Employee Profit-Sharing and Corporate Governance

　Employee stock bonus program in Taiwan is designed as a device to tie employees’ interests and firm’s interests together. Although it is generally believed that employee stock bonus has an incentive effect that can potentially enhance firm’s productivity and profitability to some degree, there are increasing dissatisfied voices appearing in recent years due to the serious dilution effect. In this study, we try to investigate the connection between firm’s using extent of employee stock bonus and the corporate governance mechanism.

　The empirical evidences indicate that corporate governance does influence the adoption of employee stock bonus. The percentage of control-affiliated directors, the joint CEO-chairman factor, the controlling shareholder’s cash flow right, the deviation from control right to cash flow right, and the foreign ownership all present remarkably negative impacts on the use of employee stock bonus. Besides, the participation of board members in employees’ profit sharing reinforces the approval of employee stock bonus.