Codetermination: A Poor Fit for U.S. Corporations

Dammann, Jens; Eidenmueller, Horst

doi:10.2139/ssrn.3565955

Cited by 6 publications

(5 citation statements)

References 18 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…knowledge of corporate strategies) that often they do not have, and therefore, they may be not qualified to cover such role (Huse et al , 2009). This argument is consistent with the idea of workers’ influence over firm governance could impede efficient decision-making and lead to “hold-up” problems that discourage capital formation because potential investors know that the outcome of their investment can be captured by workers (Jensen and Meckling, 1979; Dammann and Eidenmueller, 2020).…”

Section: Literature Review and Research Hypothesessupporting

confidence: 77%

Does board-level employee representation impact firms’ value? Evidence from the European countries

Silva

Machado

2022

JFRC

View full text Add to dashboard Cite

Purpose Using, for the first time, a sample of European listed firms from 30 countries with different legal regimes of board-level employee representation (BLER), the purpose of this paper is to examine the impact of BLER on firms’ value of European public companies, where employee representation is voluntary or imposed by law depending on the country of origin. Design/methodology/approach Using a difference-in-differences approach and a matching procedure, the authors analyze the impact of BLER on firms' value. Findings The results of this paper suggest that BLER adopted voluntarily affects positively firms’ value comparing to a group of firms where employee representation is in some way mandatory. Moreover, the findings of this paper show that firms from countries where BLER is not imposed by law tend to pay higher dividends. Nevertheless, the evidence presented in this paper only holds for low levels of employee representation on the board. Research limitations/implications This research not only provides some evidence in favor of the codetermination on corporate governance but also offers new avenues for discussing the conditions necessary for codetermination to be effective, especially the level of employees' participation on board. Practical implications This study provides to policymakers new insights for them to gain perspective, analyze and decide if codetermination is a useful tool to improve firms’ performance or at least in what conditions it should be applied. Social implications This study incentives the discussion of the proper way to include workers in firms’ boards with expected benefits on firms’ performance, economies and societies. Originality/value This paper provides evidence of a positive (but limited) impact on firms’ value derived from voluntary codetermination.

show abstract

Section: Literature Review and Research Hypothesessupporting

confidence: 77%

Does board-level employee representation impact firms’ value? Evidence from the European countries

Silva

Machado

2022

JFRC

View full text Add to dashboard Cite

show abstract

“…While we believe our results can help inform policy makers decisions', we caution readers that our sample of firms could have some features of governance structure, cultural norms, and legal environment that are unique to Germany. Some authors, such as Dammann & Eidenmuller (2020), argue that U.S. firms might not benefit as much from codetermination as German firms due to legal, social and institutional differences. Based on our research, future studies might focus on the specific effects of employee representatives on the decision-making process or cover other countries where a comparable institutional setting is applicable.…”

Section: Resultsmentioning

confidence: 99%

Codetermination and Aggressive Reporting: Audit Committee Employee Representation, Tax Aggressiveness, and Earnings Management.

Romney¹

2020

Preprint

View full text Add to dashboard Cite

This study uses a unique dataset from listed German companies that helps identify a granular measure of board-level codetermination to examine whether board-level codetermination (inclusion of employee representatives on the board) reduces aggressive financial and tax reporting, i.e. tax aggressiveness and earnings management. To the extent codetermination allows for effective employee monitoring of management, then it should be negatively associated with tax and financial reporting aggressiveness because prior research hypothesizes that employees prefer lower tax aggressiveness and less earnings management. Our analysis also highlights the mechanisms through which employees can monitor and influence firms' decisions and outcomes. We find that employee representation on audit committees is the most consistently influential codetermination mechanism associated with reduced tax aggressiveness and earnings management. We contribute to prior and current discussions of stronger employee rights and influences on management decisions from a board-level perspective.

show abstract

“…Second, as several commentators emphasize, a long list of important practical questions remain concerning how codetermination would be implemented in the United States (Liebman 2017; Dammann and Eidenmueller 2021; Strine et al 2021). The European solutions to these practical problems draw indispensably on institutional features of European labor markets, including widespread union representation and broader frameworks of social partnership, that are currently comparatively absent in the United States.…”

Section: What Would Codetermination Do In the United States?mentioning

confidence: 99%

What Does Codetermination Do?

Jäger¹,

Noy²,

Schoefer

2021

ILR Review

View full text Add to dashboard Cite

The authors provide a comprehensive overview of codetermination, that is, worker representation in firms’ governance and management. The available micro evidence points to zero or small positive effects of codetermination on worker and firm outcomes and leaves room for moderate positive effects on productivity, wages, and job stability. The authors also present new country-level, general-equilibrium event studies of codetermination reforms between the 1960s and 2010s, finding no effects on aggregate economic outcomes or the quality of industrial relations. They offer three explanations for the institution’s limited impact. First, existing codetermination laws convey little authority to workers. Second, countries with codetermination laws have high baseline levels of informal worker voice. Third, codetermination laws may interact with other labor market institutions, such as union representation and collective bargaining. The article closes with a discussion of the implications for recent codetermination proposals in the United States.

show abstract

Codetermination: A Poor Fit for U.S. Corporations

Cited by 6 publications

References 18 publications

Does board-level employee representation impact firms’ value? Evidence from the European countries

Does board-level employee representation impact firms’ value? Evidence from the European countries

Codetermination and Aggressive Reporting: Audit Committee Employee Representation, Tax Aggressiveness, and Earnings Management.

What Does Codetermination Do?

Contact Info

Product

Resources

About