Corporate Constituency Statutes and Employee Governance
University of Minnesota Law School
October 15, 2002
Minnesota Public Law Research Paper No. 02-13
The paper compares the effects of corporate constituency statutes versus employee involvement in corporate governance, using a simple model to consider interactions between shareholders, employees, and managers. Both constituency statutes and employee governance tend to lead to a redistribution from shareholders to employees. However, constituency statutes do so at the cost of weakening limits on managerial misbehavior, thereby reducing social welfare. In contrast, employee governance strengthens the limits on managerial misbehavior, and hence is potentially more desirable than constituency statutes.
Number of Pages in PDF File: 40
JEL Classification: G30, G34, K22, L21
Date posted: November 10, 2002