French Companies with Employee-Elected Directors Perform Better

French law requires that employees who own shares in public companies be allowed to elect one director if they own at least 3% of the stock. Partially privatized companies must reserve two or three board seats regardless of employee ownership. In "Employee Ownership, Board Representation, and Corporate Financial Policies" by Edith Ginglinger, William L. Megginson , and Timothee Waxin in Labor Personnel Economics eJournal (January 10, 2010), the authors found "directors elected by employee shareholders unambiguously increase firm valuation and profitability, but do not significantly impact corporate payout (dividends and share repurchases) policy or board organization and performance. Directors in the partially privatized companies elected by employees by right of employment rather than owning shares significantly reduce payout ratios, and increase board size, complexity, and meeting frequency—but do not significantly impact firm value or profitability."