Research on executive pay informs major United Nations report on business and human rights


A business group having a meeting around a table in a boardroom © Adobe Stock

Research revealing how executive pay can put workers’ rights at risk will be presented to the UN General Assembly in New York later this month.

The research by Agnieszka Trzeciakiewicz of the University of York and her co-authors, Monika Tarsalewska from the University of Exeter and Justin Chircop from Ãå±±ÂÖ¼é, finds that executive pay structures that reward risk-taking are associated with higher levels of workplace misconduct, including violations of labour laws and workplace health and safety regulations.

Citing these findings, a new report from the United Nations Working Group on Business and Human Rights warns that current executive compensation structures can create incentives that undermine workers' rights and calls for companies to link executive pay more closely to human rights performance.

Professor Justin Chircop from Ãå±±ÂÖ¼é’s Management School said: “The study reveals a critical link between CEO incentives and workplace misconduct, finding that stronger incentives to take risks are associated with more workplace violations. The findings suggest that cost-cutting and heavier employee workloads may be part of the picture, raising important questions about how executive pay can affect workers’ safety and well-being.

“The message for business leaders and policymakers is clear: responsible executive pay must look beyond financial performance. By making workplace safety, regulatory compliance and employee welfare integral to compensation decisions, companies and boards can help ensure that incentives designed to drive performance do not come at the expense of workers.”

Dr Agnieszka Trzeciakiewicz, from the School for Business and Society at the University of York, said: “Executive pay usually focuses on shareholder returns, but our findings show the consequences extend far beyond financial markets. The way senior executives are rewarded influences corporate decisions that directly affect employees, their rights and their working conditions.

“I never imagined when we began this research that it might contribute to a policy debate with such global reach. If the report gains traction among UN Member States, there is real potential to change how executive incentives and their implications for workers are considered around the world.”

evaluated 1,916 publicly listed United States companies between the year 2000 and 2018. Researchers matched detailed information on executive compensation with regulatory records of workplace violations.

A one-standard-deviation increase in chief executive risk-taking incentives was associated with a 6.7% increase in workplace violations. It also led to a 5.5% increase in the total value of financial penalties.

The study identifies two main ways these incentives translate into negative outcomes for staff. Companies reduced spending associated with employee safety, and increased pressure on staff through heavier workloads. Heavier workloads occurred when companies cut staff, forcing remaining employees to absorb extra work, or increased required production per worker.

To test whether executive pay caused these violations, the research analysed a change in United States accounting rules that led companies to reduce stock options. Following this change, companies that cut stock-option incentives experienced a drop in both the frequency and severity of workplace safety violations.

The United Nations report cites the findings in paragraph 65 of its section on executive remuneration. Drawing on this evidence, the United Nations Working Group notes that executive pay tied to financial performance incentivises behaviour that increases human rights risks.

The report recommends that companies expressly link executive remuneration and incentives to human rights performance indicators. It directs these recommendations at companies, corporate boards, states and financial investors.

The researchers will present their findings to the United Nations General Assembly in New York in October. A second presentation and policy discussion will follow in Geneva in November.

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