Labor's Role in the American Corporate Governance Structure

Abstract

A preliminary examination of the topic of the role of employees in corporate governance reveals that Germany provides for codetermination, Japan implicitly allows directors to balance the competing interests of employers with shareholders and the United States does not provide for participation for workers. The United States has a shareholder primacy model of the law, defining the interests of workers through contract and governmental regulation. This article explores why American workers do not have corporate governance rights. The absence of employee voice in corporate governance demonstrates a great deal about American corporate culture, as well as the American national political economy. The free market position states that employees do not play a role in corporate governance because they are protected by contractual mechanisms, such as collective bargaining. In contrast, this author has argued that corporate governance rights for workers are necessary because private contracts are inadequate; practical and legal hurdles prevent employees from negotiating against corporate opportunism. In contrast to the absence of a role for American workers in corporate governance, American pension funds have a significant position in corporate governance matters as shareholders. Specifically, union pension funds are harnessing labor’s pension power to exert much influence in the institutional shareholder movement. For the most part, union influence is limited to promoting so-called good corporate governance practices that promote shareholder value. The AFL-CIO, however, is taking steps to develop a worker-