Financial Policies of Organized Labor in the 21st Century
43 Pages Posted: 7 May 2022
Date Written: April 2021
Abstract
Although frequently considered an independent and opposing force to capital, modern labor unions face many of the same pressures as businesses. Using a novel sample of union financial statements, we document that unions behave like corporations in a variety of ways. Unions often have well-compensation teams of executives whose incentives may become misaligned with members. Their relative cash and leverage choices are well-explained by extant corporate finance theories. Unions invest in capital expenditures and public security markets. They appear to be prone to agency problems. More competitive environments are correlated with leaner financial policies and lower executive compensation. Misalignment in incentives between members and the union is related to higher executive compensation, worse performance, and more unrelated investment.
Suggested Citation: Suggested Citation