Big Profits, Big Harm? Exploring the Link Between Firm Financial Performance and Human Rights Misbehavior

Abstract

We examine whether, relative to their global peers, the financial performance of firms from developing countries leads to increases in human rights abuses. We also study the institutional conditions that qualify this relationship. Based on a combination of behavioral and neo-institutional theories, we suggest there is a positive relationship between financial performance and human rights misbehavior as home country liabilities motivate firms to misbehave to achieve their primary goal of economic leadership. We also suggest that strong regulatory and normative pressures attenuate the abovementioned positive relationship, as failure to comply with norms endangers such firms’ secondary goal of achieving international legitimacy. Our analysis, based on a sample of 245 large companies from eight developing countries studied over a 20-year period, supports our hypotheses. Our empirical results suggest that such companies misbehave when they endeavor to strike a balance between maintaining their global economic leadership and sustaining their social legitimacy.

Exploring how organizational performance feedback influences corporate social responsibility (CSR): the moderating role of LGBT inclusion

“…While PFT proposes no effect when performance exceeds aspirations, limited and conflicting findings on the influence of performance above aspirations on CSR exist. Existing studies had shown positive, negative or no effects (Kim and Kim, 2020; Giuliani et al ., 2019) on CSR. Our results progress towards resolving that conflict, suggesting as performance exceeds aspirations, organizations become more motivated to engage in CSR.…”

“…However, the question of what motivates organizations to engage in this strategic decision remains largely unanswered (Aguinis and Glavas, 2012;Grewatsch and Kleindienst, 2015). Recently, organizational performance feedback theory (PFT) is used to explore whether organizational performance may influence CSR (Angelidou and Saridakis, 2021;DasGupta, 2022;Giuliani et al, 2019;Kim and Kim, 2020;Yang and Habaragoda, 2018;Zhong et al, 2021). PFT explains how organizations make decisions on a variety of organizational actions based on performance evaluations relative to an aspiration level (Cyert and March, 1992;Greve, 2003b), suggesting that unsatisfactory performance motivates organizations to engage in more actions and this motivation disappears when performance exceeds aspirations (Kotiloglu et al, 2021;Posen et al, 2018).…”