Does good corporate governance include employee representation? Evidence from German corporate boards
Fauver, Larry ; Fuerst, Michael E.
2004
35 p.
supervisory board ; workers representation ; corporate governance
Maastricht Meetings Paper
1171
Workers participation and European works councils
English
Bibliogr.
"Within the German corporate governance system, labor representation on the supervisory board is common and typically legally mandated. We propose that labor representation on corporate boards brings valuable first-hand operational knowledge to corporate board decision-making. This information improves the monitoring capability of the board and reduces agency costs within the firm. Our results show that the judicious use of labor representation increases firm market value and that the greater the need for coordination within the firm, the greater the potential improvement there is in governance effectiveness. "
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