Labour-friendly practices and value maximization: a SEM approach

Abstract

PurposeThis paper aims to present a vital strand that is part and parcel of an informed discussion towards the adoption of labour-friendly practices (LFP). This study is intended to examine the influence of LFP on five dimensions: job performance (JP), employee satisfaction (ES), corporate governance (CG), customer satisfaction (CS) and organizational performance (OP).Design/methodology/approachThe study was conducted on top and middle-level management personnel in several companies across the United Arab Emirates (UAE). A total of 1,000 questionnaires was distributed personally and via email of which 366 usable responses were analysed using confirmatory factor analysis and structural equation modelling (SEM).FindingsThe results reinforce the premise that LFP positively and significantly influences value maximization.Originality/valueThis paper affirmed that what is good for the employees (or other stakeholders) is also good for shareholders, but within the constraints of an ideal context, where the shareholders subscribe to strict ethical principles and the stakeholders act with their moral agency intact. Thus, the discussion of LFP comprises not just about what is satisfying for the employees but also what is conducive for optimal value creation. The empirical findings were, however, more compatible within the agency theory framework because of the non-instrumentality that was observed too ideal and philosophical for the stakeholder theory of value creation.