When Labor Has a Voice in Corporate Governance
AbstractEquity ownership gives labor both a fractional stake in the firm's residual cash flows and a voice in corporate governance. Relative to other firms, labor-controlled publicly-traded firms deviate more from value maximization, invest less in long-term assets, take fewer risks, grow more slowly, create fewer new jobs, and exhibit lower labor and total factor productivity. We therefore propose that labor uses its corporate governance voice to maximize the combined value of its contractual and residual claims, and that this often pushes corporate policies away from, rather than towards, shareholder value maximization.
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Date of creation: Apr 2005
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Other versions of this item:
- G3 - Financial Economics - - Corporate Finance and Governance
- J0 - Labor and Demographic Economics - - General
This paper has been announced in the following NEP Reports:
- NEP-ACC-2005-04-09 (Accounting & Auditing)
- NEP-ALL-2005-04-09 (All new papers)
- NEP-BEC-2005-04-09 (Business Economics)
- NEP-FIN-2005-04-09 (Finance)
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