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Employees on Corporate Boards

Author

Listed:
  • Tom Berglund

    (Hanken School of Economics, Finland)

  • Martin Holmen

    (University of Gothenburg, Sweden)

Abstract

Employees in Swedish firms have the legal right to be represented on the company board. However, in a considerable share of Swedish listed firms, this option is not exercised. This paper asks why that is the case. We use a simple framework, based on rational choice by individual employees. Our sample consists of 226 listed non-financial Swedish firms in 2001-2007. The results are in line with our predictions. Employee board representation does not impact firm performance, neither positively nor negatively. The main driver of employee board representation is the number of eligible employees. Furthermore, employee board representation decreases with firm risk, slow growth, and internationalization. We conclude that when the law grants the right for employees to be represented on the board a simple model based on individual utility maximization provides an explanation for why the right is used in some firms and not in others.

Suggested Citation

  • Tom Berglund & Martin Holmen, 2016. "Employees on Corporate Boards," Multinational Finance Journal, Multinational Finance Journal, vol. 20(3), pages 237-271, September.
    • Handle: RePEc:mfj:journl:v:20:y:2016:i:3:p:237-271
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    Citations

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    Cited by:

    1. Aleksandra Gregorič & Thomas Poulsen, 2020. "When Do Employees Choose to Be Represented on the Board of Directors? Empirical Analysis of Board‐Level Employee Representation in Denmark," British Journal of Industrial Relations, London School of Economics, vol. 58(2), pages 241-272, June.
    2. Gregorič, Aleksandra, 2022. "Board-level worker representation," GLO Discussion Paper Series 1136, Global Labor Organization (GLO).

    More about this item

    Keywords

    employee representation; board composition; dependent directors; firm performance; corporate governance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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