Legitimising corporate reputation in times of employee distress through disclosure

Abstract

Purpose This paper aims to examine changes of non-financial voluntary reporting practices over time in response to episodes of employee-related distress. It investigates employee-related disclosures by the four largest electronic manufacturing services firms in China between 2008 and 2013 during a series of employment-related incidents, to investigate how the firms re-legitimate their reputation in response to the media coverage on those incidents. Design/methodology/approach A series of employee-related incidents that occurred in 2010-2012 is selected as the focus of this study, with total coverage of employee-related disclosures between 2008 and 2013. These incidents are directly linked to three of the four sample companies: Foxconn, Pegatron and Compal Electronics. Employee-related disclosures in corporate social responsibility (CSR) stand-alone reports are coded by a set of specifically designed instructions, and newspaper articles about employee-related incidents are coded for sentiment. Results are interpreted through two theoretical lenses: the media agenda setting theory and the legitimacy theory. Findings Newspapers reported the employee-related incidents in a way detrimental to the legitimacy of firms that directly involved in the selected industry. In the process of legitimation, firms switch between disclosing more employee-related information and reducing disclosures. The self-expectation on organizational legitimacy also affects how CSR reporting is used in legitimation. The employee-related disclosure analysed is closer to symbolic legitimation than substantive legitimation. Originality/value This study contributes to reporting practice by showing that employee-related disclosure is largely vacuous and to a greater extent is used as symbolic legitimation. The quality of disclosure requires significant improvement. This study contributes to the literature by using the legitimacy theory to interpret employee-related disclosure in China, addressing inadequate research efforts in the context of social and human rights dimensions of CSR reporting.

Employee-Related Disclosure: A Bibliometric Review

“…In a globalized environment that produces new employment models and poses new human resources management challenges, stakeholders pay increasing attention to the firms' working conditions and treatment of employees, as well as issues such as diversity and equal opportunities [7,14,21]. In this sense, a company's CSR agenda is considered unfeasible if it does not take into account the physical and emotional well-being of its employees [15] and integrates CSR principles into human resource management implementing policies to develop a quality workforce and enhance employees' welfare [33].…”

“…Employee-related disclosures are mostly voluntary and can be conveyed to stakeholders through different means, i.e., annual reports, sustainability/CSR reports, integrated reports, intellectual capital reports, human resources reports, corporate websites, etc. [20,21]. Prior research has shown that, in spite of the scant research attention that employee-related disclosures have received, companies do not report less employee-related information than environmental information [23], although some issues, such as diversity and equal opportunities, tend to be overlooked [11,12,17,18,26,30] and, in many cases, employee-related disclosure can be considered as a kind of public relation exercise [21].…”

“…[20,21]. Prior research has shown that, in spite of the scant research attention that employee-related disclosures have received, companies do not report less employee-related information than environmental information [23], although some issues, such as diversity and equal opportunities, tend to be overlooked [11,12,17,18,26,30] and, in many cases, employee-related disclosure can be considered as a kind of public relation exercise [21]. Furthermore, prior studies suggest that the extent and quality of employee-related disclosures are associated with some variables related to firm characteristics (e.g., company size, ownership structure, organizational culture, strategy, industry affiliation, etc.)…”

“…As can be seen, Australia stands out as the country with the highest number of publications on employeerelated disclosure, followed by the UK (8 papers). As noted by Cahaya et al [10] and Li et al [21], most published studies on employee-related disclosure focus on developed countries (both Anglo-Saxon countries and European countries, as well as Japan). However, interestingly, there are three developing countries (India, Malaysia, and Indonesia) among the countries with a higher number of publications on employee-related disclosure, which could indicate a growing research concern about working conditions and labor-related human rights in developing countries, characterized by relaxed labor standards and a low-cost workforce [14].…”

“…Within this cluster, the articles with more links are Vuontisjärvi [8], Kent and Zunker [9], Kent and Zunker [82], Loliwe [39], and Li et al [21]. In total, 17 papers were written by multiple authors, whereas there are 6 single authored publications.…”