When Labor Has a Voice in Corporate Governance

44 Pages Posted: 23 May 2005 Last revised: 3 Apr 2022

See all articles by Olubunmi Faleye

Olubunmi Faleye

Northeastern University - D'Amore-McKim School of Business

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Asian Bureau of Finance and Economic Research

Vikas Mehrotra

University of Alberta - Department of Finance and Statistical Analysis

Multiple version iconThere are 3 versions of this paper

Date Written: April 2005

Abstract

Equity ownership gives labor both a fractional stake in the firm's residual cash flows and a voice in corporate governance. Relative to other firms, labor-controlled publicly-traded firms deviate more from value maximization, invest less in long-term assets, take fewer risks, grow more slowly, create fewer new jobs, and exhibit lower labor and total factor productivity. We therefore propose that labor uses its corporate governance voice to maximize the combined value of its contractual and residual claims, and that this often pushes corporate policies away from, rather than towards, shareholder value maximization.

Suggested Citation

Faleye, Olubunmi and Morck, Randall K. and Mehrotra, Vikas, When Labor Has a Voice in Corporate Governance (April 2005). NBER Working Paper No. w11254, Available at SSRN: https://ssrn.com/abstract=697179

Olubunmi Faleye

Northeastern University - D'Amore-McKim School of Business ( email )

Boston, MA 02115
United States

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
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National Bureau of Economic Research (NBER)

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European Corporate Governance Institute (ECGI) ( email )

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Asian Bureau of Finance and Economic Research ( email )

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Vikas Mehrotra

University of Alberta - Department of Finance and Statistical Analysis ( email )

School of Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2976 (Phone)
780-492-3325 (Fax)

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