Zafar, Faiza
(2024)
Essays on modern slavery: disclosure, supply chain governance, and human rights violation consequences.
PhD thesis, University of Nottingham.
Abstract
This thesis provides a critical evaluation of corporate accountability for modern slavery, focusing on the most severe forms of labour exploitation in global supply chains. While corporate human rights abuse is not a recent issue, neoliberal economic policies have facilitated the lengthening of both labour and product supply chains through practices such as offshoring, subcontracting and outsourcing, allowing companies in Global North to distance themselves from the legal liability and diffuse responsibility for abuses in supply chains in Global South. More recently, however, the introduction of supply chain regulations, such as the UK Modern Slavery Act (2015), has unequivocally heightened and legally extended the notion of corporate accountability to include labour violations and modern forms of slavery in global supply chains. As a result, businesses are forced to take on greater responsibility for labour standards in their supply chains (Islam et al., 2023; Islam and Van Staden, 2022). Therefore, understanding how companies demonstrate accountability and transparency for modern slavery is a topical scholarly, practice and policy issue.
The thesis makes an original contribution by assessing corporate accountability for modern slavery in the UK and elsewhere. It is a paper-based thesis comprised of four essays:
Essay 1 examines corporate modern slavery disclosure in the UK, questioning whether companies are employing impression management strategies to demonstrate their accountability in combatting modern slavery. It uses Natural Language Processing (NLP) techniques to explore the underlying themes and focuses on linguistic attributes, evaluating information transparency in statements from FTSE-100 companies over a two-year period (2018-2019). Expanding on the strong ties of corporate disclosures and impression management theory, the study finds the successive use of impression management strategies in modern slavery disclosures being used as a tool to manage legitimacy. The results lend empirical support to the use of three impression management strategies: syntactical (difficult to understand), thematic (manipulative tone) and structural manipulation (content bias). The study contributes to the literature on modern slavery disclosure, discussing transparency issues in reporting from the theoretical perspective of impression management theory.
Shifting the focus of accountability from external reporting to governance practices, Essay 2 focuses on modern slavery supply chain governance. The study employs a multimethod approach using focus groups, a workshop and the Workforce Disclosure Initiative (WDI) survey data to explore the current supply chain practices of the Utilities and Industrial (U&I) sector in the UK. The findings highlight that despite a clear awareness of the limitations of buyer-centric governance, U&I companies engage with traditional stakeholders by implementing traditional governance mechanisms such as codes of conduct and social auditing to address modern slavery in supply chains. The study also finds evidence of a more collaborative mode of governance involving U&I companies’ engagement with various non-traditional stakeholders in the supply chain, i.e. NGOs, suppliers, academics, and sectoral-level collaborations. Notably, there is a clear absence of a worker-driven approach to supply chain governance; there was no reported participation of key stakeholders such as workers, representation of unions or workers-led initiatives promoting decent work in the global supply chain of U&I. The study contributes to the literature on the governance of human and labour rights in global supply chains, advancing the stakeholder theory and resource dependency theory by providing insights into governance mechanisms and framing across the compliance and cooperation paradigm.
In assessing corporate accountability for modern slavery, it is crucial to examine the systems of accountability that govern companies. Essay 3 discusses the key role of capital market actors in holding companies accountable. Using a sample of companies from the FTSE All-Share Index for the four-year period (2020-2023), the study uses a panel data regression with fixed effects to investigate the impact of institutional ownership on modern slavery reporting transparency (MSRT). The results show a statistically and economically significant negative relationship between stable institutional ownership and modern slavery reporting transparency. The findings suggest that institutional investors with stable-stakes are effective monitors of investee companies and that higher transparency levels are driven by institutional investors’ incentives rather the capabilities. The study contributes to the corporate governance and social disclosure literature focusing on the unique social risk of modern slavery and offers insights into the heterogeneous monitoring role of institutional investors using stakeholder-agency theory.
Finally, Essay 4 builds on the notion that in the absence of meaningful consequences for firms in financial markets, corporate accountability is not warranted. This essay provides international evidence of the impact of human rights violations, including modern slavery, on both firm value in the short-term (share price loss) and reputation in the long-term (capital market-based reputational loss). Using an event study methodology, the study investigates a sample of 252 human rights violations by globally listed companies during the period of 1996-2021. Of these announcements, 54 involve forced labour events, 77 are related to security issues and conflict zones events, and 107 are related to poor working conditions and discrimination. The results indicate that there is a significant and economically meaningful negative market reaction to human rights violation announcements across all categories, with firms suffering significant losses in the market value of firm equity. Notably, the results show that there is no reputational penalty for firms’ complicity in human rights abuses based on the capital market-based measure of reputation. The study contributes to corporate social irresponsibility literature and advances a multi-theoretic framework of signalling theory and social contract theory to unpack the financial consequences for firms’ complicity in human rights violations.
Put together, this thesis enhances the current understanding of accounting, accountability and disclosure literature on modern slavery in supply chains in the UK, with additional insights from global firms. The research’s empirical findings are largely in line with the predication of impression management, strategic legitimacy, resource dependency, stakeholder-agency, social contract and signalling theory. The findings have significant implications for accountability practices and accountability mechanisms for addressing the grand challenge of modern slavery in global supply chains
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