Varieties of Employee Ownership: Some Unintended Consequences of Corporate Law and Labor Law

University of Pennsylvania Journal of Business and Employment Law, Vol. 10, p. 305, 2008

U of Penn, Inst for Law & Econ Research Paper No. 07-04

33 Pages Posted: 8 Aug 2005 Last revised: 9 Apr 2009

See all articles by Aditi Bagchi

Aditi Bagchi

Fordham University School of Law

Abstract

Theories of employee ownership implicitly assume that its essential features are the same in all countries. In fact, employee ownership varies considerably across institutional environments. In this paper, I compare its development in the United States, Germany, and Sweden to show that the institutional background - in particular, the existing bodies of corporate and labor law - against which a program of employee ownership arises determines its course. Background institutions determine the cost of worker control over management, the cost of collective decision-making, and the expected gains from risk-bearing. Those consequences of corporate and labor law in turn determine whether employee ownership legislation transfers, or creates incentives for firms to transfer, a share of profits to workers (residual income rights); or whether legislation instead empowers workers to raise the present and/or deferred price of labor in proportion to profitability (control). Workers and their representative organizations push (or allow) only those employee ownership programs that secure what is absent but feasible in light of their existing range of tools. Even when employee ownership is a viable program, employee ownership legislation can only augment, not revise, the present institutional resources of organized labor.

Keywords: employee ownership, industrial democracy, economic democracy, path dependence, historical institutionalism, residual income rights, collective bargaining, organized labor, unions

Suggested Citation

Bagchi, Aditi, Varieties of Employee Ownership: Some Unintended Consequences of Corporate Law and Labor Law. University of Pennsylvania Journal of Business and Employment Law, Vol. 10, p. 305, 2008; U of Penn, Inst for Law & Econ Research Paper No. 07-04. Available at SSRN: https://ssrn.com/abstract=757564

Aditi Bagchi (Contact Author)

Fordham University School of Law ( email )

140 West 62nd Street
New York, NY 10023
United States

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