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Unionization and Shareholder Interests

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  • Brian E. Becker
  • Craig A. Olson

Abstract

Drawing on agency theory, this study examines union-nonunion differences in the allocation of both firm profits and business risk to employees and shareholders. Using a sample of more than 1,000 large private sector firms, the authors find that over the period 1970–81 shareholders in unionized firms assumed less of the firm's business risk than shareholders in nonunion firms. This finding is interpreted as evidence that managers of unionized firms attempted to minimize agency costs by capitalizing on the incentive effects of risksharing. In addition, risk-adjusted returns to shareholders were lower in unionized firms than in nonunion firms. The authors view the relatively poor performance of union firms as a primary motivating factor behind the restructuring of the American industrial relations system during the period studied.

Suggested Citation

  • Brian E. Becker & Craig A. Olson, 1989. "Unionization and Shareholder Interests," ILR Review, Cornell University, ILR School, vol. 42(2), pages 246-261, January.
    • Handle: RePEc:sae:ilrrev:v:42:y:1989:i:2:p:246-261
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    Cited by:

    1. J. Adam Cobb, 2019. "Managing the Conflicting Interests of Workers and Shareholders: Evidence from Pension-Assumption Manipulations," ILR Review, Cornell University, ILR School, vol. 72(3), pages 523-551, May.
    2. Min Park, 2021. "Unionized employees’ influence on executive compensation: Evidence from Korea," British Journal of Industrial Relations, London School of Economics, vol. 59(4), pages 1049-1083, December.
    3. Bartholomew Armah & James Peoples, 1997. "Foreign Corporate Acquisition Activity Domestic Union Status in the U.S," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 103-115.
    4. Bowen, Robert M. & DuCharme, Larry & Shores, D., 1995. "Stakeholders' implicit claims and accounting method choice," Journal of Accounting and Economics, Elsevier, vol. 20(3), pages 255-295, December.

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