Agency Costs, Corporate Governance, and the American Labor Union

Abstract

Acute agency costs exist in unions as they do in other complex organizations. Specifically, union officials are imperfect representatives of the rank-and-file workers they ostensibly represent. Yet far less attention has been paid to addressing agency costs in the context of unions than in the context of public corporations, where the separation of share ownership and managerial control long has been the subject of intense scrutiny by academics and policymakers. By contrast, concrete suggestions for confronting agency problems in unions on the ground are few. This Article posits that unions would be more successful in attracting new members and in securing benefits for existing members if unions could reduce agency costs. Workers who think that unions are corrupt and incapable of faithfully representing their interests in the workplace rationally will eschew union membership. The lack of focus on agency costs in the union context appears to be based on ideological and political considerations that conflate the interests of workers with the interests of union officials. But the interests of workers and union officials diverge in significant ways. Workers are concerned with job security, wages, and working conditions, and union officials are concerned with maximizing the private benefits of their office, often at the expense of workers.