Essays in Workforce Satisfaction and Labor Contracting

In the first chapter, I examine whether disclosures of rival collective bargaining agreements (CBAs) affect workforce treatment. I exploit U.S. CBAs, which specify terms and conditions resulting from labor renegotiations. Using an effectively staggered difference-in-differences design, I find that around the time of rival CBA disclosures, non-unionized firms operating in unionized industries improve their workforce treatment. Their behavior is transitory. My cross-sectional analyses show that their behavior is more pronounced when they operate in the electronics industry, have fewer peers, provide lower pension and retirement benefits, and are headquartered in states without Inevitable Disclosure Doctrine adoption. I also find that they experience a reduction in voluntary employee turnover in the face of rival CBA disclosures. Collectively, my evidence suggests that non-unionized firms in unionized industries strategically improve workforce treatment to retain their workforce around the time of rival CBA disclosures. In the second chapter (co-authored with Annita Florou, Meng Li, and Peter F. Pope), we examine whether relaxing pension funding requirements affects overall and leadership workforce satisfaction. We exploit the Moving Ahead for Progress in the 21st Century Act (MAP-21) of 2012 as a plausibly exogenous regulatory shock. Easing the funding constraints of defined benefit plans, MAP-21 reduces minimum required pension contributions and impairs employee retirement security. Using a difference-in-differences design, we predict and find that following the enactment of MAP-21, firms with defined benefit plans experience a decrease in overall and leadership workforce satisfaction, relative to firms without defined benefit plans. We also find that firms with non-collectively bargained and underfunded plans drive our results. Our cross-sectional tests indicate that our results are stronger when satisfaction belongs to current employees participating in underfunded plans. Collectively, our findings are consistent with MAP-21 allowing firms to implicitly underfund their pension plans by reducing mandatory contributions and to shift default risk in the firm from shareholders to employees. More interestingly, our results suggest that we can estimate the shadow price of workforce satisfaction when deferred compensation plays a central role in the tradeoff between the corporate financial and corporate ESG performance. In the third chapter, I plan to examine whether firm managers use goodwill impairment losses to weaken union bargaining power. While labor unions aim to reduce income inequality through collective bargaining, conflicting incentives pressure firm managers to resist unions’ rent extraction. I exploit U.S. labor renegotiations staggered over time to represent the timing of unions’ demand for wage increases and benefit improvements. I predict that unionized firms use the announcement of goodwill impairment to reduce union bargaining power around the time of labor renegotiations. I expect to find that unionized firms announcing goodwill impairment around the time of labor renegotiations experience a reduction in union bargaining power. My results are expected to be more salient for unionized firms with low firm age, high union strength, and high employee ownership. Overall, my results suggest that managers may time the announcement of goodwill impairment losses to reduce union bargaining power. However, I caution against interpreting my findings as managers accelerating the recognition of goodwill impairment losses.