Does human-oriented governance foster labor and human rights disclosure?

The most important initiative in the area of business and human rights is the United Nations Guiding Principles on Business and Human Rights (UNGPs), approved in 2011, which introduce the concept of human rights due diligence. This involves an ongoing and proactive process by which companies must identify, prevent, mitigate, and account for how they address their actual and potential adverse human rights impacts (Hess 2021). These principles are at the heart of a global governance system for addressing the impact of business activities on human rights (Rosser et al. 2022) and represent the common interface between business, governments, LHR laws and agreements (Ismail et al. 2021; Bagus et al. 2022).

At the same time, since the adoption of the UNGPs, several Western European countries have introduced national initiatives to regulate business conduct in relation to LHR (Chambers and Vastardis 2020; Wettstein 2021). These initiatives reflect a growing movement to implement binding legal frameworks that promote corporate responsibility for human rights, overcoming the limitations of voluntary and non-binding guidelines at the international level (Chambers and Vastardis 2020; Wettstein 2021; Schrempf-Stirling et al. 2022). However, the proliferation of these national laws has led to a fragmentation of the human rights regulatory framework, with each country adopting its own legislation with specific requirements and different approaches. This creates a regulatory patchwork that can be complicated and costly for companies operating in multiple jurisdictions. This fragmentation underlines the need for a more harmonised and coordinated approach that would not only make compliance easier for companies, but also ensure a more consistent and robust standard of human rights protection.

In this sense, at the regional level, the European Union has taken more concrete action and introduced several regulatory instruments in this area (Hess 2021), including the 2014 Non-Financial Reporting Directive (NFRD), which required large companies to disclose information on their human rights policies and practices. It was amended in 2022 by Directive (EU) 2022/2464, known as the Corporate Sustainability Reporting Directive (CSRD), which introduces stronger and more detailed disclosure requirements, including information on due diligence processes to identify, prevent, mitigate, and remediate adverse impacts on LHR. This represents an important step towards greater transparency and corporate responsibility in the area of LHR. Furthermore, the European Union’s commitment to the protection of fundamental human rights in the business sphere is reaffirmed by the Directive (EU) 2024/1760 on Corporate Sustainability Due Diligence (CS3D), which entered into force on 25 July 2024. With the aim of promoting sustainable and responsible corporate behaviour in business operations and throughout the global value chain, this Directive requires companies to integrate due diligence policies into their governance frameworks and risk management systems. It is likely to be “the real game changer” for business and human rights, cementing “the push for mandatory human rights due diligence as an international legislative trend” (Wettstein 2021, p. 315).

As noted above, another shortcoming of most of LHR initiatives is their “non-coercive enforcement”, with no or weak sanctions for non-compliance or misleading statements (Chambers and Vastardis 2020, p. 326). As a result, despite these significant advances in the regulation of LHR due diligence and disclosure, the implementation of these regulations often falls short. Many companies around the world do not recognise their importance, lack the necessary skills, or are simply unwilling to implement the required due diligence processes (Deva 2020; Hess 2021; Helfaya et al. 2024). They often take a minimalist approach, meeting basic requirements without truly integrating these principles into their corporate culture and daily operations (Muchlinski 2012; Ruggie 2013; Schrempf-Stirling et al. 2022).

The quality of LHR information disclosed by these companies also leaves much to be desired. According to the Corporate Human Rights Benchmark 2022, which analyses the LHR policies and practices of 127 of the largest corporations in three high-risk sectors (i.e., food and agricultural products, ICT manufacturing, and automotive manufacturing), although “corporate respect for human rights has gained momentum”, few companies have disclosed LHR information that demonstrates their commitment to protecting human rights (World Benchmarking Alliance 2022). In many cases, public reports and statements on LHR are superficial, focusing on compliance with formalities rather than providing a transparent and detailed overview of practices and policies (Islam et al. 2017; Hess 2019; Zeng et al. 2022; Esterhuyse and du Toit 2023). This not only undermines stakeholder confidence but also prevents a proper assessment of a company’s performance in this crucial area (Chambers and Vastardis 2020).

