The Impact of Employee Relations on the Reputation of the Board of Directors and CEO

This study examines the impact of employee relations issues on the reputation of the board of directors and the executive officer (CEO). We utilize a unique, hand-collected dataset of employee disputes, including lawsuits, complaints, health and safety inspections, and wage-hour-benefit violations. We show that, when firms engage in employee mistreatment, both directors and CEOs are punished by deterioration in their reputation, as proxied by a reduced number of outside seats. In addition, we document that case characteristics, such as settlement fees, attorney fees, case duration, and case outcome, can play an important role in the CEO’s diminished reputation and losing extra board seats. Overall, our results provide evidence supporting an association between employee workplace treatment and the individual reputations of directors and CEOs