The dominant agency-cost paradigm for the analysis of corporate law is based on the
proposition that the welfare of society is best met by rules which minimise the costs of production through the corporate form. This is typically interpreted to mean that the agency costs of shareholders should be minimised, so as to reduce the company?s cost of capital.
However, it is clear that the agency cost analysis admits of the theoretical possibility that a company?s overall costs of production might be minimised even in the presence of sub-optimal rules relating to the cost of capital if those additional capital costs were outweighed by a greater reduction in the costs of contracting for other inputs necessary for the company?s productive activities.
It has often been asserted that this situation obtains in relation to labour inputs. This
essay seeks to establish the basis on which this argument might be formulated, dealing in particular with the proposition that employees can obtain full protection for their exchange relationship through contracting with the company. It then considers what empirical evidence is available about the production costs of companies in systems with high levels of mandatory employee involvement in decision-making. It focuses in particular on the tripartite system of employee representation in Germany ? board representation, works councils and collective bargaining. Finally, it speculates about the conditions under which high levels of employee involvement might reduce a company?s overall costs of production or, by contrast, might increase those costs.
We examine the role of employee health in Private Equity buyouts using employee-level data on employment, wages, medical prescriptions, and health expenditures. We conduct matched-sample difference-in-differences estimations including more than...Read more
During the revelation of the Weinstein scandal and the emergence of the #MeToo movement, firms with a culture of ethical behavior toward women, proxied by having women among their five highest paid executives, earned excess returns of close to 1....Read more
The idea that a corporation’s employees should be allowed to elect some of the corporation’s board members, a system known as codetermination, has moved to the forefront of U.S. corporate law policy. Elizabeth Warren’s Accountable Capitalism Act...Read more
The United Kingdom introduced a Stewardship Code in 2010, followed by a slightly revised iteration in 2012 (the “first version” of the SC). It was premised upon the corporate governance advantages of engagement between institutional investors and...Read more