Government Ownership and Corporate Disclosures on Human Rights Pre- and Post-Labour Reforms: A Neo-Pluralist Legitimacy Perspective with Evidence from Saudi Arabia

Abstract

This study explores the factors influencing corporate disclosure of labor rights, modern slavery, and human rights in Saudi Arabia, an emerging economy experiencing significant regulatory and institutional reforms. Much of the previous research has relied on various theories, such as stakeholder theory, legitimacy theory, and institutional theory. These frameworks often assume that power is equally distributed among stakeholders, overlooking environments where one stakeholder holds significant political power. To address this gap, this study employs the neo-pluralist perspective of legitimacy theory, which highlights the crucial role of powerful actors, such as the state, in shaping disclosure practices. This research utilises a quantitative design, focusing on secondary data collection from 114 Saudi companies listed on the Saudi Stock Exchange. Disclosure levels were assessed using a structured index derived from the Global Reporting Initiative (GRI) standards. This index covers various areas, including employment, labour/management relations, occupational health and safety, diversity and equal opportunity, child labour, forced labour, and human rights assessments. The ownership structure of the companies was classified into governmental and non-governmental categories, consistent with findings from previous studies. Additionally, control variables such as company size, financial performance, and age were included in the analysis. Data were gathered from sustainability reports and annual reports available on the Tadawul platform, encompassing the period before and after the 2021 labour reforms. The results indicate that government ownership is positively associated with higher levels of voluntary disclosure; however, a definitive causal relationship cannot be established. Larger firms and those with stronger financial performance also demonstrated higher levels of disclosure. Furthermore, the labour reforms of 2021 significantly increased voluntary disclosure among all firms, highlighting the role of regulatory pressure. Nevertheless, the study points out the risk of token compliance, where increased disclosure occurs without substantial improvements in labour practices. The originality of this study lies in its demonstration that disclosure in Saudi Arabia is primarily influenced by state-led initiatives rather than by market or stakeholder pressures. By employing the neo-pluralist perspective of legitimacy theory, this research enhances theoretical understanding and offers practical insights to policymakers aimed at improving corporate accountability in emerging markets.