Big Profits, Big Harm? Exploring the Link between Firm-Performance and Human Rights Abuses

Abstract

We examine the relationship between the performance of companies relative to their global industry peers and their abuse of human rights. We exploit a unique database covering 245 large publicly listed companies from eight of the principal and most economically dynamic developing countries. We find that the more firms over-perform relative to their industry peers, the more they are likely to engage in abusive behaviours. However, this observed positive linear relationship becomes negative in the presence of high host country regulatory pressure. We find also that the proclivity for top over-performing firms to abuse human rights applies only to companies with no or limited prior commitment to addressing human rights issues as part of their corporate social responsibility (CSR) policies.

Keywords: Business and human rights, high-performance, institutions, corporate social responsibility (CSR), developing countries

JEL Classification: F23; M14