Mandatory Worker Representation on the Board and Its Effect on Shareholder Wealth

Petry, Stefan

doi:10.1111/fima.12181

Cited by 26 publications

(10 citation statements)

References 52 publications

(76 reference statements)

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“…In fact, reported results are often contradictory (cf. e.g., Bermig/Frick 2011or Gordon, Schmid 2004, Zugehör 2003or Petry 2018. 10 Instead, I shall base my arguments exclusively on quasi-experimental studies of the economic effects of co-determined supervisory boards in Germany, because the identification strategies of these studies allow for causal inferencedespite the lack of random assignment.…”

Section: The Economic Impact Of Codetermined Supervisory Boardsquasiexperimental Studiesmentioning

confidence: 99%

Board-Level Codetermination in Germany - The Importance and Economic Impact of Fiduciary Duties

Sadowski¹

2021

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The empirical accounts of the costs and benefits of quasi-parity codetermined supervisory boards, a very special German institution, have long been inconclusive. A valid economic analysis of a particular legal regulation must take the legal specificities seriously, otherwise it will be easily lost in economic fictions of functional equivalence. At its core the corporate actor “supervisory board” has no a priori objective function to be maximised – the corner stone of the theory of the firm – but its objective function will only be brought about a posteriori – should negotiations result in an agreement (E. Fraenkel). With this understanding,the paper presents six recent quasi-experimental studies on the economic (dis) advantageousness of the German codetermination laws that try to follow the rules of causal inference despite the lack of random variation. By and large they refute the hold-up model of codetermination by showing positive or nonnegative effects even on shareholder wealth – and a far-reaching improvement of the well-being of the core workforce. In conclusion, indications are offered that the shareholder primacy movement has only weakened, but not dissolved the “Deutschland AG”.

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Section: The Economic Impact Of Codetermined Supervisory Boardsquasiexperimental Studiesmentioning

confidence: 99%

Board-Level Codetermination in Germany - The Importance and Economic Impact of Fiduciary Duties

Sadowski¹

2021

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“…For example, Testa et al (2018) examined the adoption of Eco-Management and Audit Scheme, which is considered as common practice for corporate greening in worldwide. Bøhren and Siv Staubo (2016), Gregorič et al (2017) and Petry (2018) studied organisational responses to mandatory board diversity (e.g. 40% representation of women on the board in Norway, 50% worker representation on boards in Germany) in international trends.…”

Section: Organisational Adaptionmentioning

confidence: 99%

“…The contest and resistance that result from the latter are more complex, drawing on notions of normative and cultural differences. Consequently, theoretical lenses applied to imported management practices should reflect the cross-national diversity of corporate governance systems (Beuselinck et al 2017;Biukovic 2008;Bøhren & Siv Staubo 2016;Buck & Shahrim 2005;Gregorič et al 2017;He & Lu 2018;Jin 2017;Petry 2018;Testa et al 2018).…”

Section: Introductionmentioning

confidence: 99%

What triggers firms to appoint outside directors beyond the legal minimum requirement?

Park

2018

South African Journal of Business Management

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Background: Although previous studies provide important insights on how firms respond to institutional pressure, they fail to acknowledge the salience of globalisation that results in institutional pressures diffusing across countries.Objectives: Drawing on a selective adaptation model, this article examines whether firms comply with reforms to board structures beyond the minimum legal requirement.Method: It investigates the determinants of appointing outside directors beyond the minimum legal requirement by analysing the relationship between four main variables and minimum compliance.Results: Using a sample of Korean listed firms during 2002-2014, this study found that the salient organisational conditions (firm complexity and firm performance) and key organisational actors (controlling shareholders and foreign investors) determine the extent to which firms appoint outside directors on their boards. Conclusion:This study contributes to the strategy literature that examines organisational response to institutional pressure, furthering the understanding of why there is heterogeneity in firm decisions even from firms in the same institutional environment that face similar institutional pressures. Moreover, it makes a contribution to corporate governance literature, in particular to the adoption of governance mechanisms that originate from foreign models.

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“…The CDI covers a broad range of codetermination mechanisms that we separately examine in our tests, such as (full-time) labor union involvement, structure and formal influence of the supervisory board, and composition of the audit committee. Unlike related research that has also examined the economic effects of worker representation on corporate boards (e.g., Gorton & Schmid, 2000, Fauver & Fuerst, 2006, Balsmeier et al, 2013, Petry, 2017, Gleason et al, 2019, to the best of our knowledge, our study is the first to look beyond employee board representation by also examining employees' committee membership, including membership on the audit committee. Audit committees, in particular, have been described as a main pillar of good corporate governance that is often well-placed to monitor and advise management on tax and financial reporting (Robinson et al, 2012;Richardson et al, 2013;Armstrong et al, 2015).…”

Section: Introductionmentioning

confidence: 98%

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

Romney¹

2020

Preprint

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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.

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Mandatory Worker Representation on the Board and Its Effect on Shareholder Wealth

Cited by 26 publications

References 52 publications

Board-Level Codetermination in Germany - The Importance and Economic Impact of Fiduciary Duties

Board-Level Codetermination in Germany - The Importance and Economic Impact of Fiduciary Duties

What triggers firms to appoint outside directors beyond the legal minimum requirement?

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

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