An examination of UK companies' modern slavery disclosure practices: Does board gender diversity matter?

Abstract

The United Nations' Sustainable Development Goals persuade governments and businesses to fight modern slavery as part of the 2030 Agenda for Sustainable Development. The UK government took the initiative by introducing the Modern Slavery Act in 2015. Despite this, little is known about how companies disclose information about their efforts to tackle modern slavery as required by the Act and the role of corporate governance as a determinant of modern slavery disclosure (MSD) levels. This study, therefore, investigates the extent to which companies engage in MSD and empirically examines the impact of board gender diversity (BGD) on MSD. Based on a content analysis of FTSE 100 companies' modern slavery statements during the 2016–2020 period, we find that MSD improved over time but is still relatively low. Our results show that companies pay less attention to the core practices of modern slavery, such as key performance indicators (KPIs), due diligence procedures, risk assessment and management, and training. This evidence suggests that companies tend to comply with the Act by focusing largely on symbolic structures rather than providing a comprehensive disclosure of their impacts on modern slavery practices to minimise regulatory risks and manage stakeholders' perceptions. We also find that boards with greater female representation have a positive and significant association with MSD. This finding is consistent with the gender socialisation theory in that women are more sensitive to communal values and ethics. Consequently, companies with a greater proportion of female directors are more transparent about their strategies and actions related to fighting modern slavery. Furthermore, a critical mass of at least four female directors is necessary before any positive impact on MSD can be observed. Our findings shed new light on this under‐researched area and the role of female directors in addressing modern slavery risk and can be of interest to companies, policymakers, and other stakeholders.

Sustainable board governance and sustainable supply chain reporting: European evidence

“…Various sustainability issues refer to the 17 United Nations (UN) Sustainable Development Goals (SDGs) to motivate firms to implement solid sustainable management practices. Environmental and social reporting can only be decision-useful for a broad range of stakeholders if it includes the supply chain of the firm (Moussa et al, 2023). Sustainable supply chain data are difficult to measure, and thus often incomplete.…”

“…During the last years, many regimes have initiated sustainable supply chain regulations, for example, to prevent modern slavery practices or increase human rights of the employees (e.g. Moussa et al, 2023;Flynn, 2020). Among other, this relates to the UK, Australia and Germany.…”

“…While there is also an increased research activity on some CSR sub-pillars, for example, environmental performance and reporting, archival research on determinants of SSCR has just started. We only identify few studies on governance determinants of SSCR from an international perspective (Cai et al, 2023;Flynn, 2020;Moussa et al, 2023;Sebastianelli and Tamimi, 2020). Cai et al (2023) focused on a Chinese setting and included a corporate governance score, for example based on board independence, board size and CEO duality.…”

“…Flynn (2020) referred to a sample of UK firms and documented, among others, an insignificant impact of non-executive directors on the extent of compliance with the UK Modern Slavery Act. Moussa et al (2023) also relied on the UK capital market and stressed that a critical mass of at least four female directors increases SSCR on modern slavery. Finally, Sebastianelli and Tamimi (2020) recognized a sample of US firms and included board age, board gender diversity and board independence as board variables.…”

“…We do not identify any prior study on the link between sustainable board governance and SSCR, and thus mainly contribute to the literature (e.g. Cai et al, 2023;Flynn, 2020;Moussa et al, 2023;Sebastianelli and Tamimi, 2020) as follows. First, regarding methodology, no study includes sustainable board variables expect for board gender diversity.…”