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When Labor Has a Voice in Corporate Governance

Author

Listed:
  • Olubunmi Faleye
  • Vikas Mehrotra
  • Randall Morck

Abstract

Equity 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.

Suggested Citation

  • Olubunmi Faleye & Vikas Mehrotra & Randall Morck, 2005. "When Labor Has a Voice in Corporate Governance," NBER Working Papers 11254, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11254 Note: CF LS
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • J0 - Labor and Demographic Economics - - General

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