1. Issues in Social and Environmental AccountingVol. 2, No. 1 June 2008Pp. 36-60 The Case For Reporting Pro-Active Environmental Initiatives: A Malaysian Experiment On Stakeholder Influence Strategies Evangeline Elijido-Ten Faculty of Business and Enterprise Swinburne University of Technology AustraliaAbstractThe purpose of this research is to gain insights on the preferred strategies chosen by variousstakeholder representatives to influence management to either provide/not provide environ-mental disclosures in an experimental setting. A typology of resource relationships and influ-ence strategies is adapted as a framework to make sense of the views presented by variousstakeholder representative groups. To facilitate a Malaysian experiment, qualitative interviewswith the aid of a hypothetical vignette are conducted to understand how different stakeholdergroups go about seeking what they want from the management. The findings in this exploratorystudy indicate that although the model is useful to understand the influence strategies taken byeach stakeholder group, its effectiveness is tempered by the level of significance placed bythese groups on the environmental initiative and their perception of how the event will affecttheir stake on the firm.Keywords: Environmental disclosures, stakeholder influence strategy, Malaysia.INTRODUCTION ACCA, 2005; KPMG, 2005). It is in this regard that stakeholder theory hasWorldwide surveys show that stake- gained popularity as it offers a usefulholder pressures are one of the main framework given its basic premise thatdrivers for management’s increased fo- the firm’s success is dependent upon thecus in the area of corporate social and successful management of its relation-environmental responsibility leading to ship with its stakeholders (Freeman,increased stakeholder consultation in the 1983). Whilst the stakeholder literaturereporting process (Ernst & Young, 2002; is replete with research on stakeholderEvangeline Elijido-Ten is Senior Lecturer of Accounting at Faculty of Business and Enterprise, Swinburne Universityof Technology, Australia, email: firstname.lastname@example.org
2. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 37attributes and concerns on how to man- Firstly, it contributes to the developmentage them (see for example, Ullmann, of stakeholder theory by extending its1985; Roberts, 1992; Mitchell, Agle & application to the means by which stake-Wood, 1997; Elijido-Ten, 2007), little is holders try to get what they want fromknown about how stakeholders demand the firm particularly when a pro-activewhat they want from the firm (Frooman, environmental initiative is involved.1999). The purpose of this research is to Prior studies feature mainly negativegain insights on the preferred strategies events such as corporate downsizingchosen by various stakeholder represen- (Tsai, Yeh, Wu & Huang, 2005), possi-tatives to influence management to pro- ble threat to ecological balance and hu-vide/not provide environmental disclo- man life (Elijido-Ten, Kloot & Clarkson,sures in an experimental setting. 2007) and environmental organizations concerns and activism (Hendry, 2005;In this study, a Malaysian experiment is Frooman & Murrell, 2003, 2005). Sec-initiated to understand how different ondly, it uncovers relevant insights onstakeholder groups go about seeking how various stakeholder groups demandwhat they want from the management. environmental disclosures from an exFrooman’s (1999) typology of resource ante perspective. Much of previous envi-relationships and influence strategies is ronmental reporting research providesadapted as a framework to make sense evidence from an ex post perspectiveof the possible environmental reporting (e.g. Wiseman, 1982; Patten, 1992; Al-preferences imposed by the stakeholder Tuwaijri, Christensen and Hughes,representatives on the management. To 2004) thereby excluding the possibilityfacilitate the experiment, qualitative in- of gaining insights from stakeholderterviews are conducted with the aid of a views prior to the disclosure decision.hypothetical vignette to gain insights on Thirdly, it extends the stakeholder influ-the possible interplay between the man- ence strategy analysis to a wide varietyagement and various stakeholder repre- of stakeholders. Previous research hassentatives from an ex ante perspective, focused mainly on one stakeholderthat is, the environmental reporting pref- group such as environmental leaders/erences before disclosures are made. The groups (Frooman & Murrell 2003, 2005;hypothetical vignette features a pro- Hendry 2005) and employees (Tsai et alactive environmental initiative taken by 2005). And finally, it brings a perspec-a prominent publicly listed firm in the tive from a developing country such asbanking industry. The findings in this Malaysia into the social and environ-exploratory study indicate that although mental reporting literature.the model is useful to understand thepossible influence strategies taken by The motivation for using the Malaysianeach stakeholder group, its effectiveness context is driven by its inherent back-is tempered by the level of significance ground in terms of its economic devel-placed by these groups on environmental opment and strategic vision. Malaysiainitiative and their perception of how the offers an interesting setting since it is theevent will affect their stake on the firm. only developing country with an explicit timeline to achieve the developed nationThis study contributes to the existing status by the year 2020 (Vision 2020). Itbody of literature in a number of ways. is also one of the fastest growing econo-
3. 38 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60mies in Southeast Asia. Compared to its tion on the reporting preferences of vari-neighbouring countries, Malaysia has ous stakeholder groups and how they gorecovered much quicker from the 1997 about demanding what they want fromAsian financial crisis. Along with rapid the management particularly when aeconomic development, however, Ma- pro-active environmental initiative islaysia has been experiencing intensified concerned.environmental impact such as the defor-estation, erosion, air and water pollution The remainder of the paper is organisedlargely brought about by corporate ac- as follows. The next section provides ativities such as logging, large scale land brief overview of the literature on corpo-development, open burning, mining, rate social and environmental disclo-power stations and dam constructions sures leading to the introduction of the(Smith, Yahya & Amiruddin, 2007; framework. An explanation of the re-Sumiani, Haslinda & Lehman, 2007). search methodology employed is pro- vided next followed by the discussion ofFurthermore, Malaysia has not been im- results and further analysis. Finally, themune to environmental disasters such as concluding comments are provided.the 1993 Highland Towers erosion, the1997 haze crisis (when the Air PollutionIndex exceeded the 500 mark) and the LITERATURE OVERVIEW: MA-2004 tsunami that hit Penang along with LAYSIAN ENVIRONMENTAL RE-other countries killing more than PORTING200,000 people. Hence, it appeals to in-tuition that these adverse experiences As more compelling scientific evidencecould create higher environmental link climate change and global warmingawareness on the part of Malaysian to the activities inherent in commercialstakeholders which could then translate industrialisation, conventional wisdomto higher pressure for firms to be more would suggest that environmental re-environmentally pro-active and to pro- porting will continue to increase particu-vide environmental reports. This, how- larly if stakeholders’ demand for theseever, does not appear to be the case. A disclosures increased. Indeed, a numbercase study of Tenaga Nasional Berhad, of studies provide evidence that stake-the largest electricity producer in Malay- holder pressures are on the rise. Ernstsia, shows that its management does not and Young’s study of 147 of the Globalsee the need to provide environmental 1000 companies shows that majority ofdisclosures in their annual reports de- the key drivers for the management’sspite its adoption of a number of envi- increased focus in corporate social re-ronmentally-friendly activities. The fac- sponsibility (CSR) are stakeholder-tors, identified by the management, at- related:tributing to non-disclosure include theabsence of mandatory requirements, lack Surveyed companies identify fiveof awareness, knowledge and expertise key drivers as influencing the in-as well as lack of government and public creasing business focus on CSR ...pressure (Abdul Rahman & Ayob, These five drivers are: greater2005). Given this, the Malaysian context stakeholder awareness of corpo-offers a fertile ground for an investiga- rate ethical, social and environ-
4. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 39 mental behaviour; direct stake- The number of reporting compa- holder pressures; investor pres- nies grew from 25 in 1999, to 35 sures; peer pressures and an in- in 2000, reaching 40 companies creased sense of social responsi- by 2001. This represented 5.3%, bility … (Ernst and Young, 2002, 7% and 7.7% of the KLSE main p. 6) board listed companies in 1999, 2000 and 2001 respectively.Likewise, a survey of the world’s largest (ERMM, 2002, p. 8).250 companies reveals that, apart fromthe Global Reporting Initiative (GRI) Another descriptive study (Thompsonguideline, stakeholder consultation is and Zakaria, 2004) confirms that Malay-commonly used as the basis for CSR sian environmental reporting is still at itsreport content (KPMG, 2005). infancy and that majority of environ- mental disclosers are large companiesOne of the most commonly used vehi- with seven of the top 10 companies pro-cles to inform the public of the firm’s viding mostly general policy statementsocial and environmental accountability accompanied by some unsubstantiatedis the annual reports (Wiseman, 1982; declarative statements.Neu, Warsame & Pedwell, 1998;Cormier, Gordon & Magnan, 2004). Al- There is, however, an increase in thethough much of the financial informa- number of studies examining the moti-tion is mandated, today’s annual reports vations behind Malaysian environmentalcontain more voluntary information than disclosures using different theoreticalbefore (Anderson & Epstein, 1995). So- perspectives. Adopting the contractingcial and environmental accounting re- and political cost perspective, Ahmad,searchers around the world appear to Hassan and Mohammad (2003) examineagree that environmental reporting in the voluntary annual report environ-annual reports and other communication mental disclosures (AREDs) of 299media has increased over time (Patten, KLSE-listed companies using logistic1992; Gray, Kouhy & Lavers, 1995; regressions. Their results suggest lack ofKPMG, 2002, 2005; Elijido-Ten, 2007). support for the general hypothesis that firms voluntarily disclose environmentalStudies focusing on Malaysian environ- information to mitigate contracting andmental reporting, however, have not ap- political costs. They attribute this resultpeared in the literature until the turn of to the “argument that the commonly heldthe millennium. In a study conducted by theoretical framework of principal-agentthe Environmental Resources Manage- relationship may not hold in the Malay-ment Malaysia (ERMM, 2002), the sian context” (p.85). On the other hand,analysis of annual reports and stand- Ahmad and Sulaiman (2004) employalone environmental reports of compa- legitimacy theory in their study of KLSEnies listed in the Kuala Lumpur Stock Main Board listed companies from theExchange (KLSE) shows that environ- construction and industrial products sec-mental reporting is not widely practised tors. Using quantitative analysis, theirin Malaysia. The report, however, high- results provide limited support for legiti-lights an increase in environmental re- macy theory given the very low level ofporting, albeit minimal: disclosure. This implies that there is no
5. 40 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60serious attempt on the part of the compa- quantitative studies (Ahmad, et al, 2003;nies to appear legitimate to society. Smith, et al, 2007) seem to suggest that some expectations from the variablesThree recently published Malaysian directly derived from developed-countrystudies (Yusoff, Lehman and Nasir, studies may not hold true in Malaysian2006; Sumiani, Haslinda and Lehman, context. Third, the theoretical frame-2007; Smith, Yahya and Amiruddin, works used in previous studies (Ahmad2007) adopt no specific theoretical et al, 2003; Ahmad & Sulaiman 2004)model. In examining the AREDs of top achieve limited support. It is in this light50 companies listed in KLSE, Yusoff, et that the adoption of stakeholder theoryal (2006) use the qualitative method of using exploratory qualitative method iscontent and discourse analysis. Consis- deemed appropriate in this study.tent with the findings by KPMG (2005),their analysis shows that “majority ofdisclosures made were around the mo- THEORETICAL FRAMEWORK:tive of stakeholders’ concern” (p. 140). STAK EHO LDER I NF LUENCESumiani, et al (2007) also examine the STRATEGIESdisclosures made by top 50 Malaysianpublic companies to explore the report- The term stakeholder is originally intro-ing behaviour of ISO-certified compa- duced by Stanford Research Institutenies. They find that 13 companies are (SRI) to refer to those groups withoutISO14001 and all provide some form of whose support the organisation wouldenvironmental disclosure in their annual cease to exist (Freeman 1983). In devel-reports. Smith, et al (2007) concentrate oping stakeholder theory, Freemanon the disclosing companies identified (1983) introduces the stakeholder con-by the ERMM (2002) study in an at- cept in two models: (1) a business plan-tempt to find whether relationships exist ning and policy model; and (2) a corpo-between environmental disclosures and rate social responsibility model of stake-certain corporate characteristics. Of the holder management. In the first model,explanatory factors examined, only fi- the focus is on developing and evaluat-nancial performance is found to be sig- ing the approval of corporate strategicnificant. However, contrary to expecta- decisions by groups whose support istion, it is negatively associated with dis- required for the firm’s continued exis-closures prompting their conclusion that tence. The stakeholders identified in this“environmental reporting practices in model include the owners, customers,Malaysia appear to differ from those public groups and suppliers. Althoughelsewhere, which may be partly attribut- these groups are not adversarial in na-able to the maturity of reporting proc- ture, their possibly conflicting behavioress” (p. 195). is considered a constraint on the strategy developed by management to best matchThe Malaysian studies reviewed high- the firm’s resources with the environ-light a number of important points. First, ment. In the second model, the corporatealthough environmental reporting in Ma- planning and analysis extends to includelaysia is still very limited, majority are external influences which may be adver-driven by stakeholder concerns (Yusoff sarial to the firm. These adversarialet al, 2006). Second, previous Malaysian groups may include the regulatory bod-
6. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 41ies, environmentalist and/or special in- what they want from the firm?”terest groups concerned with social is-sues. The second model enables manag- Frooman’s (1999) typology of influenceers to consider a strategic plan that is strategies, which borrows heavily fromadaptable to changes in the social de- resource dependence theory, is used tomands of non-traditional stakeholder extend the development of stakeholdergroups. theory that accommodates the view from the stakeholders’ perspective. The basicCorporate environmental responsibility premise central to resource dependenceis one area in which much community theory is that an entity’s need for re-awareness has developed given the in- sources provides opportunities for otherscreasing manifestations of the effects of to control the firm. Power is a centralglobal warming, deforestation, air, land theme in the argument because the na-and water pollution. As proposed by ture of the relationship is determined bystakeholder theory, this increased level who is dependent on whom and howof environmental awareness creates the much. Frooman explains that operation-need for companies to include non- alising power under resource depend-traditional stakeholders like the regula- ence theory is quite different. He quotestory adversarial groups in their corporate Pfeffer and Salancik (1978):plans to adapt to changing social de-mands. The literature hints that compa- For the dependence between twonies provide disclosures voluntarily for organisations to provide one or-various reasons (Gray & Bebbington, ganisation with power over the2001; Buhr, 2007), most of which could other, there must be asymmetry inbe related to satisfying various stake- the exchange relationship (p. 53)holder groups including adversarial …Power, thus, is defined in