Disclosure-based regulation has not yet fulfilled its potential to improve firms’ LHR performance and has not produced the necessary organisational changes (Hess 2021). The lack of real commitment and the poor quality of disclosed information on LHR reflect a significant gap between regulatory expectations and practical reality, highlighting the need for deep cultural change within companies (Narine 2016). The impetus for such change may also come from within the organisation (Chambers and Vastardis 2020). However, CSR alone is not enough to integrate human rights into corporate policy (Frankental 2002; Ramasastry 2015; Deva 2020; Schrempf-Stirling et al. 2022). In particular, a different mode of corporate governance is needed– one that is human-oriented (Salleh et al. 2009). The specific characteristics of LHR reporting, compared to other types of corporate reporting (both financial and non-financial, including diversity reporting), require the adoption of a “sui generis” approach that “marries corporate reporting expertise with human rights expertise” (Chambers and Vastardis 2020, p. 328).

Human-oriented governance is “an inside-out, values-based conviction” that guides human conduct according to moral principles and ethical values that promote human dignity (Salleh et al. 2009, p. 30). This implies an “Aristotelian-Thomistic approach” to corporate governance capable of overcoming the “ethical deficit” in reconciling individual, organizational, and societal goals (Macaulay and Arjoon 2012). Indeed, the “Aristotelian-Thomistic approach” to corporate governance views business as an integral part of social life, positing that organisations exist to enable individuals to live complete and good lives. This perspective “provides a more plausible basis for corporate governance in addressing and correcting dysfunctional aspects and the ethical deficit of human and market behaviour” (Macaulay and Arjoon 2012, p. 553). Thus, an “Aristotelian-Thomistic approach” to corporate governance involves developing an organisational culture based on a humanistic understanding of corporate responsibility that brings out the best in people and promotes the common good (Macaulay and Arjoon 2012; Muchlinski 2012).

Therefore, it can be said that focusing on stakeholders, transparency, and accountability regarding the impacts of LHR are crucial elements of a human-oriented approach to corporate governance (Ismail et al. 2021). Human-oriented governance systems are characterised by a set of commitments, structures, and processes related to corporate responsibility for sustainability, employees, and the protection of human rights. These include sustainability-related remuneration policies, sustainability committees, ethical certifications, adherence to leading sustainability reporting standards and frameworks, and assurance of sustainability reports. These elements have been shown to be associated with greater corporate commitment to LHR (e.g., Baraibar-Diez et al. 2019; Hess 2021; Principale 2023; Helfaya et al. 2024). In this regard, Principale (2023) shows that the existence of a CSR committee increases companies’ willingness to engage in human rights due diligence. Similarly, Peters et al. (2019) and Fu et al. (2020) demonstrate that assigning responsibility for corporate ethics to a member of the management team or a committee facilitates the allocation of time and resources to preventing socially irresponsible behaviour, thus enhancing the company’s social performance, regardless of the title given to the individual or committee (e.g., corporate responsibility officer, chief sustainability officer, sustainability committee, etc.) (Hess 2021). Sustainability-related compensation policies ensure adequate consideration of stakeholder interests, including employees, and align them with the management’ interests (Baraibar-Diez et al. 2019; Velte 2022), thereby promoting commitment to sustainability in general and LHR in particular. Similarly, certifications can be viewed as expressions of an organisation’s ethically oriented values (Tregidga et al. 2019), while compliance with human rights standards indicates companies’ willingness to improve their LHR practices.

The literature on LHR has adopted different theoretical perspectives, ranging from legitimacy theory to stakeholder theory (Ismail et al. 2021; ElKelish 2023). According to Hoque et al. (2013, p. 1171), “each theory has its own virtue and collectively, thus adding (not replacing) to our understanding of practice and individuals in their social, economic, and cultural contexts”. This study draws on legitimacy theory, stakeholder theory, and resource dependency theory.

