Business Case for Respecting Labor Rights

The ability of workers to organize, act concertedly, and engage in collective bargaining is an important human right that can be a net positive for companies and investors. Unionization has been shown to support an equitable and inclusive workplace, increase productivity, decrease turnover, improve health and safety, boost innovation, and strengthen responsible business conduct.

Trade union density and inequality are related.  Significant research has been done that indicates the decline of union density is a contributor to wage stagnation and rising inequality rates.  Conversely, a study of 32 OECD countries found that higher collective bargaining coverage for working people is strongly correlated with lower wage inequality.

Upholding fundamental labor rights is important to investors because they mitigate systemic risks of inequality and weak economic growth. Institutional investors are long-term investors and, as such, their investment returns depend on a stable and healthy economy.

Some companies accused of labor rights violations have committed to international standards but appear to not be living up to their commitments. We believe misalignment between a company’s public commitments and its reported conduct represents meaningful reputational, legal, and operational risks, and may negatively impact its long-term value. Failing to respect workers’ rights could harm a company’s reputation with stakeholders and hurt its ability to attract and retain a high-performing workforce, a crucial element of its ability to provide quality products and services.