rela-stakeholders. Furthermore, given that tive terms, that is, A has powermajority of Malaysian environmental over B if B is more dependent ondisclosures are motivated by stake- A relative to A’s dependence on Bholders’ concerns (Yusoff et al, 2006) (p. 196).and the increasing need to get the stake-holders involved in the reporting process Drawing from this power relationship,worldwide (KPMG, 2005), stakeholder two types of resource control strategiestheory offers a useful framework for this are suggested: (1) withholding strategiesstudy but perhaps not in the conven- - defined as those where stakeholderstional way it has usually been adapted. discontinue providing a resource to a firm with the intention of making theThe notion of ‘successful management’ firm change a certain behaviour; and (2)appears to have been taken mostly from usage strategies - those in which thethe management’s perspective; hence, stakeholder continues to supply a re-much of the early development in stake- source, but with strings attached, i.e.holder theory has focused on stakeholder some conditions must be met. Froomanattributes and concerns on how to man- and Murrell (2003; 2005) later labelledage them. As a result, there is a scarcity ‘withholding’ as coerce and ‘usage’ asof literature addressing the question: compromise strategies.“how will the stakeholders try to get
7. 42 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 Figure 1: Typology of Resource Relationships and Influence Strategies IS THE STAKEHOLDER DEPENDENT ON THE FIRM? NO YES Is the firm dependent P1: When the relationship is one P2 : When the relationship is one on the stakeholder? of LOW INTERDEPEND- of FIRM POWER, the stake- NO ENCE, the stakehoder will holder will choose indirect-usage choose indirect-withholding strategy to influence the firm. strategy to influence the firm. P3 : When the relationship is P4 : When the relationship is one one of STAKEHOLDER of HIGH INTERDEPEND- YES POWER, the stakeholder will ENCE, the stakeholder will choose direct-withholding strat- choose direct-usage strategy to egy to influence the firm. influence the firm. Source: Adapted from Frooman (1999, p.200)Another source of power is one that nor the stakeholder are dependent oncomes from relationships with others each other; (2) high interdependence –who supply resources to a focal firm. when both the firm and the stakeholderWhile some stakeholder groups do not are dependent on each other; (3) stake-have the power to use either withholding holder power – when the firm is depend-or usage strategies, they could form an ent on the stakeholder; and (4) firmalliance with other stakeholder groups power – when the stakeholder is depend-with whom the focal firm has a depend- ent upon the firm. The last two relation-ence relationship. Frooman identifies ships show power asymmetry.this concept as types of influence path-ways which he divides into two: (1) di- Appealing to these characterisations,rect pathways – those in which the Frooman’s typology of resource rela-stakeholder directly manipulates the tionships and influence strategies sug-flow of resources to the firm; and (2) gests four propositions relating to theindirect pathways – those where a stake- choice of pathway (direct or indirect)holder works in concordance with a and strategy (withholding or usage). Theprincipal despite not having formal rela- choice of pathway-strategy combinationtionships with the focal firm. Note that is conditional on the power dependenceboth types of influence pathways could relationship between the firm and theuse either withholding or usage strate- stakeholders. These propositions aregies. shown in Figure 1.Finally, Frooman introduces a typology A number of studies have adoptedof resource relationships based on the Frooman’s model. For example,powerdependence relationship between Frooman and Murrell (2003, 2005) usedthe firm and the stakeholders. Four types experimental approach with the aid ofof relationships are observed: (1) low hypothetical vignettes to solicit re-interdependence – when neither the firm sponses from actual environmental lead-
8. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 43ers regarding events with negative im- stake on the firm AND the firm manage-pact, e.g. recycling used car batteries in ment/stakeholder interdependence struc-a developing country that has no envi- ture WILL determine whether or not theyronmental regulations. Hendry (2005) will demand environmental disclosure.conducted interviews with 28 represen-tatives of four environmental organisa- Hence, in extending the application oftions to understand why they choose Frooman’s (1999) typology in the fieldparticular types of strategies to influence of environmental disclosures, Proposi-firms to change. And Tsai, et al (2005) tions P1 to P4 will apply, if and only if,used the model to understand the em- there is a perceived demand for environ-ployees’ actions of 18 Taiwanese firms mental disclosure. Furthermore, al-involved in business downsizing. though Frooman’s typology is useful to analyse possible strategies which stake-Whilst these studies provide some em- holders may adopt to demand environ-pirical support to the usefulness of the mental disclosures from the firm, it ismodel, what is clear from prior research clear that the ‘withholding’ strategy as-is that the model has not been used in sumes that the event or issue has a nega-the context of environmental reporting. tive connotation necessitating pressureFurthermore, the use of the model has from the stakeholder/s to withhold orbeen restricted mainly on negative even withdraw a critical resource. Theevents thereby limiting the possibility of typology, therefore, is not entirely suit-gaining insights from stakeholder prefer- able when the focal event has a positiveences when a pro-active environmental environmental impact. Hence, for thisevent is involved. It is also evident that study, the propositions are slightly modi-the use of the model has so far been re- fied to replace the ‘withholding’ strategystricted to a few stakeholders such as with ‘promoting’ strategy. The rationaleenvironmental leaders/groups (Frooman for this is clear - those stakeholders who& Murrell 2003, 2005; Hendry 2005) can see the value of environmentallyand employees (Tsai, et al, 2005). What friendly practices adopted by the firmis lacking is an attempt to extend the are not likely to even consider withhold-analysis to a wide variety of stake- ing their support because of non-holders. disclosure. Instead, they might even ‘promote’ this event either directly orThis study addresses these gaps in the indirectly. Therefore, the four proposi-literature. Frooman’s model is adapted tions emanating from the modifiedas a framework to make sense of the framework are restated as follows:power-dependence relationships be-tween the stakeholder groups and firm P1: If the stakeholder/s place high sig-management. In order to apply the nificance to the proactive environ-propositions in the context of environ- mental initiative and their relation-mental disclosure demand, there is an ship with the firm is that of ‘LOWimportant underlying assumption, that INTERDEPENDENCE’, the stake-is: holder/s will adopt indirect promot- ing strategy to demand environ-The stakeholder’s perception of how the mental disclosures.environmental event will affect their P2: If the stakeholder/s place high sig-
