Employee Primacy, or Economics Meets Civic Republicanism at Work

85 Pages Posted: 30 Jan 2006

See all articles by Brett McDonnell

Brett McDonnell

University of Minnesota Law School

Date Written: January 27, 2006

Abstract

This paper argues for employee primacy in corporate governance. "Employee primacy" has two elements: ultimate employee control over the corporation, and an objective function of maximizing employee welfare. In methodology, the argument draws upon both economics, but understood more broadly than in most corporate law scholarship, and upon civic republican ideas. The paper presents four different arguments favoring employee primacy. (1) Employee primacy is likely to create the most surplus within the corporation due to incentive effects and the wealth of information that employees possess. (2) Corporations characterized by employee primacy are more likely to be socially responsible, and hence generate fewer negative externalities, than corporations characterized by shareholder primacy. (3) Employee primacy will lead to a more egalitarian distribution of wealth and political power. (4) Employee primacy will produce citizens better fit to participate within a political democracy.

Keywords: shareholder primacy, employee primacy, law and economics, civic republicanism, theory of the firm, corporate social responsibility, redistribution, endogenous preferences

JEL Classification: D21, D60, G30, J54, K22, L21

Suggested Citation

McDonnell, Brett H., Employee Primacy, or Economics Meets Civic Republicanism at Work (January 27, 2006). Minnesota Legal Studies Research Paper No. 06-06, Available at SSRN: https://ssrn.com/abstract=878790 or http://dx.doi.org/10.2139/ssrn.878790

Brett H. McDonnell (Contact Author)

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-625-1373 (Phone)

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