Corporate Constituency Statutes and Employee Governance

40 Pages Posted: 10 Nov 2002

See all articles by Brett McDonnell

Brett McDonnell

University of Minnesota Law School

Multiple version iconThere are 2 versions of this paper

Date Written: October 15, 2002

Abstract

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

McDonnell, Brett H., Corporate Constituency Statutes and Employee Governance (October 15, 2002). Available at SSRN: https://ssrn.com/abstract=349642 or http://dx.doi.org/10.2139/ssrn.349642

Brett H. McDonnell (Contact Author)

University of Minnesota Law School ( email )

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