NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Harry M. Markowitz

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9500 Gilman Dr. #0553
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NBER Working Papers and Publications

April 2010Risk and Lack of Diversification under Employee Ownership and Shared Capitalism
with Joseph R. Blasi, Douglas L. Kruse
in Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options , Douglas L. Kruse, Richard B. Freeman and Joseph R. Blasi, editors
August 2008Risk and Lack of Diversification under Employee Ownership and Shared Capitalism
with Joseph R. Blasi, Douglas L. Kruse: w14229
Some analysts view risk as the Achilles Heel of employee ownership and to some extent variable pay plans such as profit sharing and gainsharing. Workers in such "shared capitalist" firms may invest too much of their wealth in the firm, contrary to the principle of diversification. This paper addresses whether the risk in shared capitalism makes it unwise for most workers or whether the risk can be managed to limit much of the loss of utility from holding the extra risk. We create an index of financial security based on worker pay and wealth, and find that workers who feel financially insecure exhibit fewer of the positive outcomes associated with shared capitalism, and are less interested than other workers in receiving more employee ownership or even more profit sharing in their workpl...

Published: Risk and Lack of Diversification under Employee Ownership and Shared Capitalism, Joseph R. Blasi, Douglas L. Kruse, Harry M. Markowitz. in Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options , Kruse, Freeman, and Blasi. 2010

 
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