Financialization and HRM

PhD Importance and Key Contribution: Financialization is a very topical concept at present. It affects many vital issues of the economy such as industrial relations, work mechanisms, HRM, social life, governments, corporate... [ view full abstract ]

PhD Importance and Key Contribution:
Financialization is a very topical concept at present. It affects many vital issues of the economy such as industrial relations, work mechanisms, HRM, social life, governments, corporate governance, wealth distribution, etc. Moreover, the impact of financialization on employees is a relatively new topic and there is a lack of literature and empirical evidence in this area, which makes the research novel and beneficial. The idea of investor activism and other forms of voluntary institutional mechanisms have grown dramatically in recent years. Corporations with advanced financialization strategies face intense pressures to prioritize short-term shareholder’ returns. However, they also face pressures to maintain social and environmental issues, such as human rights, equal pay, family-friendly policies, and gender and diversity balance.
An enlightened shareholder value perspective can offer the potential balance between the two directions of pressures: while financialization creates a retreat in HRM practices, progressive pressures create an opportunity for a positive reform in HRM.

Theoretical Base:
Financialization is relatively a new term that refers to an accumulation regime in which profit is generated by transferring “value" (tangible and intangible) into financial value or financial instruments, empowering financial markets, and maximizing shareholder value in the short-term. Financialization looks at organizations as financial instruments to make profits. Since the 1980’s, liberal market economies (LMEs) have been underpinned by a shareholder value perspective via maximizing share prices and gaining short-term financial returns. The focus on producing short-term financial returns for shareholders creates a lack of balance in an economy’s outcomes and organizational practices (Thompson, 2003). For HRM, the implications are that employees are viewed as costs or expenses to be minimized, rather than collaborative partners who are worthy of respect and fair treatment.
Financialization has changed work relations and employment relations (Gospel & Pendelton, 2006). Shareholders value perspective increases pressures on managers to maximize the share price. Thus, shareholders align their interests with manager’s interests through rewards and benefits. In this scenario, employees who use their skills and experience to contribute significantly to the value of a firm are excluded from the benefits, and exposed to risk and to precarious work conditions. Thus, we see increases in wage inequality, job insecurity, redundancies, and work intensification, and diminished employee voice, high levels of stress, and reduced job satisfaction and trust (Palley, 2007; Appelbaum & Batt, 2013; Gospel & Pendelton, 2006). Financialization has encouraged the innovation of new business models such as private equity (PE), which have frequently been associated with cost cutting activates such as downsizing, outsourcing for labor using zero-hour contracts or subcontracts, and reengineering labor structure (Clark, 2011 ; Applebaum & Batt, 2014). involve.
Having said that, there are some voluntary mechanisms that enhance enlightened shareholder value and encourage responsible capitalism. Such voluntary mechanisms include corporate social responsibility (CSR) (McLaughlin & Deakin, 2011), socially responsible investors (SRI) (Waring &Edward, 2008), disclosure regulation, universal owner hypothesis, regulating to enhance competitiveness on quality rather than on price (Deakin et al., 2006), and empowering unions (Kalleberg, 2009).

Research question:
This research project will revolve around the following research question: How can we move toward an enlightened shareholder value perspective with regard to HRM practices in LMEs?’
The PhD thesis will be focused on HRM practices in financialised businesses and on the influence of voluntary institutional mechanisms on HRM practices: what is the role of investor activism and shareholders’ activism? What is the impact that shareholders can make through CSR (engagement and screening) in human resource issues? What role can investor activism play in improving CSR, social, environmental and ethical performance? What is the role of shareholder activism in human capital reform? The research will be conducted via qualitative data collection methods including interviews and case studies.

References:
Appelbaum, E., Batt, R., & Clark, I. (2013). Implications of financial capitalism for employment relations research: evidence from breach of trust and implicit contracts in private equity buyouts. British journal of industrial relations, 51(3), 498-518.

Clark, I. (2011). Private equity,‘union recognition’and value extraction at the Automobile Association: The GMB as an emergency service?. Industrial Relations Journal, 42(1), 36-50.

Deakin, S., Hobbs, R., Konzelmann, S. J., & Wilkinson, F. (2006). Anglo-American corporate governance and the employment relationship: a case to answer?. Socio-Economic Review, 4(1), 155-174.

Gospel, H., & Pendleton, A. (2006). Corporate Governance and Labour Management: An International Comparison. ILR Review, 59(4), 85.

Guest, D. (2011) ‘Human Resource management and performance: Still searching for some answers’ Human Resource Management Journal, 21(1): 3-13.

Kalleberg, A. L. (2015). Financialization, Private Equity, and Employment Relations in the United States. Work and Occupations, 42(2), 216-224.

Kalleberg, A. L. (2009). Precarious work, insecure workers: Employment relations in transition. American sociological review, 74(1), 1-22.

McLaughlin, C., & Deakin, S. (2011). Equality law and the limits of the ‘business case’for addressing gender inequalities. Gendered Lives: Gender Inequalities in Production and Reproduction.

Palley, T. L. (2007). “Financialization: What it is and Why it Matters”. Political Economy Research Institute Amherst (No. 153). Working Paper.

Thompson, P. (2011) ‘The trouble with HRM’, Human Resource Management Journal, 21(4): 355-367.

Waring, P., & Edwards, T. (2008). Socially responsible investment: explaining its uneven development and human resource management consequences. Corporate governance: an international review, 16(3), 135-145.

Key words: Financialization, human resources management (HRM), shareholder value, voluntary institutional mechanisms. [ view full abstract ]

Key words: Financialization, human resources management (HRM), shareholder value, voluntary institutional mechanisms.