9. 44 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 nificance to the proactive environ- a useful framework for an examination, mental initiative and their relation- the processes involved in selecting these ship with the firm is that of ‘FIRM strategies are still not very much under- POWER’, the stakeholder/s will stood. Inductive methodologies like adopt indirect usage strategy to qualitative interviewing techniques are demand environmental disclosures. generally favoured for this type of ex-P3: If the stakeholder/s place high sig- ploratory research primarily because the nificance to the proactive environ- choices of strategies are mainly subjec- mental initiative and their relation- tive. ship with the firm is that of ‘STAKEHOLDER POWER’, the Research Design and Methods stakeholder/s will adopt direct pro- moting strategy to demand environ- This study is organised into two phases. mental disclosures. The first part is the pilot phase aimed atP4: If the stakeholder/s place high sig- exploring how Frooman’s model can be nificance to the proactive environ- used in Malaysian context given that mental initiative and their relation- little is known about how Malaysian ship with the firm is that of ‘HIGH business psyche may affect business de- INTERDEPENDENCE’, the stake- cisions. This phase used both secondary holder/s will adopt direct usage (website perusal and relevant news arti- strategy to demand environmental cles using Factiva database) and primary disclosures. data in the form of unstructured/semi- structured qualitative interviews. Quali-These propositions are consistent with tative interviews is the preferred term toresource dependence theory in that the distinguish this method from the highlylevel of interdependence between the structured line of questioning normallyfirm and stakeholder plays a significant used in survey research (Rubin & Rubin,role in the choice of strategy used. For 2005). Since the responses provided byexample, when the firm has a low level the participants in this phase are triangu-of dependence on the stakeholder (as in lated against secondary data gatheredP1 and P2), the firm does not need to be from media and website releases, fiveresponsive to the stakeholder’s demands, interviews are considered sufficient.leaving the stakeholder no choice but tofind an ally to indirectly influence the The insights gathered from this phasefirm. On the contrary, when the firm provide the platform for the identifica-depends heavily on the stakeholder for tion of the salient stakeholders. Mitchell,survival, the stakeholders will have no Agle and Wood’s (1997, p.873) stake-hesitation to express their demands di- holder salience typology propose thatrectly to the firm (as in P3 and P4). “stakeholder salience will be positively related to the cumulative number of stakeholder attributes – power, legiti-RESEARCH METHODOLOGY macy, and urgency – perceived by man- agers to be present”. Although, it is notThe previous section revealed that while the purpose of this research to directlyresource dependence theory and stake- test this proposition, the typology is use-holder influence strategies may provide ful in identifying the salient stakeholders
10. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 45to be included in the main phase of this views tends to be around 15 +/- 10.”study. Most of the interviews are conducted in Malaysia in 2005. As all the targetedIn line with Frooman and Murrell (2003, stakeholder groups are represented and2005), the main phase adopted an ex- given the time and geographic con-perimental approach using a hypotheti- straints, 15 interviews are consideredcal vignette to solicit the views of the sufficient in the main phase of this ex-interviewees representing a wide array ploratory study.of stakeholders identified from the pilotphase. A structured interview question- Analysis Techniquesnaire is designed to include both closedand open-ended questions (see the Ap- Analysis for the unstructured/semi-pendix). Given that the questionnaire structured qualitative interviews in theasks for the informant’s opinions and pilot phase is done in two stages. In thereactions regarding the chosen environ- first stage, all the interviews are tran-mental issue/event, it is considered im- scribed word-for-word. Then in the sec-portant not to select the participants ran- ond stage, the transcripts are analysed.domly. A number of authors argue that Memoing is used to summarise the re-qualitative samples tend to be purposive sponses and to tie together differentrather than random (Kuzel, 1992; Miles pieces of data into clusters of recognis-& Huberman 1994). Hence, the partici- able concepts. Memoing is a data reduc-pants are chosen based on the criteria tion analytical technique that allows thethat, at least, each can represent the researcher to write ‘memos’ to self sum-stakeholder groups identified in the pilot marise the responses and to identify re-phase and most importantly, that their curring themes (Miles & Huberman,current/previous positions and experi- 1994, p.72). The primary data are sup-ence would allow them to provide realis- plemented with secondary data fromtic responses to the hypothetical ques- news reports/relevant websites.tions asked. Snowball sampling (Patton,1990) is used since this approach is use- In the main phase, the responses to theful for locating information-rich key in- closed and open-ended interview ques-formants. Initially, the names/contact tions are separately analysed. Responsesdetails of prospective participants are to the closed interview questions aretaken from relevant company websites tabulated. Then, quantitative techniquesand from recommendations of the inves- such as weighting and ranking are used.tigator’s former colleagues. Once con- On the other hand, responses to thetacts are established, the participants open-ended interview questions are fullyintroduced other prospective informants. transcribed and the qualitative tech- niques of ‘question-by-question matrix’Another fifteen interviews are conducted and ‘memoing’ are used. Both the quan-in the main phase. Kvale (1996, p.101) titative and qualitative analyses arenotes that, in designing an interview linked using a ‘conceptual matrix’ or astudy, it is important to “interview as ‘pattern matching’ technique. Miles andmany subjects as necessary to find out Huberman (1994, p. 127) explain that awhat you need to know… in current in- conceptually clustered matrix has “itsterview studies, the number of inter- rows and columns arranged to bring to-
11. 46 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60gether items that “belong together.” This practices is formulated. The vignetteoutcome can happen in two ways: con- features a firm in the banking industryceptual – the analyst may have some a which promotes sustainability and so-priori ideas about items that derive from cially responsible initiatives. The focalthe same theory or relate to the same event is the investment on a ‘state of theoverarching themes; or empirical – dur- art’ technology that enables recycling,ing early analysis you may find that in- reduction of waste and energy consump-formants answering different questions tion. Details of the vignette are shown inare tying them together or are giving the appendix.similar responses”. These techniques areuseful in conducting qualitative studies. Another important aspect of the pilot phase is the identification of the salient stakeholders. The stakeholder literatureRESULTS AND DISCUSSION hints that while there could be an infinite number of stakeholders ‘out there’, aIdentification of Relevant Environ- coalition analysis (Freeman, 1983; 1984)mental Issues and Stakeholders would suggest that certain stakeholders can be grouped together as they mayThe qualitative interviews and the pe- have similar demand/stake on the firm.rusal of relevant media/website reports Utilising Mitchell, et al’s (1997) typol-point to a number of significant environ- ogy characterised by the attributes ofmental issues that are specific in the Ma- power, legitimacy and urgency, a list oflaysian setting. For example, the popular the stakeholder groups commonly re-media (New Straits Times via Factiva) ferred to by the respondents in the pilothighlights a number of environmental phase is collated. The groups identifiedissues such as: consist of both primary and secondary or adversarial stakeholders. The primary• Toxic wastes and chemicals used by stakeholders include the long-term credi- companies destroying the ecological tors, customers, suppliers, employees, balance; relevant government agencies and the• Health risks due to rampant air pollu- shareholders. It is decided to split the tion arising from toxic wastes and for- shareholder stakeholder group into two: est fires; major shareholders and minor sharehold-• Push for companies to adopt environ- ers, since it is conceivable that the two mentally-friendly technology and prac- groups are able to exert their power on tices. the firm in different manners. The sec- ondary stakeholder groups identified byGiven that the purpose in this study is to the respondents include the media andgain insights on stakeholder reporting the environmentalists.preferences when pro-active environ-mental initiative is involved, attention is Establishing Power-Dependence Rela-focused on the third environmental is- tionshipsue. Hence, a hypothetical vignette con-taining an environmental event that Part I of the structured interview ques-simulates the popular media coverage on tionnaire (see the Appendix) starts byenvironmentally-friendly technology and asking the participants to provide gen-
12. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 47eral information like their current/ and pattern matching analyses con-previous position and the type of stake- ducted. Note that despite the majorholder they are most likely to be classi- shareholders (MJS) being perceived tofied based on their past/current experi- be the most important stakeholder groupence. They are also asked to rank the to company survival (ranked 1), the rela-stakeholder groups identified from the tionship established is one of high inter-pilot phase in the order of their per- dependence. This is because their po-ceived relevance to the company’s sur- tential to threaten firm survival is neu-vival with 1 being the most important tralised by their high cooperation poten-and 9 being the least important. The pur- tial. The major shareholders, by virtue ofpose here is to understand the respon- their substantial investment, are depend-dents’ perceived power-dependence re- ent on the firm for their capital growth.lationship between the stakeholders and However, the firm is equally dependentthe management. on them for funding. Despite the lower ranking (ranked 4) for long-term credi-It appeals to intuition that the higher the tors (LTC), the same rationale appliesmean ranking is (i.e. closest to 1), the for companies highly dependent onmore probable it is for that stakeholder long-term debt for funding.group to exert their power over the firm(i.e. stakeholder power) given that these In the absence of any urgent event, ad-groups are most important to company versary stakeholders like the mediasurvival. In the same token, the lower (MED) and environmentalists (ENV)the mean ranking is (i.e. closer to 9), the virtually have neither power nor legiti-less probability there is for that stake- mate claim against the firm, i.e. theirholder group to have influence over the potential to threaten or cooperate withfirm suggesting firm power. This rank- the firm is generally low. As confirmeding analysis, however, is not likely to by the low ranking of MED and ENVgive an indication as to whether there is (shown in Table 1), the firm does notperceived high/low interdependence. depend on them for survival, hence theThus, a follow-up open-ended question relationship is expected to be one of lowasking the respondents to elaborate on interdependence.their reason for ranking is necessary toestablish the perceived potential of the While the customers (CUS) and the rele-stakeholder to threaten or cooperate with vant government agency (RGA), to athe firm. An analysis of the stake certain extent, may depend on the firmholders threat and cooperation potential for various reasons such as the supply ofis likely to give an indication on the per- goods/service (for CUS) and socio-ceived level of interdependence between economic progress (for RGA), the analy-the firm and the identified stakeholder sis shows that the firm is dependent ongroups. these groups more than they are to the firm, i.e. stakeholder power. This isTable 1 shows the overall mean ranking because of the stakeholder’s ability toand qualitative findings summary. The threaten the firm’s existence in terms oflast column shows the established lost business (for CUS) as well as penal-power-dependence relationship based on ties, sanction or even closure (for RGA).the findings from the conceptual matrix
13. 48 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 Table 1: Summary of Power-Dependence AnalysisStake- Overall Qualitative Findings Summary: Power-Dependenceholder Mean Analysis of Threath/Corporate Potential Relationship Estab-Group Ranking Shown in brackets [ ] are interviewee number lished LEGEND: LO – Low; ME – Medium, HI - High POTENTIAL FOR THREAT (PT) ð HI High Interdependence:MJS 1 POSSESS CONTROL & POWER TO MAKE DECISIONS [6,8,11,13,16,17,20] -both the potential to cooper- (2,30) POTENTIAL FOR COOPERATION (PC) ðHI ate and threaten the firm are BECAUSE OF CAPITAL INVESMENT [15,20] equally high. POTENTIAL FOR THREAT (PT) ð HI Stakeholder PowerCUS 2 WITHOUT CUSTOMERS SUPPORT, THE COMPANY CAN’T SURVIVE -highly important for firm (3,36) [10,14,16,18,19] survival with high threat POTENTIAL FOR COOPERATION (PC) ð LO DEPENDENT ON HOW MUCH THE CUSTOMER RELY ON THE FIRM BUT potential and low potential GENERALLY LOW BECAUSE OF COMPETITION [10,14,19] to cooperate. POTENTIAL FOR THREAT (PT) ð LO to HI Firm powerEMP 3 HIð Employee skills/services are vital [12,16] -although quite highly (4,20) MEð Employee skills/dedication is needed  ranked; Malaysian employ- LOð Employee generally have not say...... POTENTIAL FOR COOPERATION (PC) ð HI ees are more likely to coop- POTENTIAL (FINANCIAL) SUCCESS IS CRUCIAL TO EMPLOYEES JOB erate than to threaten firm SECURITY [8,14,18] survival. POTENTIAL FOR THREAT (PT) ð LO to HI High InterdependenceLTC 4 NOT ALL COMPANIES DEPEND ON LTC BUT MANY DEPEND ON BANKS -for companies relying more (4,67) FOR FUNDING; POSSESS POWER TO RETRACT FUNDING [11,18] on LTC, both potential to POTENTIAL FOR COOPERATION (PC) ð LO to HI COMPETITIVE INVESMENT & L-TERM RELATIONSHIP [11,15] cooperate and threaten will be high. POTENTIAL FOR THREAT (PT) ð HI Stakehoder PowerRGA 5 DEPENDING ON THE INDUSTRY , POSSESS PUNITIVE & OTHER -despite low to high poten- (4,77) POWER; COULD STOP COOPERATION IF NECESSARY [13,16,18,20] tial to cooperate, their sanc- POTENTIAL FOR COOPERATION (PC) ð LO to HI POLICIES CAN PROVIDE CONDUCIVE INVESMENT CLIMATE TO ASSIST tion and punitive power is THE COMPANY enough to threaten company survival. POTENTIAL FOR THREAT (PT) ð LO Firm PowerSUP 6 BECAUSE OF BUSINESS OPPORTUNITY & COMPETITION [14,15,18,19] -given the low ranking and (5,43) POTENTIAL FOR COOPERATION (PC) ð HI low threath potential but MUTUAL BUSINESS RELATIONSHIP NECESSITATES SUPPLIER COOP- ERATION [17,18,20] high cooperation potential. POTENTIAL FOR THREAT (PT) ð LO Firm PowerMIS 7 POSSESS NO POWER INDIVIDUALLY; -given the low ranking and (5,57) CAN’T MAKE DECISION [8,16,20] low threath potential but POTENTIAL FOR COOPERATION (PC) ð LO to HI CAPITAL INVESMENT CAN BE EASILY LIQUIDATED [8,9] high cooperation potential. POTENTIAL FOR THREAT (PT) ðLO to HI Low InterdependenceMED 8 MEDIA COULD PLAY A ROLE BUT NOT SO POWERFUL BECAUSE IT’S -without any urgent issue, (6,77) GOVERMENT-CONTROLLED      threat and cooperation POTENTIAL FOR COOPERATION (PC) ð LO to HI DEPENDING ON POLITICAL CONNECTIONS    potential are both low. POTENTIAL FOR THREAT (PT) ð LO to HI Low InterdependenceENV 9 ðCould create a lot of trouble for company if there is a need  -without any urgent issue, (7,77) POTENTIAL FOR COOPERATION (PC) ð LO to HI threat and cooperation ðDEPENDING ON WHETHER THE COMPANY ADOPTS ENVIRONMEN- TALLY FRIENDLY PRACTISE OR NOT [11,15,16,18,19,20] potential are both low.LEGEND: MJS – major shareholder; CUS – customers; EMP – employees; LTC – long term/major creditors; RGA– relevant goverment agency; SUP – supplier; MIS – minor shareholder; MED – media; ENV – enviromentalist.Finally, the employees (EMP), suppliers firm to find another supplier. Moreover,(SUP) and minor shareholders (MIS) are in the Malaysian setting, the employeesfound to fall under the firm power rela- (EMP) and minor shareholders (MIS),tionship since they are more likely to rarely exercise their prerogative to ques-depend on the firm for their survival tion management decisions. Thus, thethan vice versa. Generally in a highly power lies mainly with the firm manage-competitive market, the suppliers need ment. Although the above discussionthe firm more because it is easy for the may appeal to intuition, without a par-
14. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 49ticular event that could change the The analysis shows that 8 out of 15 re-power/interdependence relationships, the spondents consider the featured event toanalysis is incomplete. This is where be between Very Significant (2) and Sig-Part II of the questionnaire is deemed nificant (3). On average, however, theuseful. results suggest that the perceived ur- gency of the event is relatively low withPerceived Significance of the Event mean average of 3.33 indicating some- where between Significant to Moder-In order to understand management/ ately Significant. Furthermore, none ofstakeholder behaviour, the literature the stakeholders represented consider thehints that there is a need to ‘feel and see’ event to be Extremely Significant (1),the world from their perspectives. Free- whilst 4 perceive the event to be Notman (1984) suggests that role playing is Significant (5) at all.an effective way to synthesise and fullyunderstand the objectives and beliefs of It appears that pro-active environmentalparticular stakeholders. Role playing, initiatives are not given much kudos ashowever, can only be effective if the indicated in the following comments:participants have some first-hand knowl-edge of the role they are playing from …here in Malaysia, it’s quitetheir own experience. This is why it is common that when you’re doingconsidered crucial for this research that well, you won’t get much atten-participants are chosen on the basis of tion. If you’re doing prettytheir exposure to Malaysian business badly ... then you get the atten-environment and on the presumption tion… [Interviewee 7]that their current/previous position en- In Malaysia, it’s very much profit-ables them to represent the stakeholder oriented … It doesn’t work… In-groups identified. terviewee 8] I think in our environment here,Hence, in Part II of the questionnaire, this [environmental] event is notthe interviewees are asked, after reading significant… What they care isthe hypothetical vignette, to assume the just making profit - the bottom-role of the stakeholder they are most line. [Interviewee 9]likely to be associated with given theirprevious/current professional experi- The above sentiments are shared by theence. They are then asked how signifi- majority of the respondents like Inter-cant the featured event is to them, on a viewees 12, 14, 15, 16, 18 and 19 whoscale of 1 (Extremely Significant) to 5 expressed their belief that because Ma-(Not Significant), in deciding whether to laysian environmental awareness is gen-provide continued support to the com- erally low, the local customers and em-pany. They are also asked to elaborate ployees would less likely find this eventtheir reasons for providing such signifi- very high in their priority list. The localcance level. The purpose here is to elicit customers and the employees are thethe respondent’s perception on how ur- closest representatives of the Malaysiangent the environmental issue/event is to public in this study.them.
15. 50 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60Demand for Environmental Disclo- munication with press conference/sures release as the most preferred medium followed closely by some form of inter-The purpose in Part II Questions 2 (Q2) nal communiqué such as newsletters,and 3 (Q3) is to understand whether emails and memos. Of the 3 respondentsthere is a demand for environmental dis- who expect not to receive disclosuresclosures from each stakeholder represen- from other means, one represents thetatives concerning the featured event. local customer [Interviewee 19], whileQuestion 2 aims to solicit the partici- the other two include a representativepants’ Annual Report environmental from the media [Interviewee 15] and thedisclosures (AREDs) preference while environmentalist [Interviewee 17].Question 3 asks if they are likely to de- When asked to explain why they wouldmand environmental disclosures in other not expect the firm to provide disclo-ways of communication. Of the 15 re- sures through other means, their com-spondents, only two—a minority share- ments are:holder and a local customer representa-tive [Interviewees 18 and 19] - will not- I’m taking the stand that I am notdemand AREDs. The implication is such a good corporate citizen whichthat while pro-active environmental means I’m not really interestedevent is not given the highest priority, with pro-active environmentalthere is a demand from various stake- initiatives. holders for this event to be disclosed in It’s already good, there’s no needthe company’s Annual Report. When to promote. It’s just like having aInterviewees 18 and 19 are asked to ex- good programme, it will sell byplain why they will not demand AREDs, itself. the necessity for government regulation Honestly, I really wouldn’t botheris raised: whether the company do it or not [i.e. provide ‘other’ disclosures], You see the problem is, there is no I will still support this company. statutory requirement to provide  this type of disclosure… I reckon, as long as the government will not Although the response provided by In- make a legal requirement to do terviewee 19, once again, confirms ear- so, I don’t think many companies lier comments on low environmental will bother to provide voluntary awareness, the explanations offered by disclosure.  Interviewees 15 and 17 give an entirely I think at the end of the day, one different view, that is, not demanding depends on the government to disclosure does not tantamount to non- drive the environmental issues. In appreciation of the company’s pro-active the Malaysian context, a lot de- environmental efforts. Hence, it is clear pends on the government to take that direct answers provided to questions that leadership role.  pertaining to environmental disclosure demand are not sufficient. The answersFurthermore, in response to Q3, all but to the open-ended questions asking themthree of the respondents prefer to see to elaborate on their reasons provide athis event featured in other ways of com- rich data source for further analysis.
16. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 51 Table 2: Summary of ResponsesINTERVIEW NUMBERS 13 18 10 11 16 8 9 19 20 7 14 12 15 6 17STAKEHOLDER MJS MIS LTC LTC RGA EMP EMP CUS CUS SUP SUP MED MED ENV ENVQ1-Perceived signifi- 5 3 4 2 2 5 5 5 2 3 2 2 4 2 4cance of featuredeventQ2-Will demand AREDs? Yes No Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes YesQ3-Will demand disclo- Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes No Yes Nosure elsewhere?Q4-Preferred Action b a b b c b a a c b b c c c cLegend Stakeholder MJS – major shareholder; CUS – customers; EMP – employees; LTC – long term/major creditors; RGA – relevant government agency; SUP – supplier; MIS – minor shareholder; MED – media; ENV – environmentalist. Legend Q1 : (5) Not Significant; (4) Moderately Significant; (3) Significant; (2) Very Significant; (1) Extremely Significant Legend Q4: (a) Ignore the environmental event and continue supporting the company. (b) Encourage the firm to make environmental disclosure & continue supporting the firm. (c) Continue supporting the company and attempt to influence other to do the same.These comments clearly have further who either feel strongly about environ-implications in their preferred action mental issues and/or see the need for thewhich is discussed next. firm to publicise its pro-active environ- mental initiatives. Table 2 provides thePreferred Stakeholder Action summary of direct answers to the closedended questions Q1 to Q4 in PartIn Question 4 (Q4), participants are II of the structured questionnaire.asked to choose the most likely actionthey would take if they are aware of the The result shows that majority (12 out offeatured environmental event and the 15 respondents) see some value in en-company did not provide any environ- couraging the firm to make environ-mental disclosure. Three ‘possible ac- mental disclosures (Options b and c)tions’ are provided as follows: with six respondents going further as to promote and influence others to do the(a) Ignore the environmental event and same (Option c). Only three respondents continue supporting the firm. choose to ignore the event (Option a). Of(b) Encourage the company to make en- these three, the local customer vironmental disclosure and continue a nd e mpl o ye e r e pr e s e nt a t i ve s supporting the company. [Interviewee 19 & 9] believe that the(c) Continue supporting the company environmental event is not significant and attempt to promote this initiative (consistent with their response to Q1), by influencing others to do the same. hence they do not see the need to compel the management to provide disclosures.Option (a) is likely to be chosen by those It is, however, interesting to probewho believe that environmental consid- deeper as to why the minority share-erations are not significant and/or are not holder representative [Interviewee 18]likely to affect their stake on the firm. consider the event significant and yet heOn the other hand, Options (b) and (c) chose to ignore the event (Option a).are likely to be chosen by stakeholders
