When Labor Has a Voice in Corporate Governance
Journal of Financial and Quantitative Analysis (JFQA), Vol. 41, No. 3, 2006
University of Alberta School of Business Research Paper No. 2013-221
Posted: 26 May 2013 Last revised: 30 May 2013
There are 3 versions of this paper
When Labor Has a Voice in Corporate Governance
When Labor Has a Voice in Corporate Governance
When Labor Has a Voice in Corporate Governance
Date Written: June 23, 2005
Abstract
Equity ownership gives labor both a fractional stake in a 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. Therefore, we 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 toward, shareholder value maximization.
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