Managers, Workers and Corporate Control

Marco Pagano and Paolo Volpin

No 3649, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: If the private benefits of control are high and management owns a small equity stake, managers and workers are natural allies. Two forces are at play. First, managers can transform employees into a 'poison pill' through generous long-term labour contracts and thereby reduce the firm?s attractiveness to a raider. Second, employees act as 'white squires' for the incumbent managers: to protect their high wages, they resist hostile takeovers, by refusing to sell their shares to the raider or by lobbying against the takeover. The model is consistent with available empirical findings, and also yields new predictions.

Keywords: Corporate control; Private benefits; Takeovers; Esops; Employment protection (search for similar items in EconPapers)
JEL-codes: G34 K22 K42 (search for similar items in EconPapers)
Date: 2002-11
New Economics Papers: this item is included in nep-cfn and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Managers, Workers, and Corporate Control (2005)
Working Paper: Managers, Workers, and Corporate Control (2004)
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