Stakeholder theory (Freeman 1984), focuses on the relationships between an organisation and its various stakeholders, beyond shareholders. It argues that companies must consider and balance the interests of all their stakeholders by adopting practices that promote transparency, fairness, and social responsibility. This involves implementing due diligence processes to ensure that business activities comply with LHR and communicating this information clearly and comprehensively to all stakeholders (Preuss and Brown 2012; Wahab 2020). In doing so, a company not only ensures compliance with the law but also strengthens its legitimacy and trust in the eyes of society. From this perspective, corporate governance mechanisms can facilitate the balanced integration of stakeholder interests in business decisions and the adoption of practices that promote transparency, fairness, and social responsibility, thereby ensuring the support and legitimacy of all stakeholders (Michelon and Parbonetti 2012; Orazalin and Mahmood 2021; Helfaya et al. 2024).

Legitimacy theory postulates that legitimacy is a crucial resource for any organisation, as it ensures conformity with the norms, values, and beliefs of the society in which it operates (Deegan 2007). From this perspective, legitimacy, defined as “a generalised perception or assumption that the actions of an entity are desirable, proper or appropriate within a socially constructed system of norms, values, beliefs, and definitions” (Suchman 1995, p. 574), is not a permanent state but a dynamic continuum in which organisations must constantly adapt to the changing expectations of their stakeholders. With evolving societal expectations, companies must continually review and adjust their practices to maintain legitimacy, requiring ongoing strategic management and effective stakeholder communication. In this sense, corporate governance mechanisms can facilitate the adaptation of the company to societal expectations by facilitating the achievement of legitimacy (Helfaya et al. 2024).

Resource dependence theory (Pfeffer and Salancik 2003) postulates that an organisation’s ability to obtain and control critical resources, both tangible and intangible, is fundamental to its success and survival. From this perspective, corporate governance mechanisms provide critical resources that enable firms to obtain competitive advantage and manage relationships with stakeholders (Lagasio and Cucari 2019; Campanella et al. 2021). They play a key role in managing these resources by providing a structure for making strategic decisions and monitoring the implementation of these strategies and can also be a critical resource by providing the firm with knowledge, skills, relationships, and enhanced legitimacy (Hillman and Dalziel 2003; Orazalin and Mahmood 2021). In this way, human-oriented governance mechanisms that promote the disclosure of LHR information are an intangible strategic resource that play a key role in the firm’s relationship with its employees and other stakeholders by fostering a culture of transparency and trust. In turn, transparency and effective disclosure of LHR information enables companies to gain and maintain the trust of employees, which is essential for retaining key personnel and ensuring a sustainable flow of human capital.

Previous studies have shown that the effectiveness of a company’s corporate governance mechanisms influences the quality of sustainability-related information disclosed (Lagasio and Cucari 2019; Fahad and Rahman 2020; Campanella et al. 2021) and that “a sound corporate governance structure is crucial to stimulate more disclosure” (Nicolò et al. 2023, p. 4). Thus, our starting point is the idea that the morphology of an organisation determines how it responds to external pressures to disclose LHR-related information, and that consequently a human-oriented approach to corporate governance that emphasises ethical responsibility and transparency can promote LHR disclosure. Several authors (e.g. Velte 2022; Aibar-Guzmán et al. 2024; Helfaya et al. 2024) highlight the role of corporate governance structures that are specifically designed to improve corporate sustainability performance and transparency, overcoming the limitations of traditional governance mechanisms. In particular, human-oriented governance plays a distinctive role by fostering a broader and more ethical perspective in business management (Macaulay and Arjon, 2012).

From the legitimacy theory perspective, human-oriented governance helps organisations to meet societal and normative expectations, thereby enhancing their legitimacy through increased transparency with respect to LHR. Similarly, from a stakeholder theory perspective, such governance systems would promote inclusive and transparent due diligence processes that involve all stakeholders and ensure that their concerns are reflected in the LHR information disclosed by companies. Finally, from the perspective of resource dependence theory, human-oriented governance, by prioritising cooperation and ethical behaviour, can improve relationships with key stakeholders and create incentives for more comprehensive disclosure of LHR information.

