Mandatory employee board representation: Good news for family firms?

François Belot and Timothée Waxin
Additional contact information
François Belot: THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université
Timothée Waxin: PULV - Pôle Universitaire Léonard de Vinci

Post-Print from HAL

Abstract: We assess the corporate performance and corporate governance consequences of mandatory employee board representation through a natural experiment: the passage of the 2015 Rebsamen law in France, which requires 1 or 2 board seats to be allocated to employee representatives. We hypothesize that such formal institutional arrangements to give workers a voice in corporate governance are irrelevant for family firms, which have been shown to commit to implicit contracts with their employees. We find evidence that affected family firms' share prices reacted negatively to the passage of the law. Moreover, standard OLS regressions of operating performance suggest that family control neutralizes the positive effect associated with employee directors. A more sophisticated difference-in-differences approach shows that affected family firms experienced a significant subsequent decrease in their return on assets. Our investigations of board composition also suggest that family firms rely on avoidance strategies to offset the influence of employee representatives. Overall, this paper casts doubt on the efficiency of minority worker representation in the boardrooms of family-owned companies and thus cautions against a "one-size-fits-all" approach to corporate governance practices.

Date: 2022-09
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published in International Review of Law and Economics, 2022, 71, pp.106084. ⟨10.1016/j.irle.2022.106084⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04264297

DOI: 10.1016/j.irle.2022.106084

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().