Beyond Agency Theory: The Unexpected Effects of Employee Stock Ownership on Employee Extra-Role Behaviors

Although research demonstrates that employee stock ownership (ESO) is associated with increased firm performance, ESO’s influence on employees’ extra-role behaviors has been neglected. Using five-year panel data (N=156,051 employees) of a leading automotive manufacturer we find that ESO plans are related to extra-role behaviors, in the form of making suggestions for innovative work solutions. Remarkably, however and in stark contrast to expectations grounded in agency theory, equity ownership alone showed no immediate meaningful independent effect on extra-role behaviors, suggesting critical boundary conditions and additional underexplored underlying mechanisms. Our results indicate that stock discounts from an employee stock purchase plan (ESPP), rather than simply employee stock ownership, drive employees’ extra-role behaviors in the short-term and over time the effect size of stock discounts is substantially larger than even long-term equity accumulation. Hence, our findings call into question agency theory expectations for most employees; the results also extend ESO understanding by integrating social exchange theory with the dominant theory in the literature, agency theory, showing that social exchange theory may be a stronger explanation for employee extra-role behaviors than agency theory. These unexpectedly weaker-than-anticipated agency effects highlight meaningful boundary conditions for ESO effects, indicating opportunities for future theoretical and empirical exploration.