Workforce-related disclosure, its determinants and consequences for workforce outcomes and corporate performance of the FTSE 100 firms

Abstract

This thesis examines the extent, trends, and content of workforce disclosures in the United Kingdom (UK) in the light of UK’s current regulatory environment and the 2018 Corporate Governance Code in addition to international frameworks such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB) guideline and the United Nation’s Global Compact. Moreover, the thesis identifies the determinants of workforce disclosure of the FTSE 100 firms. It also investigates the consequences of workforce reporting, more particularly its relationship with workforce outcomes and financial performance for the period 2017-2020. In this context, this study makes a threefold contribution to workforce disclosure studies, mainly its novelty in terms of its conceptual framework combining workforce disclosure variables and performance variables, the context of the study (UK), as well as the development of a research instrument (index) used to collect workforce-related data. To determine the extent and content of disclosures, a unique and comprehensive workforce disclosure index was developed based on UK and international regulatory frameworks such as UK’s Corporate Governance Code 2018, Financial Reporting Council’s (FRC) Guidance on Board Effectiveness 2018, GRI and SASB. Moreover, disclosure items related to workforce practices and welfare were also adapted from previous studies. The index was then used to collect data from corporate narratives such as integrated reports, annual reports, sustainability reports, and Environmental, Social and Governance (ESG) Databook. It is found that the workforce disclosure index (WDI) including each of its components: workforce diversity (WDD), workforce welfare (WWD) and workforce engagement (WED) are increasing each year. This research also examines the workforce voice and engagement mechanism adoption trends of the FTSE 100 companies. The findings show that of the three core options for workforce governance voice mechanisms recommended in the 2018 Code, the majority of firms in the sample had appointed a designated non-executive director followed by advisory panels, while the least popular option was the worker director. The first empirical chapter shows that WDI has a strong relationship with workforce voice governance mechanisms and workforce strategic posture (workforce-related policies, board ethnic diversity, board sustainability experience). Considering the stakeholder perspective, this finding suggests that a stakeholder-oriented regulatory framework increases emphasis on workers, transparency on measures used, and legitimacy of firms in ways visible to all workers and other stakeholders. The final empirical chapter, which investigates the consequences of workforce disclosures, shows that the higher the extent of disclosure the better the workforce outcome, i.e., in this case lower gender pay gaps (both hourly and bonus). However, it appears progress in narrowing the gender pay gap has been slow over the four years, i.e., 2017-2020, and more nuanced regulations should be introduced to help address the fundamental issues. Additionally, the results of the final empirical chapter suggest that while there is a negative and significant relation between WDI and profitability, there is no relation between WDI and firm value.