When Labor Has a Voice in Corporate Governance

Olubunmi Faleye, Vikas Mehrotra and Randall Morck

No 11254, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G3 J0 (search for similar items in EconPapers)
Date: 2005-04
New Economics Papers: this item is included in nep-acc, nep-bec and nep-fin
Note: CF LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published as Faleye, Olubunmi, Vikas Mehrotra and Randall Morck. "When Labor Has A Voice In Corporate Finance," Journal of Financial and Quantitative Analysis, 2006, v41(3,Sep), 489-510.

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Journal Article: When Labor Has a Voice in Corporate Governance (2006)
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