Employee Participation in Corporate Governance and Corporate Social Responsibility

Forthcoming in Handbook on the Economics of Social Responsibility: Individuals, Corporations and Institutions (Lorenzo Sacconi and Giacomo Degli Antoni eds.)

European Corporate Governance Institute (ECGI) - Law Working Paper No. 322/2016

Fordham Working Paper Series

40 Pages Posted: 22 Jun 2016 Last revised: 21 Jul 2016

See all articles by Martin Gelter

Martin Gelter

Fordham University School of Law; European Corporate Governance Institute (ECGI)

Date Written: June 21, 2016

Abstract

The chapter investigates the impact of employee participation on the board of directors or supervisory board (particularly codetermination) on corporate social responsibility (CSR). Conceptually, it is important to distinguish between “internal” and “external” CSR. Internal CSR relates to practices of the firm regarding groups with which it is in a long-term contractual relationship such as employees. Employee participation systems serve to protect employees from shareholder opportunism and shift the balance in the distribution of corporate rents in favor of employees, which is why they clearly have an impact on internal CSR. The situation is much less clear for external CSR, which is concerned with effects of corporate activities that are externalities, for example pollution. I argue that there may sometimes be a tradeoff between internal and external CSR: If a firm is more profitable because it scores badly in terms of external CSR (e.g. because it habitually pollutes), employees may benefit similarly as shareholders. In fact, the interests of shareholders and employees may be largely aligned in this respect, with both either benefiting or being harmed concurrently.

Keywords: Codetermination, Corporate Social Responsibility, CSR, Corporate Governance, Volkswagen Emissions Scandal, Ownership Strucute, Varieties of Capitalism

JEL Classification: A13, K22, J50, M14

Suggested Citation

Gelter, Martin, Employee Participation in Corporate Governance and Corporate Social Responsibility (June 21, 2016). Forthcoming in Handbook on the Economics of Social Responsibility: Individuals, Corporations and Institutions (Lorenzo Sacconi and Giacomo Degli Antoni eds.); European Corporate Governance Institute (ECGI) - Law Working Paper No. 322/2016; Fordham Working Paper Series. Available at SSRN: https://ssrn.com/abstract=2798717 or http://dx.doi.org/10.2139/ssrn.2798717

Martin Gelter (Contact Author)

Fordham University School of Law ( email )

150 West 62nd Street
New York, NY 10023
United States
646-312-8752 (Phone)

HOME PAGE: http://www.fordham.edu/info/23135/martin_gelter

European Corporate Governance Institute (ECGI)

HOME PAGE: http://ecgi.global/users/martin-gelter

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