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Works councils: an agency perspective

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  • Juan M. Gallego

Abstract

This paper investigates the role of works councils in a simple agency framework in which works councils are supposed to monitor manager´s information on behalf of the workforce, but they are independent agents who might pursue their private interest. First, we consider that workers can incentivizeworks councils through contingent monetary payments. In order to deter collusion, workers must pay higher compensations in states of nature where they can be expropriated by potential coalitions among works councils and management. Collusion makes contingent payments costly and reduces workers´ payoffs. Second, when elections are the exclusive mechanisms to align works councils´ interest, only well compensated representatives would face an intertemporal tradeoff between accepting management´s transfers at first period and losing rents at the second period. Elections increase the cost of entering on collusive behavior with management and works councils will try to behave on the employees´ interest.

Suggested Citation

  • Juan M. Gallego, 2012. "Works councils: an agency perspective," Documentos de Trabajo 10092, Universidad del Rosario.
    • Handle: RePEc:col:000092:010092
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    File URL: http://repository.urosario.edu.co/handle/10336/11529
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Workplace Representation; Works Councils; Collusion; Elections;
    All these keywords.

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights

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