Executive Fiduciary Duties and Workplace Safety

53 Pages Posted: 8 Feb 2022 Last revised: 28 May 2022

See all articles by Sichen Shen

Sichen Shen

The University of Hong Kong

Vijay Yerramilli

University of Houston, C. T. Bauer College of Business

Hong Zou

The University of Hong Kong - Faculty of Business and Economics

Date Written: November 8, 2021

Abstract

Does enhanced legal accountability of non-director executives improve workplace safety? We exploit an exogenous increase in executive legal accountability triggered by Delaware Supreme Court’s 2009 “Gantler ruling” to address this question. In a difference-in-differences framework, we show that the workplace injury rate of establishments of Delaware-incorporated firms decreases significantly following the Gantler ruling relative to similar establishments of non-Delaware-incorporated firms. This effect is stronger in firms that have adopted enterprise risk management or have higher labor union membership before the Gantler ruling, but is attenuated by financial constraints or non-director executives’ performance-based compensation. Moreover, the reduction in workplace injuries brought about by the Gantler ruling benefits shareholders by leading to higher factor-adjusted stock returns. This study adds to the limited research on the efficacy of corporate operational risk management and non-director executive accountability.

Keywords: Executive fiduciary duties, Workplace safety, Operational risk management, Gantler ruling

JEL Classification: G32, K22, K32, J28

Suggested Citation

Shen, Sichen and Yerramilli, Vijay and Zou, Hong, Executive Fiduciary Duties and Workplace Safety (November 8, 2021). Available at SSRN: https://ssrn.com/abstract=4009372 or http://dx.doi.org/10.2139/ssrn.4009372

Sichen Shen

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Vijay Yerramilli (Contact Author)

University of Houston, C. T. Bauer College of Business ( email )

Houston, TX 77204
United States
713-743-2516 (Phone)

Hong Zou

The University of Hong Kong - Faculty of Business and Economics ( email )

China

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

Paper statistics

Downloads
49
Abstract Views
145
PlumX Metrics