Board-Level Employee Representation and Firms' Responses to Crisis

Aleksandra Gregoric, Marc Steffen Rapp

Research output: Contribution to conferencePaperResearch

Abstract

We hypothesize that companies with board level employee representation (BLER) should experience a lower probability of crisis-induced dismissals than other firms. Theoretically, we link this effect to the employee directors’ ability to reduce the in-formation asymmetry and moral hazard in employee-employer contracting, thereby facilitating the implementation of labor-cost adjustments that are an alternative to workforce dismissals. We confirm our hypotheses by analyzing the behavior of Scandinavian public corporations with/without employee directors during the Great Recession. We show that BLER associates with significantly lower performance-sensitivity of employment cuts during the crisis period. In these firms, the lower likelihood of employment reductions was in part ensured through alternative measures providing for a reduction of the labor costs per employee.
Original languageEnglish
Publication date2018
Number of pages30
Publication statusPublished - 2018
EventIZA Workshop on the Economics of Employee Representation: International Perspectives - IZA - Institute of Labor Economics, Bonn, Germany
Duration: 7 Sep 20188 Sep 2018
http://conference.iza.org/conference_files/EmRep_2018/viewProgram?conf_id=3147

Workshop

WorkshopIZA Workshop on the Economics of Employee Representation
LocationIZA - Institute of Labor Economics
CountryGermany
CityBonn
Period07/09/201808/09/2018
Internet address

Keywords

  • Industrial relations
  • Board of directors
  • Employee directors
  • Employment
  • Labor costs
  • Great Recession

Cite this

Gregoric, A., & Rapp, M. S. (2018). Board-Level Employee Representation and Firms' Responses to Crisis. Paper presented at IZA Workshop on the Economics of Employee Representation, Bonn, Germany.