We examine the impact of shareholder litigation threat on workplace safety. Using the staggered adoption of Universal Demand (UD) laws across U.S. states, which increased the procedure hurdles for derivative lawsuits, as a quasi-natural experiment, we find that weakened shareholder litigation rights led to rises in workplace injury rates. The impact is more pronounced for firms with weak monitoring by institutional investors and the board, in less competitive, low union coverage, or low skilled industries. Safety inputs are significantly reduced after UD law adoptions. Our findings suggest that threat of shareholder litigation incentivizes managers and directors to keep workplaces safe. 

JEL Classification: G39, J28, K22

Keywords: Shareholder Litigation; Workplace Safety; Universal Demand Law; Agency Costs; Employee; Environmental and Social Performance.​