How well is employee ownership working? Evidence from non-financial misconduct

This study investigates how employee activism manifested through equity ownership affects non-financial misconduct by corporate managers. We find that firms with larger employee ownership experience fewer violations and lower penalties for such wrongdoings. This effect likely arises from empowered whistleblowing and potential shareholder litigation. Additionally, employee activism against misconduct is stronger in firms with lower employee well-being, suggesting it acts as a corrective mechanism.