CEPRI seminar - Employees, Expenses and Externalities


Photo of Prof. HillBusinesses generally seek to reduce labor costs, or more precisely, to fix labor costs at a level that maximizes their profits. For lower-skilled workers, or workers with skills that are not in demand, there may be considerable pressure – by markets generally and by economic activists in particular -- to lower labor costs.  At the same time, there is pressure in an apparently incompatible direction, reflecting a vision of corporations as having duties to do right not just by shareholders, but also by other stakeholders, notably including employees. 

 My article argues that even under a profit maximization perspective, a case can be made that corporations’ assessments as to the extent to which they should take employee interests into account may be too low. First, I explain why the computation of labor costs might be flawed, and why those flaws might persist. Second, I argue that how companies treat their employees can impose externalities, and, as to lower-paid employees, typically negative externalities, of the sort that law often seeks to have internalized.     

Bio of Professor Claire A. Hill, University of Minnesota Law School, the United States

Professor Claire A. Hill holds the James L. Krusemark Chair in Law at the University of Minnesota Law School. She is the founding director of the Law School’s Institute for Law and Rationality, and the associate director of its Institute for Law and Economics. She is also an affiliated faculty member of the University’s Center for Cognitive Sciences and its Center for Political Psychology.  Professor Hill is a member of the American Law Institute and an associate reporter on its Compliance, Risk Management, Governance, and Enforcement project.  She is also a Research Associate at the European Research Centre for Economic and Financial Governance.

Professor Hill has published numerous articles and book chapters in journals and books in the U.S. and Europe, in the fields of corporate governance, structured finance, rating agencies, contract theory, law and language, and behavioral economics, including on the role of culture, personality and identity in banks and other organizations. 

Professor Hill’s book (with Richard Painter), Better Banks, Better Bankers: Promoting Good Business through Contractual Commitment, was published by University of Chicago Press in the fall of 2015.  Her textbook on Mergers & Acquisitions (with Brian Quinn and Steven Davidoff Solomon) was published by West in the spring of 2016, with a second edition to be published in 2019.  


Please register here no later than 1 December 2021, 10:00.