Labor union representatives rely primarily upon management-issued financial statements to determine the size of the pool of shareable profits when conducting contract negotiations. In this study, we assess whether managers bargain ethically with unions by examining the relationship between financial statement comparability and the level of firm unionization. During collective bargaining, employee dignity and respect are best preserved when financial information asymmetries between managers and workers are low. We postulate that managers of highly unionized firms have incentives to make accounting choices that result in less comparable financial statements to improve the firm’s bargaining position over unions. Our empirical evidence supports our prediction, indicating that managers may unfairly exploit their informational advantage. The negative relationship between union strength and comparability is more pronounced in more complex firms, firms with low corporate social performance, highly levered firms, and firms with poor operating performance. Overall, our study provides strong evidence that managers use financial reporting choices to strengthen their negotiation power with employee labor unions. 

Keywords: Financial statement comparability; labor unions; corporate social responsibility; human rights; bargaining

JEL Classifications: J52, J53, M41​