Management Accounting Section Midyear Meeting

Assessing the Social Impact of Corporations: Evidence from Management Control Interventions in the Supply Chain to Increase Worker Wages

• In Event: Contracting

Abstract

Do corporate investments in sustainability of their commercial partners pay-off? This study estimates the impact of management control interventions by a large multinational corporation that sought to increase factory worker wages at its supplier firms. Difference-in-differences estimates based on eight years of data from over 1,800 factories show that wage interventions were associated with a wage increase of approximately 5 percent over the three years following their implementation relative to factories at which no wage-related interventions were implemented. Cost-benefit analyses suggest that the wage impacts of changing suppliers’ management practices were many times greater than if the invested financial resources were instead paid directly to the affected workers. We also shed light on the role of different types of management control interventions – a bottom-up approach that focuses on mobilizing stakeholder representations within the firm and a top-down approach that focuses on establishing formal guidelines and systems to increase wages. The evidence is consistent with the predominant role of a top-down approach. This study has implications for standard-setters by providing in-depth insights on corporate investments into sustainable management practices. Our findings also inform managers on how to design management control interventions to maximize their social impact.

Authors

• Jee-Eun Shin, University of Toronto

• Gregory Distelhorst, University of Toronto