Deck 15: Employee Rights and Voice Across Corporate Governance Systems

Question 1

Which one of the following statements about employee representation on the board of directors is true?

A)Employee board representation invariably increases firm value.
B)The firm's employees sitting on the board tend to increase firm value whereas trade union representatives on the board seem to reduce firm value.
C)Employee board representation invariably reduces firm value.
D)None of the above.

Answer 1

B

Question 2

Andrei Shleifer and Laurence Summers's breach of trust hypothesis refers to:

A)the new management, following a change in ownership, breaking the implicit contracts the old management had with the workforce.
B)employees stealing from their employer and breaking the latter's trust.
C)Both of the above are correct.
D)None of the above are correct.

Answer 2

A

Question 3

Which one of the following statements is correct?

A)The market reaction to employee stock option plans (ESOPs)is typically negative, suggesting that employee stock ownership destroys firm value.
B)ESOPs also generate tax benefits and this makes it more difficult to assess the benefits arising from employee stock ownership.
C)Studies on the market reaction to ESOPs find either positive or insignificant abnormal returns.
D)Statements B and C are correct.

Answer 3

D

Question 4

Which one the following statements is true?

A)The varieties of capitalism (VOC)theory argues that there is a zero-sum game between improving employee rights and improving investor rights.
B)The VOC literature predicts that strong employee rights reduce economic growth.
C)According to the law and finance literature, strong employee rights can exist alongside strong shareholder rights.
D)None of the above.