Wealth Creation and Wealth Sharing: A Colloquium on Corporate Governance and Investments in Human Capital [Paperback]

Margaret M. Blair (Author)

Book Description

Publication Date: May 1996

Corporations are the productive engine of market economies. Yet the rules by which the wealth generated by corporations gets divided between the providers of financial capital and the providers of human capital are poorly understood. In this colloquium, a group of economists, social scientists, lawyers, labor relations specialists, business executives, and executives of financial institutions debate questions about the allocation of risks, returns, and rights in corporations that were raised in Margaret Blair's prior book, Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century (Brookings, 1995). In addition to Margaret Blair, participants include Bernard Aidinoff, Amatai Etzioni, Ronald Gilson, Martin Ginsburg, Mark Goyder, Oliver Hart, Bruce Householder, Tony Jackson, Bevis Longstreth, Jonathan Low, Bruce MacLaury, Ira Millstein, Nell Minow, Charles Rossotti, Charles Schultze, Kenneth West, and Sidney Winter. Roswell Perkins, of the New York law firm of Debevoise & Plimpton, served as moderator.

Product Details

• Paperback: 90 pages
• Publisher: Brookings Inst Pr (May 1996)
• Language: English
• ISBN-10: 0815709498
• ISBN-13: 978-0815709497
• Product Dimensions: 9 x 6 x 0.3 inches
• Shipping Weight: 5.4 ounces (View shipping rates and policies)
• Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #3,500,233 in Books (See Top 100 in Books)

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7 of 7 people found the following review helpful:

5.0 out of 5 stars Blair calls for expansion of equity-based compensation., June 17, 1996

By A Customer

This review is from: Wealth Creation and Wealth Sharing: A Colloquium on Corporate Governance and Investments in Human Capital (Paperback)

A distinguished group of academics and practitioners revisits Blair's earlier book Ownership and Control:
Rethinking Corporate Governance for the Twenty-First Century. In less than 90 pages, the participants
review some of the most significant arguments in the field concerning Blair's contention that employees
are legitimate stakeholders in corporations and that like shareholders, they too have firm-specific
investments at risk, in the form of human capital. Blair looks at the current system and asks whether the
allocation of risks and rewards is inevitable or should labor also be considered a residual claimant.

The group seems to come close to consensus that firms should greatly expand their use of equity-based
compensation systems in exchange for salary reductions. Blair suggests the use of restricted stock which
can encourage commitment to the firm by requiring they continue their employment in order to reap the
full benefits. In fact, many are already doing so, especially, as pointed out by Ronald Gilson, in
high-technology industries. Some pension funds have recognized this in their proxy voting guidelines
(see, for example TIAA-CREF which has different stock dilution guidelines for high-technology
industries).

An encouraging note comes from Jonathan Low, Deputy Assistant Secretary for Work and Technology
Policy at the U.S. Department of Labor who indicates that five different groups have approached the
Department that are looking to set up screens or create funds based on workplace practices and
investments in human capital. Low also cites a study by Wayne Cascio, of the University of Colorado, on the effects of massive downsizing.
Three years after downsizing, sample companies had subsequent earnings increases of 183%, whereas
comparison firms in the same industries that did not downsize had earnings increases of 422%.
Cumulative stock returns over three years were 4.7% vs 34.3%. He concludes that pension fund
managers "would be justified in encouraging a second look at such tactics."