Accordingly, human-oriented governance systems are expected to lead to greater disclosure of information on LHR issues as they raise awareness of these issues (Haque and Azmat 201). Elements that characterise human-oriented governance, such as sustainability-related compensation policies, sustainability committees, certifications, and adherence to human rights standards, have been shown to promote corporate transparency (Baraibar-Diez et al. 2019; Tregidga et al. 2019; Balluchi et al. 2021; Velte 2022; Principale 2023). The existence of a sustainability committee has been shown to enhance stakeholder awareness (Velte 2022; Vitolla et al. 2019), which, in turn, fosters greater disclosure of LHR information (Fahad and Rahman 2020; Hess 2021; Helfaya et al. 2024). Similarly, certification is another element of human-oriented governance that promotes the disclosure of LHR information (van der Waal and Thijssens 2020). In the light of this discussion, we formulate the following hypothesis:

Previous research has shown that higher sustainability-related performance leads companies to disclose more sustainability-related information to increase stakeholder awareness of these achievements (García-Sánchez et al. 2020). Higher LHR performance is also likely to increase the effectiveness of human-oriented governance mechanisms, leading to more comprehensive disclosure of LHR information. Specifically, companies with high LHR performance are expected to provide more detailed and transparent disclosure, as their governance systems are more attuned to ethical considerations and transparency (Monteiro et al. 2022). This suggests that LHR performance may act as a moderating factor in the relationship between human-oriented governance and LHR disclosure, enhancing the effect of the former on the latter.

Therefore, we expect that better LHR performance will strengthen the positive relationship between these governance mechanisms and the level of LHR disclosure and hence propose the following hypothesis:

Figure 1 depicts the hypothesised relationships.

The population under analysis consists of the most prominent multinational companies globally. These companies possess substantial resources and capabilities enabling them to meet stakeholder needs and demands. They are subject to rigorous scrutiny from various organisations and specialised groups, both in general ( e.g.,Salminen and Rajavuori 2019; Aibar-Guzmán et al. 2024) and specifically regarding LHR ( e.g., Aibar-Guzmán et al. 2023; Monteiro et al. 2022 and 2023; Schilling-Vacaflor and Gustafsson 2024). For this purpose, we identified those firms with a parent company that was founded and registered in one country but has subsidiaries in different countries. In this sense, the organisation was considered to have facilities and other assets in at least one place other than its country of origin or headquarters.

The study period spans from 2011 to 2020, covering ten years of relevant developments in human resource management and LHR. Specifically, at the start of this period, human resource leaders had just faced a historic global recession that saw many of the world’s largest companies make mass layoffs in the face of turbulent markets. Subsequently, they have witnessed a technological revolution, geopolitical conflicts, and social movements that have promoted a shift from managing people in uncertain times to managing and developing talent and respecting human rights. The last year of the study period allows us to observe the impact of the pandemic on them.

The Refinitiv EIKON database provides an ESG score for over 6,000 companies. In addition to the previous criteria used to identify multinational companies for the 2011–2020 period, the following criteria were used to construct the database for the empirical study. Initially, an ESG score was required to be available for at least five of the ten years. Accordingly, the initial sample comprised 21,226 observations from 2,933 companies that reported their activities using ESG criteria during the selected period. This criterion allows to identify companies committed to sustainability, providing a measure of their responsible performance through ESG data. Requiring a minimum of five years of data ensures robust econometric modelling, capable of controlling for unobservable heterogeneity and endogeneity. In this sense, this criterion allows us to observe companies over a reasonable period of 4 years. The use of lagged variables means that only the oldest year of the 5 available can be used.

In a subsequent step, observations lacking disaggregated ESG data required for constructing main variables and/or essential economic and financial information for constructing control variables were identified. Specifically, a criterion was applied to exclude observations lacking necessary information to estimate empirical models for testing the proposed research hypotheses. This refined the sample to 15,993 observations across 1,828 companies, ensuring data adequacy for testing research hypotheses.

