Unionization and rank-and-file employee stock options: empirical evidence

Authors:
Publisher website
Google Scholar
Abstract
Purpose: In this paper, we empirically investigate the effects of unionization on stock options granted to rank-and-file employees. Design/methodology/approach: In this research, we adopt a regression discontinuity approach to address the endogeneity problem and draw causal inferences. In particular, we argue that close-win firms and close-loss firms should have ex-ante similar observable and unobservable characteristics, and therefore, the outcomes of union votes can be treated as randomly assigned. Findings: We find that rank-and-file employees receive more stock options after the union election wins. The positive association is more pronounced when unions have more bargaining power and when free-riding problems are less severe. Further, we provide evidence that employees receive more stock options when chief executive officers (CEOs) are entrenched. Finally, we show that stock options provide risk-taking incentives to rank-and-file employees. Originality/value: Our work extends the understanding of unionization’s impacts and reveals that union bargaining leads to increased stock option grants for rank-and-file employees.

This publication has 53 references indexed in Scilit: