The efficiency of wages, profit sharing, and stock

Abstract

Purpose

The purpose of this paper is to examine which forms of compensation are more efficient at affecting employee attitudes, thus extending efficiency wage theory from wage-based compensation to profit sharing and stock-based compensation.

Design/methodology/approach

Three models of efficiency wage theory were tested: shirking, turnover and gift exchange. The effects of those three modes of compensation (wages, profit sharing and stock) were contrasted for the three models of efficiency wage theory.

Findings

The findings were that raising wages is the most efficient form of compensation in the turnover and shirking models, while in the gift exchange model profit sharing and stock-based compensation may function like efficiency wages.

Originality/value

This is the first study of this particular issue.

Citation

Weltmann, D. (2019), "The efficiency of wages, profit sharing, and stock", Journal of Participation and Employee Ownership, Vol. 2 No. 3, pp. 222-235. https://doi.org/10.1108/JPEO-09-2019-0021