Corporate Governance and Employee Power in the Boardroom: An Applied Game Theoretic Analysis
Posted: 21 Dec 2014 Last revised: 20 Apr 2020
Date Written: July 2013
The debate on employee representation on corporate boards has received considerable attention from scholars and politicians around the world. We provide new insights to this ongoing discussion by applying power indices from game theory to examine the actual voting power of employees on boards and its effect on firm performance. Based on unique panel data on the largest listed companies in Germany, we find an inverse U-shaped relationship between labor power and Tobin's Q. Moderate employee participation in corporate board decision-making can enhance firm value.
Keywords: Applied game theory, Co-determination, Corporate governance, Power index
JEL Classification: J53, K22, K31, L22
Suggested Citation: Suggested Citation