Article: Sustainable corporate boards with employee representation Journal: International Journal of Managerial and Financial Accounting (IJMFA) 2026 Vol.18 No.8 pp.1 - 19 Abstract: We develop a theoretical model of board decision-making in which shareholder representatives, top executives, and employee directors form heterogeneous coalitions to choose between a safe long-term project and a risky short-term one. Board value depends on both the informational contribution of each group and the conflict structure among them. We show that employee representation enhances firm value when employee informational content exceeds a threshold that increases with outsider quality, thereby generating the empirically observed inverted-U relationship between representation and performance. When conflicts of interest arise, minority employee representation can shift the firm's investment choice only when it alters the coalition balance at the margin, and only for an intermediate range of shareholder patience. A further result shows that insider opacity is self-limiting: the maximum level of information withholding that insiders can sustain without losing board representation decreases with both outsider quality and employee representation, creating an endogenous governance discipline. These results provide analytical foundations for moderate codetermination policies and generate empirically testable predictions on the conditions under which employee directors are decisive. Inderscience Publishers - linking academia, business and industry through research

Title: Sustainable corporate boards with employee representation

Authors: Guillaume Baechler; Hervé Boco; Laurent Germain; Clément Lyon-Caen

Addresses: Université Paris-Saclay, 9 Rue Joliot Curie, 91190 Gif-sur-Yvette, France ' TBS Business School, 20 Bd Lascrosses, 31000 Toulouse, France ' TBS Business School, 20 Bd Lascrosses, 31000 Toulouse, France ' Université Toulouse 1 Capitole, 2 rue du Doyen Gabriel Marty, 31042 Toulouse Cedex 9, France

Abstract: We develop a theoretical model of board decision-making in which shareholder representatives, top executives, and employee directors form heterogeneous coalitions to choose between a safe long-term project and a risky short-term one. Board value depends on both the informational contribution of each group and the conflict structure among them. We show that employee representation enhances firm value when employee informational content exceeds a threshold that increases with outsider quality, thereby generating the empirically observed inverted-U relationship between representation and performance. When conflicts of interest arise, minority employee representation can shift the firm's investment choice only when it alters the coalition balance at the margin, and only for an intermediate range of shareholder patience. A further result shows that insider opacity is self-limiting: the maximum level of information withholding that insiders can sustain without losing board representation decreases with both outsider quality and employee representation, creating an endogenous governance discipline. These results provide analytical foundations for moderate codetermination policies and generate empirically testable predictions on the conditions under which employee directors are decisive.

Keywords: agency cost; board of directors; codetermination; conflict of interest; corporate governance; employee representation; shareholder value; stakeholder value.

DOI: 10.1504/IJMFA.2026.154724

International Journal of Managerial and Financial Accounting, 2026 Vol.18 No.8, pp.1 - 19

Received: 07 Jan 2026
Accepted: 21 May 2026
Published online: 10 Jul 2026 *

Title: Sustainable corporate boards with employee representation

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