Restoring an eroded legitimacy: the adaptation of nonfinancial disclosure after a scandal and the risk of hypocrisy

Abstract

PurposeThis study contributes to the literature on hypocrisy in corporate social responsibility by investigating how organizations adapt their nonfinancial disclosure after a social, environmental or governance scandal.Design/methodology/approachThe present research employs content analysis of nonfinancial disclosures by 11 organizations during a 3-year timespan to investigate how they responded to major scandals in terms of social, environmental and sustainability reporting and a content analysis of independent counter accounts to detect the presence of views that contrast with the corporate disclosure and suggest hypocritical behaviors.FindingsFour patterns in the adaptation of reporting – genuine, allusive, evasive, indifferent – emerge from information collected on scandals and socially responsible actions. The type of scandal and cultural factors can influence the response to a scandal, as environmental and social scandal can attract more scrutiny than financial scandals. Companies exposed to environmental and social scandals are more likely to disclose information about the scandal and receive more coverage by external parties in the form of counter accounts.Originality/valueUsing a theoretical framework based on legitimacy theory and organizational hypocrisy, the present research contributes to the investigation of the adaptation of reporting when a scandal occurs and during its aftermath.

Communication, disclosure and power games: a figurational approach to understanding CPA Australia's corporate governance scandal

“…Organisations engage with stakeholders and set up internal procedures during crisis prevention to prepare for and reduce the likelihood of a crisis. When a crisis does occur, organisations enter crisis management and try to fix the root cause, allocate responsibility and manage stakeholder perceptions (Belluci et al, 2021;Blanc et al, 2019;Br€ andstr€ om and Kuipers, 2003;Coombs and Laufer, 2018). Post-crisis, organisations can learn from their mistakes, repair their broken reputation, regain trust and restore legitimacy (Belluci et al, 2021;Blanc et al, 2019;Bundy et al, 2017;Coombs and Holladay, 2023).…”

“…The five figurations playing the CPAA power game resorted to different communication channels and different forms of media to coordinate, gain support, persuade and ultimately influence the power balance (Couldry and Hepp, 2017). On the one hand, the old Board mainly chose silence to fend off criticisms and remained indifferent to the concerned members' requests for information until this strategy became untenable (Belluci et al, 2021). Inside the CPAA figuration, the CEO secured a favourable power balance and eventually exerted his power in actu by negotiating an uncompetitive remuneration scheme and a marketing strategy that revolved around his personal branding (Latour, 1986).…”

MNEs’ corporate governance disclosure: a strategic response to corrupt environments

“…As disclosure is a salient strategy that MNEs use to show them as the safeguards of the stakeholders’ interests (Jizi et al , 2014; Nadeem, 2021), it is an appropriate vehicle for MNEs to manage legitimacy. Disclosure of CG-related information not only boosts corporate transparency but it enhances MNEs’ image in the eyes of their stakeholders because it influences stakeholders’ attitudes and perceptions about them (Bellucci et al , 2021; Blanc, Cho, et al , 2019; Ioannou and Serafeim, 2015; Nerantzidis and Tsamis, 2017; Rudkin et al , 2018). This idea fits the basic assumption of legitimacy theory that states that, to survive, firms must maintain legitimacy in the eyes of their stakeholders (Ashforth and Gibbs, 1990; Bitektine, 2011).…”

Form and substance: Visual content in CSR reports and investors’ perceptions

“…Visuals are often employed to send various signals to the market and to elicit positive responses from stakeholders (Greening & Turban, 2000). In particular, this study's content analysis and subsequent experiment focus on companies’ intentions to portray themselves in ways that suggest that they are acting in accordance with society's standards, thereby restoring or enhancing their organizational legitimacy (Bellucci et al, 2021; Lock & Schulz‐Knappe, 2019). Cues .…”