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

Abstract

Purpose This 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/approach The 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. Findings Four 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/value Using 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.