Labour Market Collusion through Common Leadership

Seminar summary

We study an alleged scheme involving more than fifty tech companies’ “no-poach” agreements. These are illegal agreements to suppress labour market competition by ceasing to recruit one another’s workers. We study entry into these agreements and their effects on workers. We first document an overlooked potential mechanism for collusion: what we call common leadership, where two competing firms share high-level leaders such as C-suite executives or board directors. Common leadership is prohibited by antitrust law under Clayton Act Section 8, but Section 8 was seldom enforced until recently. Using data on the networks of firm executives and board members from BoardEx combined with a transparent measure of collusion from court documents, we show that pairs of firms are 11 percentage points more likely to enter no-poach agreements after they begin to share common high-level leaders, even after conditioning on the identities of the firms. This supports increasing enforcement of the prohibition against common leadership.
After establishing the link between common leadership and collusion, we turn to the effects of the no-poach agreements on workers. We use microdata on workers’ employment histories from LinkedIn to show suggestive evidence that the agreements depressed labour flows across pairs of colluding firms. The effects are not limited to managerial and technical positions. Workers are unlikely to have been paid a compensating differential in exchange for their reduced labour mobility. First, no-poach agreements are kept secret from workers, removing the opportunity to bargain for a compensating differential. Second, we find negative impacts on promotion rates within the firms. We also find suggestive evidence in support of the Harrington (2004) hypothesis that firms caught colluding will only change their behaviour after all legal damages have been determined, rather than immediately upon discovery.

How to attend this seminar

This seminar will take place on Wednesday 29 May 2024 at 2pm.

We welcome you to join us online, please contact Dr Anna Sarkisyan for the joining details.

Speaker bio

Dr Jessica Jeffers

Dr Jessica Jeffers is associate professor of Finance at HEC Paris where she holds the R&Co chair for Data and Impact Investment alongside Ferdinand Petra. She is also a research affiliate with CEPR and a founding member of the Impact Finance Research Consortium. Jessica studies empirical corporate finance, with a special interest in labour and finance, entrepreneurship, law, and sustainability. Jessica earned her PhD in finance from The Wharton School, University of Pennsylvania, and her BA in economics and mathematics from Yale University. Prior to coming to HEC, she was an assistant professor at the University of Chicago Booth. Jessica’s research has been published in top journals such as the Review of Financial Studies and the Journal of Financial Economics.