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Realigning Corporate Governance: Shareholder Activism by Labor Unions

Michigan Law Review, Vol. 96, No. 4, p. 1018, February 1998

Vanderbilt Public Law Research Paper

Vanderbilt Law and Economics Research Paper

78 Pages Posted: 22 Dec 2010 Last revised: 26 Jan 2011

Stewart J. Schwab

Cornell Law School

Randall S. Thomas

Vanderbilt University - Law School; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 1993

Abstract

Labor unions are aggressively using their ownership power to push corporate-governance reforms. So far, much of their activity is tactical. Lasting changes in corporate governance can occur if unions develop a more strategic model of their role in corporate governance. A stretegic model would require unions to concentrate on areas where their interests coincide with other shareholders and where they can demonstrte that their actions will increase firm value. This requires that labor unions adopt a platform of maximizing long-term growth for shareholders and other stakeholders, as well as for themselves. In particular, unions must convince other shareholders that they are acting in areas where they have an informational advantage about the corporation's and management's operations. If labor can demonstrate to other sharholders that it is using its monitoring advantagaes to take actions to increase firm value by policing management shirking and reducing the agency costs of equity, then other shareholders will be more willing to follow its lead in future voting initiatives. This opens up the possibility that labor union shareholders could reinvigorate some currently ineffectual corporate-governance systems. These might include the policing of securities fraud and other types of corporate misconduct through the use of existing litigation techniques.

Keywords: Labor Unions, corporate, governance, shareholder,

Suggested Citation

Schwab, Stewart J. and Thomas, Randall S., Realigning Corporate Governance: Shareholder Activism by Labor Unions (April 1, 1993). Vanderbilt Law and Economics Research Paper ; Michigan Law Review, Vol. 96, No. 4, p. 1018, February 1998; Vanderbilt Public Law Research Paper ; Vanderbilt Law and Economics Research Paper . Available at SSRN: https://ssrn.com/abstract=1729348 or http://dx.doi.org/10.2139/ssrn.1729348

Stewart Jon Schwab

Cornell Law School ( email )

Myron Taylor Hall
#108
Ithaca, NY 14853
United States
607.255.8584 (Phone)
607-255-7193 (Fax)

Randall S. Thomas (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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