Lastly, to address temporary data gaps among companies in the second stage, preventing proper use of panel data, a complete panel dataset was constructed. This approach eliminated annual data gaps, ensuring a homogeneous temporal distribution. Thus, the final sample comprised a balanced panel of 7,920 observations drawn from 792 multinational companies. Table 1 provides details on the sampling procedure and sample description.

In this study, the level of disclosure of the LHR information disseminated by companies is determined through the identification of material issues disclosed and their scope, following recommendations from the Global Reporting Initiative (GRI) standards, Sustainability Accounting Standards Board (SASB), and the International Integrated Reporting Council (IIRC). These standards are aligned with principles and frameworks for responsible business conduct (McPhail et al. 2016). The assessment process incorporates the concept of double materiality, which integrated financial materiality and impact materiality to identify and prioritise material issues. Table 2 presents the material information on LHR.

The LHR disclosure indicator (LHRDiscl) was constructed by aggregating information disclosed in companies’ non-financial reports concerning material LHR issues outlined in Table 2. Each identified item contributed one point if disclosed, resulting in a score ranging from 0 to 33.

The procedure involved creating four sub-scores. The first sub-score quantified the information disclosed on the management approach. One point was awarded if the company disclosed descriptive information on each of the identified employee policies related to careers, training, equal opportunities, and health and safety. Regarding human rights, one point was awarded for information on the human rights policy, and one point was awarded for information on freedom of association. In the second sub-score, one point was awarded if the company reported negative incidents related to irresponsible acts regarding working conditions, and one point was awarded for reporting human rights violations. The final two sub-scores assessed the disclosure of quantitative and qualitative information on LHR performance indicators, with one point awarded for each item. To ensure robust results, the LHRDiscl variable was split into two scores, LDiscl and HRDiscl, allowing for independent analysis of LHR disclosures.

The LHRGov variable is the independent variable aimed at assessing human-oriented governance. It comprises a composite indicator that evaluates the extent to which a company’s organisational structure aligns with sustainability requirements, particularly concerning its responsibility towards employees and the value chain. It considers factors such as the company’s public commitments to international initiatives, organisational structures, and incentives related to sustainability and transparency (Hess 2021; Velte 2022; Principale 2023; Helfaya et al. 2024).

Therefore, a composite score was created, which is the sum of 11 components related to LHR responsibilities. These components include: SusComp (a dummy variable that takes the value 1 if the company has an ESG compensation policy, and 0 otherwise); ExeComp (a dummy variable that takes the value 1 if executive compensation is tied to sustainability performance, and 0 otherwise); SusCommittee (a dummy variable that takes the value 1 if the company has a sustainability committee, and 0 otherwise); H&SCert (a dummy variable that takes the value 1 if the company has a health and safety certification such as OHSAS 18001 or ISO 45001, and 0 otherwise); EthicsCert (a dummy variable that takes the value 1 if the company holds a sustainable or ethical certification such as SA 8000 or ISO 37001, and 0 otherwise); IntGuide (a dummy variable that takes the value 1 if the company uses international GRI or SASB guidelines to prepare its sustainability report, and 0 otherwise); and Assurance (a dummy variable that takes the value 1 if the sustainability report is assured by a third party, and 0 otherwise). Additionally, four additional dummies indicate whether companies have publicly committed to: the United Nations Global Compact Principles (UNGC); the Guidelines for Multinational Enterprises of the Organisation for Economic Co-operation and Development (OECD); the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy of the International Labour Organization (ILO) and the ILO Declaration on Fundamental Principles and Rights (ILO); and the UNGPs and the UN Principles for Responsible Investment (UNPRI). A higher value of this composite score indicates stronger human-oriented governance.

