This paper examines whether firms strategically legitimize large labor dismissals by performing ex-ante downward earnings management. We further assess whether the effect is larger under stakeholder pressure and whether these practices influence the external perception of firms’ behavior. As laying off employees without an economic reason is perceived as a breach of the social contract, stakeholders pressure firms to provide economic justification for LLDs. We argue that firms strategically legitimize LLDs by artificially worsening their financial performance through downward earnings management. (...) From a sample of European listed firms for the period 1998–2014, using a propensity score matching model to control for differences in observable characteristics between LLD and non-LLD firms, we find that firms manage their earnings downward in the year prior to LLDs. These results are more pronounced in the presence of high stakeholder pressure. As such, firms with stronger trade unions, higher visibility, stricter employment protection legislation, and more stakeholder-oriented legal environments have stronger incentives to manage earnings downward before LLDs. Finally, we document that downward earnings management prior to LLDs is effective at legitimizing LLDs, offsetting the negative external perceptions of firms in the aftermath of LLDs. This study contributes to the business ethics literature by identifying unintended consequences of stakeholder pressure around LLDs. It also brings important empirical insights into how ethically questionable decisions are strategically legitimized through further unethical practices. (shrink)

Does a pharmacist have a right to refuse to fill certain prescriptions? In this paper, I examine cases in which an employee might refuse to do something that is part of his or her job description. I will argue that in some of these cases, an employee does have a right of refusal and in other cases an employee does not. In those cases where the employee does not have a right of refusal, I argue that the refusals are just (...) cause for termination of employment. I argue that there are moral principles that support the different outcomes in the cases under consideration. I turn to pharmacy cases at the end of the paper and argue that they are analogous to cases where an employee does not have a right of refusal and thus fall under the principle that refusing to fill birth control prescriptions constitutes just cause for termination. (shrink)

Dismissal is a major issue for distributive justice at work, because it normally has a drastic impact on an employee’s livelihood, self-esteem and future career. This article examines distributive justice under the US’s employment-at-will (EAW) system and New Zealand’s just-cause dismissal system, focusing on the three main categories of dismissal, namely misconduct, poor performance and redundancy. Under EAW, employees have limited protection from dismissal and remedies are restricted to just a few so-called exceptions. Comparatively, New Zealand’s just-cause system delivers much (...) more just outcomes, both in terms of remedies and punishments. Despite a few shortcomings, it should be considered as a reasonable reference for policy changes in the US. (shrink)