Research points to some important motivations behind why group incentives work. For example, some forms of shared capitalism are viewed more as gift exchanges between the worker and the firm. In other words, the company offers something for free, such as shares, in anticipation of worker reciprocation in the form of additional effort.  These feelings of reciprocity are often linked to perceptions of fairness and justice underpinning the exchange between labor and rewards, and they can generate organizational commitment and loyalty in a way that a simple bonus or raise cannot.

Our own recent research indicates that shared capitalism can also improve job satisfaction. This is the case even when controlling for the additional income a worker can derive from group incentive plans, suggesting that workers derive value from sharing ownership in their firm over and above the value they get from making additional money. The effect is partly related to the warm glow employees feel in response to the “gift” of free or discounted shares, and partly to the effect ESOPs have in dampening the “bad” aspects of a job. Importantly, individual performance-related pay plans do not have this positive well-being effect — they can incentivize through income, but they don’t affect worker well-being in the same way as shared capitalism programs.

Read more: Profit Sharing Boosts Employee Productivity and Satisfaction