The Effect of Labor Unions on CEO Compensation

Huang, Qianqian; Jiang, Feng; Lie, Erik; Que, Tingting

doi:10.1017/s0022109017000072

Cited by 87 publications

(61 citation statements)

References 55 publications

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“…Firms in unionized industries appear to hold less cash (Klasa et al, 2009) and maintain higher leverage (Bronars and Deere, 1991;Matsa, 2010) as a way of signaling weakness, in order to gain concessions from unions. Another stream of research studies firms' strategic behavior before collective bargaining (DeAngelo and DeAngelo, 1991;Klasa et al, 2009;Huang et al, 2015). Our evidence suggests that labor unions engage in strategic behavior through the shareholder proposal process in order to strengthen their hand in collective bargaining.…”

Section: Introductionmentioning

confidence: 93%

Opportunistic Proposals by Union Shareholders

Matsusaka

Ozbas

2018

The Review of Financial Studies

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This paper investigates whether labor unions use proposals opportunistically to influence contract negotiations. Our empirical strategy relies on the observation that proposals have higher bargaining-chip value in contract expiration years, when a new contract must be negotiated. We find that in contract expiration years compared with nonexpiration years, unions increase their proposal rate by one-fifth, particularly proposals concerning executive compensation. Union proposals made during expiration years are less likely to be supported by other shareholders or a leading proxy advisor; the market reacts negatively to union proposals in expiration years; and withdrawn union proposals are accompanied by higher wage settlements. Received March 14, 2017; editorial decision July 19, 2018 by Editor Wei Jiang. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

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Section: Introductionmentioning

confidence: 93%

Opportunistic Proposals by Union Shareholders

Matsusaka

Ozbas

2018

The Review of Financial Studies

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“…In many countries, employees are insured against layoffs by a public unemployment insurance system that reduces the risk of unemployment and the associated loss of wages and other benefits. However, when the public insurance system is weak or does not 4 See also Bronars & Deere (1991), Chen, Chen & Wang (2015), Chino (2016), Huang (2017), Marciukaityte (2015) and Matsa (2010) for evidence that the power of unions affects debt policy, payout policy and CEO compensation and Ahmad, Beuselinck & Bollaert (2017), Dessaint, Golubov & Volpin (2017), Haw, Hu, Wu & Zhang (2018), Petry (2018), Serfling (2016) and Simintzi, Vig & Volpin (2015) for evidence that labor protection affects debt policy, payout policy, takeover activity and shareholder value. exist, firms may act as alternative providers of insurance against this risk (Ellul, Pagano & Schivardi, 2018).…”

Section: Hypothesesmentioning

confidence: 99%

“…Additionally, we use annual GDP growth as a control for economic growth. We further include measures of employment regulation (e.g., Serfling, 2016;Simintzi, Vig & Volpin, 2015), and the degree of unionization in countries (e.g., Huang, Jiang, Lie & Que, 2017;Klasa, Maxwell & Ortiz-Molina, 2009;Matsa, 2010). Legal labor protection is a synthetic indicator constructed by the OECD, which measures the strictness of regulation against dismissals in regular labor contracts (e.g., Simintzi, Vig & Volpin, 2015).…”

Section: Control Variablesmentioning

confidence: 99%

Unemployment insurance and cash holdings of privately held firms around the world

Deloof

Vanacker

2020

Corporate Governance

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This paper studies the relationship between country-level unemployment insurance and cash holdings of privately-held firms. When public unemployment insurance is weak, firms may provide alternative unemployment insurance by committing not to lay off workers in bad times. We hypothesize that one way firms can do so is by holding larger cash balances. Research Findings/Insights: Using a large sample covering 388,940 private firms from 32 countries around the world over the 2007-2014 period, we find a negative relationship between public unemployment insurance and cash holdings. This effect is driven by countries where public unemployment insurance is weak or non-existent. We also find that privately-held firms keep a larger part of their new debt issues as cash when public unemployment insurance is weak. Theoretical/Academic Implications: We contribute to a growing literature on an institutionbased view of comparative corporate governance. We show that national governance factors and, more specifically, public unemployment insurance, which protects employees (an important but relatively ignored stakeholder), influences firm cash holdings in a private firm context. Practitioner/Policy Implications: Our findings have important implications for policy design. Specifically, they suggest that labor market institutions designed to support employees can also indirectly benefit their employers because these institutions allow firms to reduce the opportunity cost related to holding larger cash balances.

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“…We also supplement some measures or double check the bankruptcy resolutions from other databases, such as SEC Edgar filing, BankruptcyData.com of New Generation Research, and Public Access to Court Electronic Records (PACER). In addition, regarding the measures of employee force, we follow Masta (2010) and Huang et al (2017) to adopt union power as a proxy. The sources of these data include the Union Membership and Coverage Database from the CPS, SEC Edgar filing, BRD, and National Labor Relations Board.…”

Section: Research Framework and Data Sourcementioning

confidence: 99%

“…They find that this may result in conflicts of interest between employees and shareholders, which decreases firm value. Lastly, numerous studies examine the relation between employees and financial policy, such as capital structure policy (Bronars & Deere, 1991;Hanka, 1998), liquidity policy (Masta, 2010;Klasa, Maxwell, & Ortiz-Molina, 2009;Schmalz, 2013), dividend policy and repurchase (DeAngelo & DeAngelo, 1991, 1994Chen, Chen, & Wang, 2015), and compensation policy (Huang et al, 2017). Overall, although concern about union power has been growing in recent years, the impacts of union power on financial distress has not been studied so far.…”

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confidence: 99%

Conflicts of Interest in Financial Distress: The Role of Employees

Liu¹

2017

IJEF

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The interests of employees are not consistent with those of other stakeholders when firms are in financial distress. Hence, conflicts of interest among stakeholders are more severe, especially for those firms with strong union power, as news is reported in the media. However, little attention has been paid to the impacts of employees on bankruptcy resolutions. This study examines the impacts of employees (i.e., union power) on the conflicts of interest of distressed firms in the United States from 1983 to 2015. We find that union power has strong effects on conflicts of interest related to employees, such as asset sales, debtor-in-possession financing, successful emergence from bankruptcy, and CEO replacement. On the contrary, for conflicts of interest unrelated to employees, including the choice of bankruptcy resolution method, and conflicts of interest between creditors and debtors, we find no significant relationships. Finally, we also find a positive impact of union power on the probability of refiling for bankruptcy in the future after emerging successfully.

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The Effect of Labor Unions on CEO Compensation

Cited by 87 publications

References 55 publications

Opportunistic Proposals by Union Shareholders

Opportunistic Proposals by Union Shareholders

Unemployment insurance and cash holdings of privately held firms around the world

Conflicts of Interest in Financial Distress: The Role of Employees

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