In 1919, Massachusetts allowed manufacturing companies to let their employees nominate and elect directors. Those directors were to have the same rights and powers, and the same duties and responsibilities, as directors elected by stockholders. Employment could provide access to the board without first being converted into share ownership.

The provision never led to broader board representation for U.S. workers, and its current reach is narrow. Its significance is to show that that employee voting rights need not entail employee ownership or a shift from shareholder value to stakeholder governance.

In a recent article, I develop this distinction through the European and American histories of worker participation. I separate the reasons for organizing corporate governance around shareholders from the additional argument needed to reserve director selection exclusively to them.

That distinction matters because worker participation is often invested with a political significance that exceeds its immediate legal effects. Its association with industrial democracy and struggles over economic power can make even limited board representation seem like a broader transformation of the corporation. The relevant question is what powers a particular arrangement actually gives employees.

A Different Route to the Same Office

The debate over stakeholder governance concerns whose interests directors should serve. Worker representation concerns who has a right to select them.

The workforce can acquire that right through employment while shareholders retain their equity and associated economic claims. An employee-selected director can also remain subject to the same duties as other directors, including a shareholder-value mandate. Conversely, a board elected entirely by shareholders can take employee interests seriously. Recognizing labor as a basis for director selection therefore need not turn ownership socialist or change corporate purpose.

Of course, a director’s connection to the workforce matters: It accounts for that director’s selection and the workforce perspective the arrangement is intended to introduce. Yet that connection need not make the director a worker delegate charged with maximizing employee welfare. The director enters an existing corporate office and exercises the powers attached to it.

American corporate law already manages constituency connections within traditional directorships. Preferred stockholders and venture investors can obtain distinct selection rights without creating a separate species of corporate authority. Labor-based selection has a different, nonproprietary foundation, but the distinction between selection and office remains useful. Constituency affiliation can create conflicts; it does not by itself establish incompatibility with the office.

This also puts the question of who the director answers to into perspective. The case for centralized board authority is substantial. Whether allowing different constituencies to select directors undermines it depends on the arrangement. One employee director subject to common duties presents a different question from a board organized around competing capital and labor blocs.

What the Historical Comparison Shows

Employee influence varies with the design of representation and with institutions outside the boardroom. Who selects the representatives, what information and committees they can access, and what authority the board exercises matter alongside the number of seats. Collective bargaining can give workers leverage that board membership alone does not supply. The comparative question is how representation interacts with the other institutions through which labor exercises power.

There is no single European model of board-level worker participation. German co-determination developed through contested settlements over industrial power, particularly during postwar reconstruction. In the coal and steel industries, labor gained supervisory participation and private ownership survived. Later legislation extended representation on different terms. Under the 1976 regime, shareholder representatives can elect the supervisory board’s chair if the full board cannot agree on one by a two-thirds majority. The chair has a second vote if a repeated vote remains tied, preserving a shareholder advantage despite equal numbers of shareholder and employee representatives. The political ambition behind participation did not determine a uniform allocation of corporate power.

Other histories reveal different choices. France moved from optional worker representation to mandatory representation in certain circumstances. Nordic systems brought employee representatives onto ordinary boards, with important differences in union involvement and workforce election. Britain’s abandoned Bullock proposal contemplated a substantial reconstitution of boards connected to British unions. Its failure does not portend failure for more limited arrangements.

The American record supplies a further qualification. At Chrysler, collective bargaining secured UAW President Douglas Fraser’s nomination, followed by election through the ordinary shareholder process in 1980. That arrangement differed from the independent employee franchise contemplated by Massachusetts. Both nevertheless accommodated labor-based access to a common corporate office.

These differences also explain why counting seats is insufficient. In France, empirical research finds that increased board representation co-existed with restricted access to important committees. Formal membership can thus provide less influence than the number of seats suggests. Effective participation depends on access to the information and preparatory deliberation through which board decisions take shape.

Institutional objections deserve the same precision. Employee representatives may resist risky investments or acquisitions that threaten employment. Differences in bargaining institutions, board structure, and bankruptcy law complicate borrowing the German model. Those concerns must be assessed against the authority the proposed representatives would actually possess. An objection to near-parity does not establish the costs of a single seat.

Who Controls Adoption

A harder question follows from legal compatibility: If worker directors can fit within ordinary corporate governance, why are they so uncommon in the United States?

Firms may obtain workforce information through management reporting or direct consultation with employees at less cost than board representation. Employees may prefer greater compensation or contractual protections to a board seat. Private ordering allows those differences to shape adoption. If worker directors routinely offered clear benefits to both firms and employees at little cost, one would expect more voluntary adoption. Their rarity therefore cautions against assuming such benefits. Negotiated American seats have also often accompanied distress and restructuring. Their subsequent performance alone cannot show what representation would do under ordinary adoption conditions.

But voluntary adoption also depends on who holds the right to authorize worker representation. Where creating employee selection rights requires shareholder approval, shareholders can decide whether to share their existing power to select the board. Employees have no equivalent option. A firm’s failure to adopt worker representation reflects decisions made within this unequal allocation of rights; it cannot alone show that both sides would reject participation if employees held an independent right to activate it.

Italy’s 2025 reform illustrates the difference. It permits worker representation through the corporate charter and collective bargaining, without giving employees an independent statutory right to require such representation. Under some Nordic arrangements, by contrast, employees can activate a statutory entitlement that shareholders cannot simply refuse. Participation is not automatic in either case, but the decision rests with different constituencies. Within an enabling regime such as Italy’s, participation can also become a governance tool in negotiations with unions during a crisis or restructuring: A board seat may support information-sharing and monitoring of commitments accompanying employee concessions.

Conclusion

These distinctions do not, by themselves, establish a case for compulsory representation. They make a more precise evaluation possible: Whether worker directors increase transparency, make corporate commitments to employees more credible, or support negotiated restructuring depends on the rights and responsibilities attached to their seats. Such benefits, where present, can be pursued within a shareholder-value regime; they require neither employee ownership nor a general stakeholder mandate.

The “drop of socialist oil” that the title of my article borrows from Otto von Gierke  captures the limited but significant change that board-level worker representation can make to the corporation’s constitution. Employment, independently of investment, can become a basis for membership in a corporate governing body without making ownership socialist or abandoning shareholder value as the governing objective. The case for shareholder predominance does not, by itself, establish a case for shareholder exclusivity in director selection.

Pierluigi Matera is a visiting professor of corporations at Boston University School of Law and a professor of comparative law at LCU in Rome. This post is based on his recent article, “Beyond Shareholder Exclusivity: Board-Level Worker Participation as a ‘Drop of Socialist Oil,’” forthcoming in the Review of Banking and Financial Law and available here.