As regards the moderator variable, Refinitiv EIKON’s Workforce Score (LPerf) and Human Rights Score (HRPerf) were used to construct the LHR performance measures. The Workforce Score measures a company’s commitment to job satisfaction, diversity and equal opportunities, and health and safety, based on 29 indicators. The Human Rights Score measures a company’s adherence to core human rights conventions, based on 8 indicators. Both scores were aggregated to create the LHR performance measure (LHRPerf) using the Thomson Reuters ESG Scores weighting methodology. This process involved normalising the two scores to dimensionless or scale-invariant units of measurement and then summing them. This is the standard procedure for handling variables with different units of measurement.

We consider 16 control variables, identified in accordance with previous studies (e.g., Botero et al. 2004; Parsa et al. 2018; Maji 2019; Monteiro et al. 2023; Morán-Muñoz et al. 2024), which represent the most important (i) firm-level factors related to the company’s capabilities and resources and the board of directors’ effectiveness; (ii) the main corporate governance mechanisms that approve, control, and supervise strategies and decisions; and (iii) the most relevant institutional pressures at the national level related to LHR.

Companies' resources and capabilities determine their commitment to sustainability and corporate transparency, as their response is shaped by internalresources and capabilities. These are identified through the following control variables: Fage (age of the company, represented by the logarithm of the number of years elapsed since the date of foundation), FSize (size of the company, determined by the logarithm of total assets), (return on assets ratio), Leverage (total ratio of external funds to total assets), R&D (intensity of investment in R&D in relation to sales); Advertising (intensity of investment in advertising in relation to sales), and Capex (intensity of investment in capital in relation to sales).

With regard to the board of directors, the variables represent the ability of this body to fulfil its responsibilities according to its size, activity, diversity, and independence: Bsize (number of members belonging to this body), Bactivity (number of meetings held in each financial year), Bdiversity (percentage of women on the board), Bindep (percentage of independent directors on the board), and CEOdua (dummy coded 1 to indicate that the CEO is the chairman of the board, otherwise 0) were used.

The institutional pressures linked to the national context are represented by the inclusion of four indices proposed by Botero et al. (2004), which are linked to the orientation of the legal system of the company’s country of origin towards the protection of workers and human rights: SPI (Social Progress Index, which measures social progress in each country), WPSindex (Women Peace and Security Index, which measures women’s inclusion, security and justice at the country level), LRI (Labour Rights Index, which measures key labour regulation efforts), and HR (Human Rights Protection Index). In addition, we included the EU dummy variable proposed by García-Sánchez et al. (2022c) to identify the requirements for corporate sustainability transparency in countries that are part of the European Union.

We also controlled for the effects of time, country, and industry with three categorical variables identifying the time period (Year), geographical area (Country), and sector (Industry) in which the firms operate. We used these types of variables instead of dummies to maintain the freedom degree of the models. In addition, we specifically controlled for the effect of the pandemic in the year 2020 with the COVID-19 variable, a dummy coded with 1 for this period and 0 for the remaining years. Table 3 shows the description of these variables.

In order to test the hypotheses, the research model shown in Fig. 1 has been translated into Eq. 1 and corresponds to a lagged endogenous model, following the evidence of García-Sánchez et al. (2022a). The adequacy of this estimate is based on the relationship between the levels of transparency that exist between a given year (t) and the one immediately preceding it (t − 1). To determine the relevance of the research hypotheses, the effect of human-oriented governance (LHRGov) will be assessed by the significance of \({\varvec{\upbeta}}_{2}\), which will allow the acceptance or rejection of hypothesis H1. For hypothesis H2, both this coefficient and the one related to the interaction of LHRGov with LHR performance (LHRPerf), \({\varvec{\upbeta}}_{4}\) will be examined.

This dependency model will be estimated using panel data regressions, given the nature of the dependent variable LHRDiscl. As described in the following section and summarised in Table 2, it corresponds to a censored variable that takes values between 0 and 33, necessitating the use of Tobit regressions. This approach allows for greater variability, consistency, efficiency, and explanatory power, while controlling for unobservable heterogeneity. To limit endogeneity problems, the dependent variable is observed in t, while t-1 is used for the explanatory variables.

