Labor Malpractice: The Critical Role of Operations

Abstract

Well-intentioned efforts by governments, non-governmental organizations (NGOs) and companies to eliminate labor exploitation have failed to curb unjust labor practice. The premise of this paper is that labor malpractice is not solely a corporate social responsibility and human resources issue; rather, its incidence can be driven by day-to-day operations. We thus develop and test hypotheses to identify key operational drivers of labor malpractice. Our analysis of a panel of nearly 7,000 controversy records at the firm-year level from 2008 to 2019 reveals that the volatility faced by the focal firm and supply chain spillovers have an impact on labor malpractice. We discuss and demonstrate that the firm has levers at its disposal to address these challenges. Our results show that the operations and supply chain function of the firm needs to be at the center of efforts to reduce labor malpractice.

Keywords: Sustainable Operations, Labor Malpractice, Corporate Social Responsibility