Corporate Governance, Corporate and Employment Law, and the Costs of Expropriation

Authors

Giulio Ecchia, University of BolognaFollow
Martin Gelter, Fordham University School of LawFollow
Piero Pasotti, University of BolognaFollow

Document Type

Article

Publication Title

Review of Law and Economics

Volume

8

Publication Date

2012

Keywords

corporations; governance; employment law

Abstract

We set up a model to study how ownership structure, corporate law and employment law interact to set the incentives that infl uence the decision by the large shareholder or manager effectively controlling the fi rm to divert resources from minority shareholders and employees. We suggest that agency problems between the controller and other investors and holdup problems between shareholders and employees are connected if the controller bears private costs of “expropriating” these groups. Corporate law and employment law may therefore somethimes be substitutes; employees may benefi t from better corporate law intended to protect minority shareholder, and vice versa. Our model has implications for the domestic and comparative study of corporate governance structure and addresses, among other things, the question whether large shareholders are better able to “bond” with employees than dispersed ones, or whether the separation of ownership facilitates longterm relationships with labor.

Recommended Citation

Giulio Ecchia, Martin Gelter, and Piero Pasotti, Corporate Governance, Corporate and Employment Law, and the Costs of Expropriation, 8 Rev. L. Econ. 1 (2012)
Available at: https://ir.lawnet.fordham.edu/faculty_scholarship/903