Table 3 shows the mean and standard deviation of the variables used to estimate Eq. 1. The level of implementation of human-oriented governance among the companies in the sample is low. The LHRGov variable, which measures the companies’ orientation towards human rights and sustainable employment in terms of their commitments, structures, and procedures, has an average value of 2.68 across the 11 items considered. This suggests that the companies in the sample generally lack most of the elements that are characteristic of a human-oriented governance model.

In terms of LHR disclosure, the selected companies disclosed on average 18 of the 33 items identified as material LHR information, primarily related to personnel matters. This indicates a medium level of disclosure on LHR. This result aligns with previous studies on this topic (e.g., Cahaya and Hervina 2019; Monteiro et al. 2023) and, in the case of human rights, confirms the low level of disclosure reported in the Corporate Human Rights Benchmark 2022 (World Benchmarking Alliance 2022).

Finally, the companies’ performance on LHR can be rated as medium (54.47 out of 100), with higher performance on labour issues than on human rights. This result suggests that the companies in the sample have taken some action in the area of LHR, although they do not communicate such action. This finding is consistent with previous evidence (e.g., Monteiro et al. 2022).

Table 4 presents the bivariate correlations. The coefficients could indicate multicollinearity between some of the variables in the model, so a further VIF analysis must be carried out to ensure the absence of this problem.

Table 5 shows the results of the estimation of the research model outlined in Eq. 1. The findings indicate a positive impact of human-oriented governance on LHR disclosure. In other words, companies with human-oriented governance tend to disclose more material LHR information. Therefore, Hypothesis H1, which posits a positive relationship between human-oriented governance and LHR disclosure, can be accepted. These results provide pioneering evidence in this field, confirming, at a broader level, the positive relationship between corporate governance structures and CSR disclosure as demonstrated in previous research (Fahad and Rahman 2020; Velte 2022), as well as the positive effect of specific elements of human-oriented governance, such as the existence of a sustainability committee, on LHR disclosure as highlighted by Principale (2023). The LHR-respectful organisational culture associated with human-oriented governance morally obliges management, fosters greater consideration of stakeholder interests, and enhances corporate commitment to LHR and transparency (Muchlinski 2012; Hess 2021).

Regarding Hypothesis H2, the findings indicate that LHR performance negatively moderates the relationship between human-oriented governance and the level of LHR disclosure. This means that the positive effect of human-oriented governance on LHR disclosure is greater when the company has poorer performance in these areas. Therefore, Hypothesis H2 cannot be accepted.

These results are confirmed for the two sub-components of the LHRDiscl variable, which cover information on employment (LDiscl) and human rights (HRDiscl), respectively. Among the control variables, board independence and diversity influence companies’ decisions to disclose more LHR information. The remaining variables related to firm resources, capabilities, and institutional pressures show varying effects depending on the score used, indicating a stronger impact when considering information on human rights compared to labour issues.

To ensure robust results, new models were estimated with several changes in the independent and control variables. Firstly, both the independent variable (LHRGov) and dependent variable (LHRDiscl) now incorporate aspects related to public commitment to ILO and GRI. Given that public commitment to ILO/GRI typically influences companies to disclose according to these standards, as reflected in the dependent variable, the statistical analysis was repeated by excluding the ILO/GRI components from the independent variable. This was done to assess if the relationship proposed in H1 remains significant. Secondly, continuous variables were replaced with dummy variables for each year, country, and industry. The results in Table 6 are quite similar to those discussed above, reinforcing the robustness of the findings.

In addition, in order to ensure that our results are not affected by selection bias due to the application of the first and last criteria in the sample design, we omitted these steps from the sampling process and ran the econometric models again with a new sample consisting of 1,505 firms (11,219 observations). Our results confirm the previous ones, indicating that the use of the two criteria does not reduce the randomness of the sampling process and does not introduce bias in the estimates (Table 7).