in the provision of telecommunications services in Nigeria. The introduction of private partnership has allowed for the licensing of smaller operators to meet the current market demand (Wills and Daniels, 2003). The Nigerian services telecoms market is currently worth USD 9.5 billion and contributes 3.5% to Nigeria's Gross Domestic Product (Nigerian Communications Commission, 2012). The structure of the Nigerian Telecommunications sector is shown in the figure below.

Policy making level

Ministry of Communications

Figure 1: Structure of the telecommunications sector in Nigeria.

Provision of services

Complementary Value added providers

New entrants

Joint Ventures

Fixed: NITEL, PTOs, FWA, Globacom, VSAT, LDOs

Mobile Licenses: Econet, MTN, Globacom, NITEL GSM, Etisalat

Regulatory level

Utility Charges Commission



(Mobile Arm of NITEL)

Nigerian Communications Commission

The research will therefore investigate the effect of employee ownership on employee participation and company performance in the telecommunication industry in Nigeria which is experiencing a considerable amount of growth.


Research is what humans do when they have a question or problem they want to resolve. Research is normally done in order to discover information and increase knowledge. This study falls under Human Resource research which Anderson (2005) describes as a systematic way of finding out things about people and processes involved in the management of work organisations. The choice of the research topic influences the research design, research method and data collecting methods available to the researcher. Other factors to be considered by the researcher are the time scale of the research, the costs involved and the resources available. The figure below shows the factors that influence the research process.

Choice of Topic

Theoretical Preference

Practical Considerations

Selection of respondents or Participants

Figure 4: Influences within the research (source: McNeil and Chapman, 2005; Bryman and Crammer, 2009)

The selection of respondents or participants can also be referred to as the research method which includes: surveys, observations, experimentation, case studies or a combination of the different methods. According to Kumar (1999), research typology can be viewed from three perspectives which are: application, objectives and type of information sought. This research focuses on applied, descriptive research seeking both quantitative and qualitative information. The figure below shows the research perspectives.

Figure 5: Types of research (Adapted from Kumar, 1999)

Research Method

This research makes use of both quantitative research and qualitative research approaches. The quantitative approach adopted aims to demonstrate causality between the main concepts described in the literature review while the qualitative approach aims to gather an in-depth understanding of human behaviour regarding the concept and the reasons of these behaviours. The quantitative data will be processed using the software package SPSS (Statistical Package of the Social Science) with various statistical analyses performed on the data. The qualitative data will be assessed based on the criteria proposed by Easterby-Smith et al, (2002) which is listed blow


Does the study clearly gain access to the experiences of those in the research setting


Is there transparency in how sense was made from the raw data


Do the concepts and constructs derived from this study have any relevance to other settings

Ethics and Confidentiality

In all types of research projects, it is of upmost importance to adhere to ethical constraints by taking steps to ensure that all respondents are protected during and after data collection. According to Denscombe (2003), the ethical expectations of a researcher are summarized below

Respect the rights and dignity of those who are participating in the research project

Avoid any harm to the participants arising from their involvement in the research

Operate with honesty and integrity

Given the high sensitivity of human resource information involved in this research, participants will be offered anonymity and assured of the confidentiality of information whilst asking for their consent to participate in the research. The anonymity given the participants will also increase the honesty of responses as the questions are designed to gather real information and experiences. The purpose of the study will also be explained in detail to the organisations involved so that each participant has an understanding of the project and knows what is expected of them is an ethical requirement.

Methods of Data collection

The main source of data collection in this study will be primary data collection using interviews and questionnaires. Kumar (1999) recognizes problems associated with using secondary sources for data collection in research projects. His main argument is that in using a secondary source, the reliability and validity of the data is unknown. This leads to questions about the rigour and objectivity of the data used for the research. Primary data collection allows the researcher to make valid conclusions based on new data where the reliability and accuracy of the data will be known. Due to the nature of this research, the main methods of data collection will be questionnaires and interviews. Worsley (1977) gives different methods for collecting data depending on number of participants involved and the personal involvement of the researcher.


