Other things being equal, it may pay to invest in public companies with significant employee ownership. That seems to be the implication of the performance of an employee-ownership index developed by Joseph R. Blasi and Douglas L. Kruse of Rutgers University and economist Michael Conte of the University of Baltimore. The index, which is not weighted by company size, reflects the average stock-price movement of all the companies listed on the New York, American, and NASDAQ exchanges that have more than 10% ownership by a broad group of employees--some 355 companies in all.
The three researchers, who began tracking the index in 1991, report that it was up 35.9% in that year, compared with increases of 20.3% in the Dow Jones industrial average and 26.3% in the Standard & Poor's 500-stock index. Last year, it posted an increase of 22.9%, while the other two indexes rose less than 4.5%. And in the first quarter of 1993, it chalked up a gain of 9.9%, vs. returns of just 4% and 4.7% for the Dow and the S&P 500.
Blasi isn't sure why the index has performed so well in recent years, though he would "like to think greater employee productivity at employee-friendly firms had something to do with it." He notes that the index doesn't include the stocks of companies where ownership is concentrated only among top management.