Corporate Constituency Statutes and Employee Governance
University of Minnesota Law School
William Mitchell Law Review, Vol. 30, p. 1227, 2004
The paper compares the effects of corporate constituency statutes versus employee involvement in corporate governance, using a simple model to consider interactions between shareholders, employees, and managers. Both constituency statutes and employee governance tend to lead to a redistribution from shareholders to employees. However, constituency statutes do so at the cost of weakening limits on managerial misbehavior, thereby reducing social welfare. In contrast, employee governance strengthens the limits on managerial misbehavior, and hence is potentially more desirable than constituency statutes.
Keywords: corporate governance, constituency statutes, employee governance
JEL Classification: G30, K22, L21Accepted Paper Series
Date posted: July 30, 2004
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