A conceptual model relating equity investment to human resource development (HRD) that results in business benefits was developed based on extant theories on employee stock ownership, organizational learning, alignment, and risk shift. Businesses will benefit from a more committed and effective workforce, receiving more employee support for retirement and health programs that reduce risks for businesses, and a social and political environment that is more favorable to business values. Needed HRD actions include educating their employees about the benefits available, providing their employees with the capability to manage their equity investments, and strengthening participant management to enhance the commitment and effectiveness of their workforce.
Business Benefits of Equity Investment
The proportion of the US households that own equities has been growing steadily over the past two decades. As of January 2005, 57 million US households (50.7%) or 91.1 million individuals owned at least one form of equity (Investment Company Institute & the Security Industry Association [ICI & SIA], 2005) - either individual common stocks or common stock mutual funds1. Within the equity-owning investors, 70% of the equity owners were employed, and the remaining 30% were either not employed or retired. These ownership figures indicate that the US is already, what one could call a "mass equity investment society (MEIS)", a society in which equity ownership of public corporations is held by a majority of all households.
Along with broader ownership, the selfmanagement of equity investment is substantial and increasing. During 2001, 31% of investors used the Internet to execute some or all of their equity market transactions versus 15% during 1998. Among these internet users, on-line discount broker users grew from 9% in 1999 to 17% in 2002 (ICI Et SIA, 2002).
While we believe that the trend in equity ownership is good for businesses, we propose that an effort to further expand ownership through HRD (Human Resource Development) will offer significant additional benefits to businesses and employees alike. To obtain those benefits in a timely manner, however, businesses should have HR departments take the lead in actions to enhance the forces favoring and to mitigate the forces limiting equity ownership expansion as ways of encouraging the complementary approach of participant management. The equity ownership expansion leads to business and employee benefits which include increased commitment and effectiveness of the workforce, improved understanding and acceptance of the shifting of retirement and health plan associated risks from business to the workforce, and a more receptive attitude toward various business activities, all changes within the purview of HRD. Figure 1 is a model relating the role HRD should play in influencing the forces that favor and limit equity ownership expansion. These benefits of equity ownership are discussed in more detail below and the HRD roles are presented after sections on the forces favoring and limiting equity ownership expansion.
Commitment of Managers and Workers
Broadening equity ownership presents an opportunity to increase the commitment of both the management and the workforce. Commitment is related to the alignment of employee interests to their employers by equity ownership. In 2002, there were 24 million employees who owned their employer stocks through the employee stock ownership plan (ESOP), 401k, and other plans (Blasi, Krause, Sesil, & Kroumova, 2003; ICI & SIA, 2002). Studies on employee stock ownership and organizational outcomes are mostly focused on ESOPs2 that are primarily invested in employer stock. As employees own stocks of their employers, they have an additional amount of commitment to their employers due to the selling costs and other specific limitations associated with the stock. Hallock, Salazar, Et Venneman (2003) reviewed selected studies on ESOPs and organizational outcomes and suggested a positive association between employee commitment and ESOPs. …