Voluntary social reporting in three FTSE sectors: a comment on perception and legitimacy

TLDR

Patten’s examination of the Exxon Valdez spill prompted a broader look at how companies in other industries respond to environmental threats in their corporate social reporting. This study investigates environmental and social reporting in five FTSE companies across three sectors chosen for their perceived unethical behavior. The authors extracted social disclosure data from annual corporate reports spanning 1975 to 1997. Results indicate that legitimacy theory explains disclosure in some cases but not others, and that perception distortions and a growing array of disclosure media account for mixed findings, thereby challenging the usefulness of future annual‑report‑only studies.

Abstract

In examining the effects of the Exxon Valdez oil spillage on corporate social reporting (CSR) in the annual reports of oil companies, Patten suggested examining companies in other industries and their response to social (e.g. environmental) threats. This paper examines environmental and social reporting in five companies representing three FTSE sectors, selected according to an intuitive understanding of society’s perceptions of their depth of “sin” or supposed unethical behaviour. Social disclosure data were captured from annual corporate reports between 1975 and 1997. Results suggest that legitimacy theory may be an explanation of disclosure in some cases but not in others. The distorting effects of perception (of legitimacy‐threatening factors) and the increase in choices of disclosure media partly explain the mixed results and these factors and it is suggested, challenge the usefulness of future “annual‐report only” studies.