Executive fiduciary duties and workplace safety

Abstract Does enhanced legal accountability for nondirector executives improve workplace safety? Exploiting the exogenous 2009 Gantler ruling by the Delaware Supreme Court that imposed fiduciary duties on nondirector executives, we find that establishments of Delaware‐incorporated firms experience a significant reduction in workplace injury rates, particularly severe injuries, relative to a control group of similar establishments belonging to non‐Delaware‐incorporated firms. The effect is stronger in firms that adopted enterprise risk management (ERM) before the ruling, supporting the value of ERM in helping firms better assess and respond to the shifted risk‐reward trade‐off after the Gantler ruling. Reduction in injury rate is also stronger in firms where the Chief Risk Officer (CRO) does not serve on the board, or a non‐board‐serving CRO or Chief Financial Officer holds greater influence, but weaker in financially constrained firms. Our study contributes novel evidence on the real effects of executive accountability and the efficacy of operational risk management in nonfinancial firms.