Employee rights protection and financial performance

Despite the existence of a substantial body of implementation guidelines and literature on employee rights, many organizations still adopt irresponsible employee practices such as child labor and appalling workplace conditions. The implementation of such irresponsible employee practices in some suppliers has badly affected the business performance and reputation of global giants like Nike, Adidas, and Apple. The study here conceptualizes employee rights protection as a management initiative concerning an organization's efforts in managing employees responsibly. By drawing from the literature on social initiatives and supply chain management, organizations should adopt employee rights protection to improve their corporate reputation and financial performance, and that it is important for buyers to involve suppliers to implement such an initiative in order to improve the financial performance of both parties in the buyer–supplier relationship. Based on data collected from 200 matched pairs of manufacturers and suppliers in the food, pharmaceutical, automotive, and clothing industries of China, all the posited hypotheses of this research receive support. The findings contribute to practice by offering empirical evidence on the strategic importance of employee rights protection and showing the critical role of suppliers in implementing this initiative. This research also provides new research insights that extend the literature on labor rights, business ethics, CSR, and supply chain management.