Does Employee Ownership Reduce Strike Risk? Evidence from U.S. Union Elections

Abstract

This paper investigates the impact of employee stock options (ESO) on labor unions’ likelihood to initiate strikes. Using the unique setting of union elections in U.S. firms, we find that firms offering higher levels of equity incentives to their employees are exposed to significantly lower post-unionization strike risk. Furthermore, firms strategically grant more stock option incentives to employees in response to the unionization of the labor force. The increase in option incentives is more pronounced among firms holding union elections in states with stronger union bargaining power and when the strike risk is perceived to be higher.