SSRN-When Labor Has a Voice in Corporate Governance by Olubunmi Faleye, Vikas Mehrotra, Randall Morck
This one will definitely make class!!!
Faleye,Mehrotra,and Morck study firms where there are large blocks of employee owned shares that ARE VOTED. Their findings may surprise some people:
"Relative to otherwise similar firms, labor-controlled publicly traded firms invest less, take fewer risks, grow more slowly, create fewer new jobs, have worse free cash flow problems, and exhibit lower labor and total factor productivity."
Why? My best guesses as to why this happens is that the employees are a. risk averse, b. at least somewhat entrenched, and c. have a shorter time horizon than do shareholders. This is counter to the hypotheses often laid out by management "gurus" that suggests employees are longer term oriented.
FWIW Additional evidence of this short-term orientation is found in lower R&D spending as well, but it was not significant at normal levels (p=.11).
Faleye, Olubunmi, Mehrotra, Vikas and Morck, Randall, "When Labor Has a Voice in Corporate Governance" . EFMA 2004 Basel Meetings Paper.