Employees on Corporate Boards

35 Pages Posted: 24 Feb 2017

See all articles by Tom Berglund

Tom Berglund

Hanken School of Economics - Department of Economics

Martin Holmen

University of Gothenburg - Department of Economics; University of Gothenburg - Centre for Finance

Date Written: February 22, 2017

Abstract

Employees in Swedish firms have the legal right to be represented on the company board. However, in a considerable share of Swedish listed firms, this option is not exercised. This paper asks why that is the case. We use a simple framework, based on rational choice by individual employees. Our sample consists of 226 listed non-financial Swedish firms in 2001-2007. The results are in line with our predictions. Employee board representation does not impact firm performance, neither positively nor negatively. The main driver of employee board representation is the number of eligible employees. Furthermore, employee board representation decreases with firm risk, slow growth, and internationalization. We conclude that when the law grants the right for employees to be represented on the board a simple model based on individual utility maximization provides an explanation for why the right is used in some firms and not in others.

Keywords: employee representation, board composition, dependent directors, firm performance, corporate governance

JEL Classification: G34, J53

Suggested Citation

Berglund, Tom Patrik and Holmen, Martin, Employees on Corporate Boards (February 22, 2017). Multinational Finance Journal, Vol. 20, No. 3, p. 237-271, 2016, Available at SSRN: https://ssrn.com/abstract=2923085

Tom Patrik Berglund (Contact Author)

Hanken School of Economics - Department of Economics ( email )

PO Box 479
FI-00101 Helsinki
Finland
+358-9-43133 345 (Phone)
+358-9-43133 382 (Fax)

Martin Holmen

University of Gothenburg - Department of Economics ( email )

School of Business, Economics and Law
Box 640
Gothenburg, 40530
Sweden
+46 31 786 6442 (Phone)
+46 31 7865114 (Fax)

University of Gothenburg - Centre for Finance ( email )

Box 640
Gothenburg, 403 50
Sweden

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
127
Abstract Views
728
Rank
418,076
PlumX Metrics