Social surveys

Structured interviews

Numbers Involved

Unstructured interviews

Non participant observation

Participant observation




Personal Involvement of researcher

Figure 6 - Methods of data collection (source: Worsley, 1977)


Swetnam (2007) defines an interview as not a conversation but a structured way of obtaining information on a focused content. Interviews are often classified based on the degree of flexibility occurring in them. The three different types of interviews with their characteristics are shown below

Figure 7 - Types of interviews (Adapted from Anderson, 2005; Kumar, 1999)

According to Anderson (2005), the semi-structured interview approach is the most common method of collecting data in human resource fields because it has the advantages of both the structured interview approach and the in-depth interview approach. However, in this study the structured interview approach will be used because of the need to get uniform information and see whether there is any causality between the concepts discussed in the literature review. The table below considers the advantages and disadvantages of interviews as a research method.



Excellent response rates once contacts have agreed to participate - can reach 100%

Time intensive

Questions can be explained to respondents

Interviewer bias in questions or interview direction may occur

Contact can be used to immediately validate results

Quality of data depends on interviewer/participant relationship

Surroundings and non verbal communication can be recorded

Interviews are not constant and uniform between participants

Can explore the reasons behind responses and probe to clarify data

Interview technique must be learnt and competence acquired

A higher quality of data can be achieved including uncovering real life information

Hard to prove causality as subjects may try to please interviewer or get expected responses.

Table 3 - Advantages and disadvantages of interviews (source: McNeil, 2003; Floyd, 2002; Swetnam, 2007)


Questionnaires in the form of surveys are often used to measure issues that are critical to the management and development of human resources (Anderson, 2005). Questionnaires are used to obtain large amounts of data from a large number of people in a relatively short period of time (McNeil, 2003). The results from a questionnaire can be presented in the form of statistics and tables. A questionnaire is employed in this study because of the need to control the conditions of the research and also improve the quality of the data. The questionnaire will also act as balance to the interviews to provide the required information.

Chosen Methodology

Survey research methods will be used in data collection combining the use of semi-structured interview and a structured questionnaire. By using a combination of different methods, triangulation can be achieved to get a high accuracy in results. The semi-structured interviews will allow different avenues to be explored while the structured questionnaire allows for quantitative data to be collected in a way to be able to contrast the different companies in view. The methodology chosen allows for data collection and data analysis to performed within the given time scale to the correct level of precision.

A structured questionnaire is a predetermined set of questions designed to capture data from participants (Money et al, 2007). The questionnaire is in a closed form meaning that the possible range of responses is pre-determined by the researcher. (Bryman and Crammer, 2009) Likert's 5-point scale is used as the response scale which allows the participant to indicate the degree of agreement/disagreement with the concept discussed. The questionnaire has two categories; the first is for collecting the personal information of the participants while the second category is for collecting data on the themes discussed in the literature review - employee ownership, employee participation and company performance.

Personal Information Questionnaire

There are six types of questions in this section: Gender, Marital status, Age, Education level, Job tenure and position



Marital status



25 years old or younger

26 ~ 30 years old

31 ~ 35 years old

36 ~ 40 years old

41 ~ 45 years old

46 ~ 50 years old

51 years old or older

Education Level

Senior secondary school certificate

Vocational Diploma

Bachelor's degree

Post graduate degree

Job tenure

Less than 1 year

1 ~ 3 years

4 ~ 6 years

7 ~ 9 years

10 years and above




Junior manager

Middle manager

Top manager

Table 4 - Items of personal information questionnaire

Employee ownership questionnaire

In this section, questions are created based on the research of Kuye and Sulaimon (2011), Birchall and Ketlison (2009) and Wright et al. (2011).

Questions 1 - 3 measure employee ownership awareness.

Questions 4 - 6 measure employee ownership structure.

Questions 10 - 16 measure effects of employee ownership on employee performance.

Questions 17 - 24 measure effects of employee ownership on employee participation.

Questions 25 - 33 measure effects of employee ownership on company performance.

I am aware of the employee ownership scheme in my organisation

I know the details of the employee ownership scheme in my organisation

I am already involved in the employee ownership scheme in my organisation

Employee ownership in my organisation is restricted to executives only.

Employee ownership in my organisation is