Corporate Constituency Statutes and Employee Governance

Posted: 30 Jul 2004

See all articles by Brett McDonnell

Brett McDonnell

University of Minnesota Law School

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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.

Keywords: corporate governance, constituency statutes, employee governance

JEL Classification: G30, K22, L21

Suggested Citation

McDonnell, Brett H., Corporate Constituency Statutes and Employee Governance. Available at SSRN:

Brett H. McDonnell (Contact Author)

University of Minnesota Law School ( email )

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