Board-Level Employee Representation and Firms' Responses to Crisis

Forthcoming in "Industrial Relations: A Journal of Economy and Society"

Posted: 5 Aug 2017 Last revised: 16 Jun 2019

See all articles by Aleksandra Gregoric

Aleksandra Gregoric

Copenhagen Business School

Marc Steffen Rapp

University of Marburg - School of Business & Economics; University of Marburg - Marburg Centre for Institutional Economics (MACIE)

Date Written: February 1, 2019

Abstract

We hypothesize that companies with board level employee representation (BLER) are less likely than other firms to experience crisis-induced employment reductions, since the employers and employees in BLER firms are better able to negotiate alternative labor-cost savings to preserve employment. Theoretically, we link this ability to BLER’s contribution in reducing information asymmetries and moral hazard in employee-employer contracting. We confirm our hypotheses by studying Scandinavian corporations with/without BLER during the Great Recession. In line with the hypothesized cooperative nature of employee-employer agreements, we also show that BLER firms did not underperform compared to other firms during the last crisis.

Keywords: Industrial relations, board of directors, employee directors, employment, labor costs, Great Recession

JEL Classification: L00, G3, J53

Suggested Citation

Gregoric, Aleksandra and Rapp, Marc Steffen, Board-Level Employee Representation and Firms' Responses to Crisis (February 1, 2019). Forthcoming in "Industrial Relations: A Journal of Economy and Society". Available at SSRN: https://ssrn.com/abstract=3012999 or http://dx.doi.org/10.2139/ssrn.3012999

Aleksandra Gregoric (Contact Author)

Copenhagen Business School ( email )

Porcelænshaven 24
Frederiksberg C, DK - 2000
Denmark

Marc Steffen Rapp

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

University of Marburg - Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

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