International Perspectives on Participation: Volume 15

All that we know about the Chief Executive Officer (CEO) labour market in China comes from the studies of public listed companies and State-owned Enterprises (SOEs). This is the first attempt to examine the operation of the CEO labour market across all industrial sectors of the Chinese economy. We find that the influence of the State extends beyond SOEs into many privately owned firms. Government is often involved in CEO appointments in domestic firms and, when this is the case, the CEO has less job autonomy and is less likely to have pay linked to firm performance. Nevertheless, we find that incentive schemes are commonplace and include contracts linking CEO pay directly to firm performance, annual bonus schemes, the posting of performance bonds, and holding company stock. The elasticity of pay with respect to company performance is one or more in two-fifths of the cases where CEOs have performance contracts, suggesting many face high-powered incentives. We also show that State-owned and domestic privately owned firms are more likely than foreign-owned firms to use incentive contracts.

CEO incentive contracts are commonplace in China but their incidence varies significantly across Chinese cities. We show that city and provincial policy experiments help explain this variance. We examine the role of two policy experiments: the use of Special Economic Zones (SEZs) to attract Foreign Direct Investment (FDI), and the privatisation of State-Owned Enterprises (SOEs). The introduction of SEZs is found to be uncorrelated with the prevalence of CEO incentive contracts. However, firms are more likely to use such contracts in areas that saw rapid SOE privatisation, irrespective of the firm’s own current ownership status and irrespective of the size of the SOE sector in the late 1970s. The positive effect of privatisation is robust to various estimation techniques and model specifications. These findings suggest that domestic privatisation policies have been more influential than FDI in driving the expansion of incentive contracts in China.

This paper assesses to what extent the workplace union power has been built under the Professional Union Leader and Organizer Program (PULOP) in China in the local community-based private workplaces. Data obtained from in-depth interviews with union leaders, rank-and-file members, and data from documentary sources are deployed. Findings show that, for the purpose of stabilizing labor-management relations in these community-based workplaces, the PULOP attempts to reinforce implementation of existing labor law and regulations regarding wages and working conditions by organizing community-based private employers. However, without workers’ support from the bottom up, the power of the newly established workplace union associations are rather precarious. The PULOP union leaders are still distant to the organized workplaces and to the workers at these workplaces; and the organized employers are still reluctant or even hostile towards PULOP activities. The paper, therefore, concludes by drawing out the implications of the finding that, without genuine worker participation in union formation and operation processes, the administrative power held by the union bureaucracies cannot be effectively translated into workplace union power via the PULOP initiative.

Islamic and cooperative banks – including credit unions – are broadly similar in that they both share risk with savers. However, risk sharing goes along with ownership control in cooperatives, whilst Islamic banks share risk with borrowers also, and full downside risk with depositors. Islamic banking is consistent with mutual ownership, which may ease some of the governance and efficiency concerns implied by Shari’ah constraints. Greater risk sharing among cooperative bank stakeholders, along the lines of products offered by Islamic banks, may strengthen cooperatives’ financial resilience.

This chapter is aimed at filling two important gaps in the large literature on high-involvement work system (HIWS). First, the existing literature tends to focus on North America and Western Europe, and detailed information on HIWS outside of the two regions (especially Asia) is still limited. Second, while there is a large body of quantitative evidence, the literature is relatively scant on detailed account of exactly how specific HIWS practices are implemented in the real workplace. This chapter draws on our extensive field research at firms in Japan, the United States, and Korea, and presents real-world examples of HIWS of firms in Japan, Korea, and the United States. Our detailed account of the implementation of HIWS in the three countries points to an intriguing process of transnational diffusion of HIWS. Japanese firms as early experimenters of HIWS posed a challenge to U.S. firms in the global marketplace, resulting in the trans-pacific diffusion of HIWS which is modified to the U.S. corporate culture. Due to its geographical proximity and historical connections to Japan, Korean firms were initially heavily influenced by Japanese HIWS. However, with the rising link to the United States and Europe, Japanese influence appears to have been waning, and interest in U.S. style HIWS and European-style state-mandated works council has risen, suggesting that a hybrid model may be emerging in Korea.

While innovative work practices (IWPs), such as self-directed teams and performance related pay, have become commonplace in firms around the world, little is known about their nature and effects in emerging market countries. This study uses new data collected from face-to-face interviews with large samples of workers from two manufacturing firms in Lithuania in 2005 mainly to investigate hypotheses concerning the effects of IWPs on firm and worker outcomes. In these cases we find: (i) the range of IWPs is limited though particular IWPs, notably self-directed teams, are strongly evident; (ii) in view of the historical legacy, the incidence of some outcomes, notably monitoring, was surprisingly high; (iii) typically self-directed teams positively impact worker outcomes, notably job satisfaction and employee involvement, though effects on monitoring and effort are less frequent; (iv) typically equity ownership and bonuses do not affect worker outcomes, though positive impacts on effort and peer monitoring sometimes are found; (v) the evidence for complementary effects of teams and performance pay or financial participation is very weak. In the main, these findings do not support the mutual gains theory that IWPs positively impact both firm and worker outcomes.

This chapter provides further evidence on the role of uncertainty and job complexity in pay-for-performance and autonomy decisions. It proposes an encompassing econometric approach in order to explain the differences in previous outcomes that may be due to differing methodological approaches. The main stylized fact is that autonomy and pay-for-performance are positively associated. Additionally, autonomy is positively related to job complexity and uncertainty suggesting that the relationship between these latter variables and pay-for-performance could be through autonomy. After controlling for autonomy, the positive relationship between pay-for-performance and job complexity disappears, while that between pay-for-performance and uncertainty becomes more negative.

A model of reputation is developed to show how firms operating in concentrated sectors can use the sponsorship of general human capital investments to specifically trained workers as a device of commitment with prospective employees. Employees of firms that operate in concentrated sectors learn skills that are valuable only for a limited number of alternative employers. This gives monopsonistic power to the training firm over the trained workers. Anticipating it, potential employees will be reluctant to work for the firm unless the employer is able to commit oneself’ must be turned back to ‘herself. I argue that human resource policies including the provision of general human capital to workers reduce employers’ commitment costs. Evidence from two representative samples of workers from Spain and the United Kingdom show that, consistent with the predictions of the model, firms from more concentrated sectors are more likely to sponsor their employees’ education.