Employee Representation and Board Size in the Nordic Countries

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Several European countries have mandatory employee representation on company boards, but the consequences for corporate governance are debated. We use employee representation rules in the otherwise quite similar Nordic countries (Denmark, Finland, Norway, and Sweden) to elicit information on shareholder preferences for employee representation and board size. We find that shareholders tend to choose board structures that minimize the proportion of employee representatives. In Denmark and Norway employee representation depends on board size, and shareholders choose board sizes that minimize the number of employee representatives. However, many companies have more employee representatives than is mandatory. In Sweden, where the law mandates a fixed number of employee representatives (two or three depending on firm size), shareholders choose to have larger boards. In Finland, where employee representation is not mandatory, <1 % of companies choose to have it. Whatever, the merits of employee representation, shareholders appear to be mildly averse to it.
Original languageEnglish
JournalEuropean Journal of Law and Economics
Volume42
Issue number3
Pages (from-to)471-490
ISSN0929-1261
DOIs
Publication statusPublished - 2016

Keywords

  • Codetermination
  • Board structure
  • Corporate governance
  • Company law

Cite this

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abstract = "Several European countries have mandatory employee representation on company boards, but the consequences for corporate governance are debated. We use employee representation rules in the otherwise quite similar Nordic countries (Denmark, Finland, Norway, and Sweden) to elicit information on shareholder preferences for employee representation and board size. We find that shareholders tend to choose board structures that minimize the proportion of employee representatives. In Denmark and Norway employee representation depends on board size, and shareholders choose board sizes that minimize the number of employee representatives. However, many companies have more employee representatives than is mandatory. In Sweden, where the law mandates a fixed number of employee representatives (two or three depending on firm size), shareholders choose to have larger boards. In Finland, where employee representation is not mandatory, <1 {\%} of companies choose to have it. Whatever, the merits of employee representation, shareholders appear to be mildly averse to it.",
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Employee Representation and Board Size in the Nordic Countries. / Thomsen, Steen; Rose, Caspar; Kronborg, Dorte.

In: European Journal of Law and Economics, Vol. 42, No. 3, 2016, p. 471-490.

Research output: Contribution to journalJournal articleResearchpeer-review

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