Pressure to meet earnings expectations negatively impacts worker safety

New research in the Journal of Accounting and Economics, “Earnings expectations and employee safety” examined the relation between workplace safety and managers’ attempts to meet earnings expectations. The finding: significantly higher injury/illness rates in firms that meet or just beat analyst forecasts compared to firms that miss or comfortably beat analyst forecasts.

Changes in operations or production, specifically increased workloads and abnormal reductions of discretionary expenses, that are meant to increase earnings impacted the number of workplace injuries. The relation between benchmark beating and workplace injuries is stronger when there is less union presence, when workers’ compensation premiums are less sensitive to injury claims, and among firms with less government business.

Employer takeaway: When pressure is applied on managers to meet earning expectations, they can detract from safety by increasing workloads, hours, speed of workflow or cutting corners. Contrast these findings to a study published in the January 2016 issue of the Journal of Occupational and Environmental Medicine (JOEM), that found 17 publicly held companies with strong health and/or safety programs significantly outperformed other companies in the stock market. Two additional studies also found that financially sound, high-performing companies invest in employee health and safety. Rather than deviate from normal business practices to meet earnings expectations in the short-term, these companies have an ongoing, long-term commitment to a healthy and safe workforce that tangibly contributes to the bottom line.

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