Executive Fiduciary Duties and Workplace Safety

Abstract

Does enhanced legal accountability of non-director executives improve workplace safety? Exploiting an exogenous increase in executive accountability triggered by Delaware Supreme Court’s 2009 “Gantler ruling”, we show that the workplace injury rate in establishments of Delaware-incorporated firms significantly decreases after the Gantler ruling compared to a control group consisting of similar establishments in non-Delaware-incorporated firms. This effect is more pronounced in firms where all risk executives do not serve on the board, firms where non-board-serving risk executives possess greater power, or firms that already had enterprise risk management infrastructure in place prior to the Gantler ruling. However, the impact is lessened by pre-existing financial constraints. This study adds to the limited research on non-director executive accountability and on the efficacy of corporate operational risk management.

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

JEL Classification: G32, K22, K32, J28