Workers and Corporate Governance: The Role of Political Culture

Abstract

This paper considers the relationship between worker influence and structures of corporate governance in firms where workers are one of several constituencies that exert managerial power. The basis of the analysis is this: to contribute to the value of the firm, corporate governance structures that give managerial power to workers should accomplish two purposes. The structures should provide a way for workers to resolve conflicts of interest among themselves; and the structures should provide a way for workers and managers to make credible commitments to each other. Conversely, if the corporate governance structures do not accomplish these purposes, firm value is more likely to be maximized by structures that provide little or no managerial influence to workers (at least through the devices of corporate governance). The paper analyzes the institutional implications of these generalizations by developing a conception of the political culture of firms, distinguishing, in particular, among hard and soft forms of worker participation in governance. The paper concludes that there are unlikely to be demonstrable efficiency gains from either form of participation; and that these forms face grave difficulties in adjustment to new production methods and prospective shifts in sectoral prosperity.