O'Connor - directors as neutral referees

Marleen O’Connor, (“The human capital era: reconceptualising corporate law to facilitate labor-management co-operation”, (1992 – 1993) 78 Cornell Law Review 899) sees a need to move from a command and control economy to one where employees are fully committed to the corporation. She seeks “organizational arrangements that are best suited to motivating a highly committed workforce to utilize fully their information-processing and communication abilities.” There are significant barriers to prevent this shift from occurring. The law needs to intervene to overcome these cultural barriers. Essentially, she suggests two reforms. First, directors should be neutral referees owing a duty to employees as well as to shareholders. Fiduciary duties, she argues, tend to foster stable patterns of co-operation. This reform would send a signal that employees are central to the employer. Directors would be freed from the shackles, real or perceived, of shareholder value. The second reform would be the establishment of Employee Participation Committees to act as the employees’ contact point with directors. This approach would be superior to German style co-determination because it would not divide the board into separate camps.