a1 email@example.com, Finance & Insurance Group, College of Business Administration, Northeastern University, 360 Huntington Avenue, Boston, MA 02115
a2 firstname.lastname@example.org, Department of Finance & Management Science, School of Business, University of Alberta, Edmonton, AB, Canada T6G 2R6.
a3 email@example.com, Department of Finance & Management Science, School of Business, University of Alberta, Edmonton, AB, Canada T6G 2R6.
Equity ownership gives labor both a fractional stake in a firm's residual cash flows and a voice in corporate governance. Relative to other firms, labor-controlled publicly traded firms deviate more from value maximization, invest less in long-term assets, take fewer risks, grow more slowly, create fewer new jobs, and exhibit lower labor and total factor productivity. Therefore, we propose that labor uses its corporate governance voice to maximize the combined value of its contractual and residual claims, and that this often pushes corporate policies away from, rather than toward, shareholder value maximization.