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Pressure to deliver profits may decrease workplace safety

Is there any relationship between workplace safety and management's attempt to meet earnings projections? A recent study suggests there is.

Published in the Journal of Accounting and Economics, the study compared worker injury and illness rates in companies that met or just beat investment analyst earnings forecasts to those in companies that miss or comfortably beat forecasts. The study found that worker injury and illness rates were 5% to 15% higher in periods where a company met or just beat analyst forecasts, compared to those companies that failed to meet earnings projections or exceeded them by a wide margin.

Conclusions regarding earnings expectations and worker safety

The authors of the study are Prof. Judson Caskey of the UCLA Anderson School of Management and Prof. N. Bugra Ozel, UTD Jindal School of Management. They found that earnings forecasts relate to workplace safety in two ways:

High workloads - Managements that are under pressure to meet earnings expectations often ask employees to work longer hours or to increase production speed. Workers may also take it upon themselves to increase production by ignoring safety protocols or over-exerting themselves.

Reduced emphasis on worker safety - Managements may postpone expenditures for equipment maintenance or safety training.

In addition, in an article in the Harvard Business Review that recaps the findings of the study, the authors identified three factors that affect workplace injury/illness rates in publicly-held corporations:

  • Highly-unionized industries have lower injury rates than less unionized industries.
  • States with high workers' compensation premiums have lower injury rates than those with low workers' compensation premiums.
  • Companies with significant sales to governmental entities have lower injury rates than other companies.

Is there a difference between public and private corporations?

Does the relationship between workplace safety and profitability hold in all cases? That's a question not answered by the study. It compares workplace injury rates in publicly-held corporations, not privately-owned ones. It also excluded financial firms and heavily regulated companies such as utilities. It is a commonplace belief in the investment community that privately-held companies are able to ignore pressure to meet short-term profitability objectives. So it's possible there is no significant relationship between workplace safety and earnings expectations in privately-held companies.

But regarding publicly-held corporations, there is a clear relationship. The study found that:

  • In companies that met or just beat earnings forecasts, 1 in 24 workers suffered workplace injuries or illnesses.
  • In companies that missed earnings forecasts or comfortably exceeded them, 1 in 27 workers suffered workplace injuries or illnesses.

Whether your employer is doing well financially or struggling, you may be entitled to workers' compensation benefits if you suffer an on-the-job injury. You may wish to speak with an attorney concerning your claim.

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