Organized Labor and Managerial Opportunism

Organized Labor and Managerial Opportunism

Lilian Ng, Man Duy (Marty) Pham, Jing Yu

Series number :

Serial Number: 
724/2021

Date posted :

January 07 2021

Last revised :

January 22 2021
SSRN Share

Keywords

  • Managerial Opportunism • 
  • labor unions • 
  • Employees • 
  • insider trading • 
  • Accounting fraud

This study examines whether organized labor plays a role in deterring managerial opportunistic behavior.

Results suggest that firms with organized labor experience statistically significant declines in opportunistic insider trading and other managerial misbehavior, including illegal insider trading, corporate accounting fraud, and stock option backdating, consistent with the disciplinary effect of organized labor on managerial opportunism. We provide evidence that good employee-management working relationships and organized labor monitoring efforts are two economic mechanisms that explain the influence of organized labor. Finally, the deterrent effect of organized labor on managerial opportunism has real economic consequences. Mitigated opportunism is associated with better labor contract renegotiation outcomes and improved firm productivity and performance.

Authors

Real name:
Man Duy (Marty) Pham
Real name:
Research Member
Schulich School of Business, York University
Real name:
Jing Yu