This paper uses matched employer-employee data to study the effects of corporate governance on the earnings and composition of the firm’s workforce. Stronger corporate governance is measured using the passage of shareholder-sponsored proposals to declassify the board of directors. Following vote passage, employee earnings decrease by 12% on average, directionally consistent with previous research. However, this is driven by the changing composition of the workforce and there is no significant change in individual employee wages. This evidence suggests that stronger corporate governance leads to real changes in the types of employees selected and retained by the firm.

INESSA LISKOVICH, University of Texas at Austin – Department of Finance Email:

See the SSRN paper here