Doing the Right Thing? Does Fair Share Capitalism Improve Workplace Performance?

The paper considers whether ‘fair share capitalism’ improves workplace productivity. ‘Fair share capitalism’ (FSC) is a generic term for the financial mechanism that links employees’ pay to group or company performance. The traditional rationale for FSC is that where employers find it difficult or costly to monitor inputs they will choose to pay for outputs. FSC can then be used to align worker and employer objectives in maximising those outputs, provided any free-rider problem from group FSC can be overcome. This implies a potential to reduce managerial monitoring (MM) of inputs where one is able to reward outputs through FSC. At the same time, it seems likely that employers will only want to link pay to performance, and employees will only be prepared to shoulder the additional risk to their income of doing so, where there is autonomy in employee decision-making (EDM) which permits employees to affect output. These relationships are explored with data for the private sector from the 2004 British Workplace Employment Relations Survey (WERS 2004). FSC is positively associated with employer perceptions of EDM, but not employee perceptions of EDM. Contrary to expectations, FSC is strongly positively associated with MM. FSC is positively associated with labour productivity. However, the productivity results are sensitive to the type of FSC scheme, its coverage and the measure of labour productivity used. The positive association between productivity and FSC was most apparent in workplaces with high EDM.