Employee representation on boards of companies is only one form of ‘industrial democracy’, in which property rights may vary from shareholder ownership in capitalism to employee ownership in communism. Discussions in Britain of alternative forms of industrial democracy have ignored the economics of property rights, which affect the allocation and use of resources. Incentives in a company must be designed to maximise effort and minimise ‘shirking’, both of which require a monitor with an incentive ‘not to shirk’, such as the right to residual rewards (‘profits’), whether of shareholders or employees.

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