It might seem self-evident that when organizations perform well, employees are more likely to behave better. Research from Binghamton University shows that this extends to tipping, with executives more likely to tip more when their company’s shares do well.
This, admittedly short-term, boost in generosity, it also appears to be stronger among employees of firms that provide more stock-based compensation, which has an impact on how employees can impact the local economy.
“Employee spending is a big factor that governments consider when trying to attract companies into their area, as it can stimulate the local economy,” the researcher explains.
Boosting generosity
The researcher analyzed payment and GPS data from approximately 2 million taxi journeys in New York between 2009 and 2016. They were particularly interested in pickups between 5 and 6 pm to typify the normal end of a working day and also trading hours on the NYSE. They focused on pickups within 100 meters of public firms with a HQ in NYC.
“The taxi setting is great because you’re unlikely to bump into the same taxi driver again, so how you tip now isn’t going to influence the quality of service the next time you take a taxi,” the author explains. “How someone tips a taxi driver probably says something about how they feel in that moment—do they feel happier and wealthier? And is that being driven by the stock performance of their employer?”
The data shows that when a company experienced an unexpected rise in its share price, the employees of that firm would tip drivers more, with this boost confined to the day of the rise in share price.
“The short-lived nature seems to suggest that the employee feels good about the stock performance of their company that day, and that happiness is motivating them to tip more,” the author explains.
Interestingly, the reverse doesn’t occur when share prices perform poorly, with the author suggesting that socially acceptable tipping levels may provide a minimum floor that people won’t go below, even if they have a bad day on the markets.
“Employee spending is an important economic driver for the location where a business is located. If employees are doing well, they are likely to spend more money in that local economy,” the author concludes. “While I just looked at taxi rides here, these findings may indicate that the stock performance of a firm may influence the overall discretionary spending of employees.”
