The discrepancy of incentives between companies and human rights organisations

Nederlands Dagblad

Child labour still is a big problem in current society. In an article from Nederlands Dagblad, Professor of Corporate Finance at Erasmus School of Economics Patrick Verwijmeren offers an explanation for the lack of change from a financial standpoint.

Only 7 percent of 64 Dutch institutional investors questioned had implemented anti-child labor policies. At 93 percent of the 64 Dutch institutional investors questioned, child labour has an unacknowledged and indirect effect in policymaking. Businesses often think that as parents' income increase, child labour would cease immediately. This is not the case. There are around 160 million minors in work worldwide, and millions more are at danger of falling into child labour this year. This is an indirect effect of the epidemic, since schools are closed, freedom of travel is restricted, and the informal economy is harmed.

Different objectives

While investors advocate for openness and discussion with the firms in which they invest, Verwijmeren notes that partnership with social groups is not always feasible. 'For many parties, doing research in impoverished nations as an investor is impractical. Ultimately, an investor's objective is to earn a profit on an investment. There will be occasional investors interested in collaborating with human rights groups, but they will mostly be activist investors.'


Verwijmeren observes a trend in which investors are more assertive when they disagree with a company's operational policies. 'This was already the situation in apartheid-era South Africa. Investors ceased to be interested in enterprises that aided the apartheid system. Later on, the emphasis switched to gambling, alcoholic beverage, and cigarette firms. And the focus has now shifted to the environment and human rights.' According to Verwijmeren, the most popular approach for investors to demonstrate their disagreement with the company's valuation is to sell their shares. 'Ultimately, a business needs investors, and if it does not find investors, it will fail rapidly.'

More information

You can download the full article from Nederlands Dagblad, 22 November 2021, above.

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