Shared Capitalism and Internal Control: A Conceptual Framework for Understanding How Employee Ownership Shapes Control Systems

Document Type

Article

Publication Date

1-1-2026

Publication Source

International Review of Applied Economics

Volume Number

40

Issue Number

5

First Page

857

Last Page

873

ISSN

02692171

E-ISSN

14653486

Abstract

Employee stock ownership and other forms of shared capitalism are widely studied as mechanisms for improving firm performance, employee engagement, and workplace stability. Far less attention has been paid to how these arrangements affect internal control systems, which play a central role in safeguarding assets, governing organizational reliability, risk management, and financial reporting quality. This paper develops a conceptual framework linking shared capitalism to internal control by viewing internal control as an applied economic institution within the firm. Using the COSO internal control framework, the analysis identifies mechanisms through which employee ownership influences the control environment, risk assessment, control activities, information and communication, and monitoring. The framework highlights both strengthening effects—such as psychological ownership, employee voice, and peer monitoring—and potential challenges, including optimism bias, collusion, and collective monitoring problems. By integrating insights from economics, governance, and organizational research, the paper contributes to applied economic research on employee stock ownership and provides a foundation for future empirical work examining how shared capitalism shapes internal governance and organizational outcomes.

Keywords

corporate governance, Employee stock ownership, internal control, shared capitalism, workplace institutions

Link to Full Text

Share

COinS