Corporate Governance and Employee Power in the Boardroom: An Applied Game Theoretic Analysis

Posted: 21 Dec 2014 Last revised: 20 Apr 2020

See all articles by Benjamin Balsmeier

Benjamin Balsmeier

KU Leuven - Department of Managerial Economics, Strategy, and Innovation

Andreas Bermig

McKinsey & Co. Inc. - Munich Office

Alexander Dilger

University of Münster

Date Written: July 2013

Abstract

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

Balsmeier, Benjamin and Bermig, Andreas and Dilger, Alexander, Corporate Governance and Employee Power in the Boardroom: An Applied Game Theoretic Analysis (July 2013). Journal of Economic Behavior & Organization, Vol. 91, July 2013, pp. 51,-74., Available at SSRN: https://ssrn.com/abstract=2541011

Benjamin Balsmeier

KU Leuven - Department of Managerial Economics, Strategy, and Innovation ( email )

Naamsestraat 69 bus 3500
Leuven, 3000
Belgium

Andreas Bermig

McKinsey & Co. Inc. - Munich Office

Sophienstr. 26
80333 Munich
Germany

Alexander Dilger (Contact Author)

University of Münster ( email )

Institute for Organisational Economics
Scharnhorststr. 100
Münster, D-48151
Germany
+49-251-83-25330 (Phone)
+49-251-83-28429 (Fax)

HOME PAGE: http://www.wiwi.uni-muenster.de/io/en/organisation/Dilger.html

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