Corporate Constituency Statutes and Employee Governance
40 Pages Posted: 10 Nov 2002
Date Written: October 15, 2002
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.
JEL Classification: G30, G34, K22, L21
Suggested Citation: Suggested Citation