17. 52 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 Figure 2: Analysis of Stakeholder/Firm Interdependence & StrategyFURTHER ANALYSIS OF RE- Recall, however, that these power-SULTS dependence relationships established earlier is based from the respondents’As is clear from the results presented in general perception of how crucial eachthe previous section, the answers to the stakeholder is to company survival with-closed questions (Q1 to Q4) do not pro- out particular consideration of the fea-vide sufficient basis for further analysis. tured pro-active environmental event.Cognisant of this limitation, these an-swers are analysed further together with The experimental approach is particu-the answers to open-ended questions larly useful for further analysis as it al-probing deeper into the reasons for their lows the injection of a particular sce-choice. nario in a relatively controlled environ- ment. As is the case in this study, a pro-The four power-dependence quadrants active environmental initiative is intro-of ‘Low Interdependence’, ‘Firm duced by a fictitious bank, KeluargaPower’, ‘Stakeholder Power’ and ‘High Banking Berhad (KBB), and the respon-Interdependence’ and the respective in- dents are asked to comment and explainfluence strategies corresponding to their views. In order to gain insights onpropositions P1 to P4 developed earlier the preferred strategies chosen by vari-are reproduced in Figure 2. In addition, ous stakeholder representatives to de-the stakeholders identified to belong in mand/not demand environmental disclo-each power-dependence quadrant are sures, the answers to the openendednow superimposed in each of the four questions provide a rich data source. Thequadrants. For example, the media purpose here is to explore the possibility(MED) and environmentalists (ENV) that if there is a demand and the firmfall into the Low Interdependence Quad- does not provide environmental disclo-rant while the major shareholders (MJS) sures, then these stakeholders may exer-and long-term creditors (LTC) are in the cise their power possibly either directlyHigh Interdependence Quadrant. or indirectly through usage or promote strategy. The results from this further
18. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 53analysis are discussed here. sent to the media. Low Interdependence Quadrant Interviewee 6’s desire to promote KBB’s initiative through discussionsThe low interdependence quadrant in with other stakeholders including theFigure 2 includes both the environmen- mobilisation of the media is characteris-talists (ENV) and the media (MED). tic of an indirect attempt to help pro-Since neither the firm, KBB, nor the mote this event. Furthermore, the influ-stakeholders, ENV and MED rely on ence of the media to inform the public aseach other to fulfil their goals, the rela- shown in the following comments pro-tionship is one of low interdependence. vides some evidence on its ability to useOne can even argue that these groups do indirect promoting strategy.not really have a stake on KBB. How-ever, because of the nature of the fea- This is why I said before that thetured proactive environmental initiative environmental awareness is moreand the nature of the role played by both or less on the increase because ofthe environmentalists and the media, it is the activities publicised by theconceivable that both groups could take media. The media plays a verythis opportunity to use KBB as an exam- important role because they areple to promote this activity. If both the one who inform the public ongroups feel strongly about increasing what is happening… environmental awareness, this event cre-ates an indirect stake on the firm. As This view is shared by other respon-such, the slightly modified model pre- dents including the two top executivesdicts that both the media and environ- interviewed in the pilot phase.mentalist representatives will adopt indi-rect promoting strategy. This is evi- Firm Power Quadrantdent from the responses toQ4 (shown inTable 2) with both the environmentalists Since the employees (EMP), minor[Interviewees 6 & 17] and media repre- shareholders (MIS) and suppliers (SUP)sentatives [Interviewees 12 & 15] choos- depend more on KBB to fulfil their goal,ing Option c. The following direct the relationship is one of firm power.quotes describe their attempt to influ- Hence, P2 suggests that indirect usageence others to follow KBB’s example: strategy is likely to be adopted but only if the stakeholders place high signifi- Since they are doing something cance to the environmental event as sug- good, it would be good to let other gested in the main assumption as indi- stakeholders know so they can set cated earlier. The following quote ex- a good example.  plains why the minor shareholder repre- An environmentalist will be most sentative [Interviewee 18] ignores the comfortable lending a hand to a environmental event (Option a) despite reputable company that does not the fact that he considers the event sig- just talk but takes the necessary nificant: action… I’m happy to discuss this … I won’t even consider encour- initiative with other stakeholders aging the company to make envi- and write an article which can be ronmental disclosure – they won’t
19. 54 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 take notice of me as a minor between KBB and those of the relevant shareholder anyway.  government agency (RGA) and custom- ers (CUS) is one of stakeholder powerDespite the different preferred actions since KBB is dependent upon thesechosen by the employees [Interviewees stakeholder groups to continue its exis-8 & 9], suppliers [Interviewees 7 & 14] tence. In the modified model, P3 sug-and minor shareholder [Interviewee 18] gests that, if there is a demand for envi-representatives as shown in Table 2, it is ronmental disclosure, a direct promot-clear that none of them choose Option c ing strategy is predicted. However, simi-suggesting that either they do not put lar to the Low Interdependence Quad-high significance on this event or they rant, it is important to highlight the factdo not care whether it is disclosed or that these strategies will only benot. This is confirmed in the following adopted, if and only if, these stakeholdercomments by the employee representa- groups feel very strongly about the pro-tives: active environmental initiative, thereby creating a sense of urgency to promote If this is a good thing, as in this this event. Hence, it all boils down to the case, it doesn’t matter to us personal convictions of the stakeholder whether they disclose or not. But representatives. It is promising to see if there is any risk on health… that the relevant government officer and then we would like to know. one customer representative I personally think that if the com- [Interviewees 16 & 20, respectively] pany does something good, they place a high significance level on this should do it willingly. It’s not nec- event (2) and choose Option c (see Table essary to let other people know so 2) suggesting that they both find KBB’s I don’t care whether they publi- environmental initiative valuable. In cise it or not.  fact, the only respondent in the Stake- holder Power Quadrant who choose toAs such, it is highly unlikely that anyone ignore this event (Option a) is the localof them will use the indirect usage customer representative [Interviewee 19]strategy. A close examination of the who consistently takes the stand of aresponses to open-ended questions con- ‘bad’ corporate citizen. It is clear, how-firms that none of the respondents in the ever, that even the socially responsiblefirm power quadrant intend to make an customer is very much aware that Ma-alliance with other stakeholders. This is laysian customers generally are not will-hardly surprising particularly since ear- ing to forego their own interest in thelier findings from the pilot phase reveal name of sustainability:that economic concerns are likely to su-persede environmental concerns magni- If this expenditure of $20 millionfied by the fact that environmental is out of the bank’s pocket and it’sawareness in Malaysia is still very low, not affecting their interest rates…albeit increasing slowly. they will continue supporting this bank. They might not want to sac-Stakeholder Power Quadrant rifice their benefits though. The analysis reveals that the relationship Despite this, perhaps the best display of
20. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 55direct promoting strategy is the one management to pay the newspa-portrayed by the relevant government per, underline the word “pay”, torepresentative in this direct quote: publicise this as a major event with pictures. I can easily do that Because this event is more of a since I’m a major shareholder. private sector initiative, we’ll look  at this positively. What we, as relevant government agencies, This suggests that because both the firm will do is to establish good net- management and the stakeholders are working so that we can look after highly interdependent, the major share- them as one of our partners – as a holders and creditors could directly de- good example for other companies mand the use of all means of environ- to follow.  mental disclosures since they have the ability to set certain conditions in theirHigh Interdependence Quadrant relationship with the management. Fur- thermore, since the featured event pro-Finally, there is high interdependence vides an opportunity to improve com-between the management of KBB and pany image, both parties are in a win-those of the major shareholder (MJS) win situation as confirmed in theseand long-term creditors (LTC) represen- quotes from long-term creditor represen-tatives because of mutual dependence to tatives:achieve profitability goals. Hence, di-rect usage strategy is expected in I’ll encourage the bank to use dif-proposition P4. It is clear from Table 2 ferent communication media tothat the major shareholder [Interviewee advertise this initiative since it’s13] and longterm creditor representa- good for our image. tives [Interviewees 10 & 11] prefer to …if we’ve been dealing with thisencourage KBB to provide disclosures company for years, we would feel(i.e. their most preferred Option is b) very comfortable with this rela-mainly because it is good for company tionship … so we would encour-image. Their ability to ‘attach strings’ is age them to disclose this since it’sinherent particularly in this comment a win-win situation. from the major shareholder representa-tive: Hence, further analyses reveal that the level of interdependence between the I’ll just invite the CEO one morn- management and the stakeholder groups ing over coffee and ask him to as well as the perceived significance of explain what is happening. I’ll events have some bearing on the type of encourage him to make disclo- influence strategies used by the stake- sures – call a press conference, holders to demand environmental disclo- make posters and brochures; sures. It is also clear that the stake- sponsor environmental cam- holder’s perception of how the event paigns– these are mainly exploit- will affect their stake on the firm will ing mechanisms to enhance our determine the demand. public image. Yes, I will ask the
21. 56 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60CONCLUDING COMMENTS veals the usefulness of Frooman’s (1999) typology to understand how dif-The purpose of this research is to gain ferent groups of stakeholders go aboutinsights into the preferred influence seeking what they want from the man-strategies adopted by various stake- agement. From the results, it is clear thatholder groups in demanding environ- there is a demand for environmental dis-mental disclosures. These insights are closures to be provided in the annualimportant given that worldwide surveys report and other means of communica-show that stakeholder pressures are one tion, particularly in the case of a pro-of the main drivers for increased corpo- active environmental initiative as fea-rate social and environmental respon- tured in this Malaysian experiment. Thesiveness. underlying assumption that ‘the stake- holder’s perception of how the environ-In examining stakeholder influence mental event will affect their stake andstrategies and disclosure preferences, the firm/stakeholder interdependencethis research extends the application of structure’ has, indeed, determinedstakeholder theory in the environmental whether the stakeholders demand envi-reporting area particularly when a pro- ronmental disclosures. The insightsactive environmental initiative is in- gathered from the stakeholders’ demandvolved. This is a first-of-its-kind as prior for environmental disclosures lead to thestudies feature mainly negative events. following conclusion.Likewise, unlike other studies whichfocussed mainly on one group of stake- From a practical perspective, the mostholders, this study extends the stake- pivotal conclusion drawn from this in-holder influence strategy analysis to a vestigation is that although the model iswide variety of stakeholders such as the useful to understand the influence strate-major shareholders, minor shareholders, gies adopted by each stakeholder groupcustomers, suppliers, relevant govern- represented, its effectiveness is temperedment agency, long-term creditors, em- by the level of significance placed on theployees, media and environmentalists. environmental event by the stakeholders.Furthermore, it uncovers relevant in- Given the considerably low level of en-sights into the environmental reporting vironmental awareness in Malaysia, it ispreferences in the context of a rapidly clear from the analysis that proactivedeveloping economy such as Malaysia efforts such as the one featured in thisfrom an ex ante perspective. Much of study is not given a very high signifi-previous research conducted mainly in cance level by the stakeholders closelydeveloped countries provides evidence identified with the general public such asfrom an ex post perspective thereby ex- the employees and the local customercluding the possibility of gaining an representatives. The implication is suchappreciation of the processes and ration- that without mobilising public aware-ale behind the decision to either disclose ness, it is not surprising to see few com-or not disclose environmental informa- panies adopting environmentallytion. friendly activities. Hence, while the me- dia and the environmentalists are seen toThe analysis conducted in this research, push the agenda of increasing publicalthough based on a small sample, re- awareness, the onus is still on the rele-
22. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 57vant government agencies to exercise typology, in particular, and stakeholdertheir power. Many of the stakeholders theory, in general, has much to offer inrepresented in this study rely on the rele- our understanding of management/vant government agencies to regulate the stakeholder behaviour and the demandcompany’s environmental activities and for corporate environmental disclosures.disclosures. Thus, without sufficientgovernment regulations mandating envi-ronmental protection and disclosures, ReferencesMalaysian companies are more likely toput economic measures ahead of envi- Abdul Rahman, R. & Ayob, N. A (2005)ronmental concerns. “Factors that shaped environ- mental reporting at Tenaga Na-From a theoretical perspective, the re- sional Berhad, Malaysia” Associa-sults presented lead to the conclusion tion of Finance and Accounting inthat whilst voluntary environmental dis- Australia and New Zealandclosures are used by corporate entities to (AFAANZ), July, Melbourne, Aus-manage their possibly competing stake- tralia.holder demands, stakeholder pressure ACCA (2005) “Improving stakeholderand influence strategy is seen as the engagement reporting: An ACCAdriving force for firms to make the deci- and the Environment Councilsion to provide disclosures. This is in Workshop”, March, London: Cer-accordance with the basic premise of tified Accountants Educationalstakeholder theory. This is also in line Trust.with the conclusion reached in Cormier Ahmad, Z., Hassan, S., & Mohammad,et al’s (2004) study of multinational J. (2003) “Determinants of envi-companies’ environmental disclosures ronmental reporting in Malaysia”,from Canada, France and Germany. International Journal of BusinessThey summarise their findings as fol- Studies, Vol. 11, No. 1, pp. 69-90.lows: Ahmad, N. N., & Sulaiman, M. (2004). “Environmental disclosures in As we attempt to understand the Malaysian annual reports: A le- actions taken by corporate manag- gitimacy theory perspective”, In- ers …we know that managers re- ternational Journal of Commerce act to stakeholder demands. Over and Management, Vol. 14, No. 1, time such reactions lead to an evo- pp. 44-58. lutionary process that results from Al-Tuwaijri, S., Christensen, T. & managers adapting and changing Hughes, K. (2004) “The relations as they try to understand what among environmental disclosure, stakeholders think is important as environmental performance, and well as deciding which stake- economic performance: a simulta- holders are most important in a neous equations approach,” Ac- given setting (Cormier et al 2004, counting, Organizations and Soci- p. 160). ety, Vol. 29, No. 5-6, pp. 447-471. Anderson, R. & Epstein, M. (1995) “TheThis suggests that the stakeholder usefulness of annual reports”,power-dependence/influence strategy Australian Accountant, April, pp.
23. 58 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 25-28. Frooman, J. (1999) “Stakeholder influ-Cormier, D., Gordon, I. & Magnan, M. ence strategies”, Academy of (2004) “Corporate environmental Management Review, Vol. 24, No disclosure: Contrasting manage- 2, pp. 191-205. ment’s perceptions with reality”, __________ & Murrell, A. (2003) “A Journal of Business Ethics, Vol. logic for stakeholder behaviour: A 49, pp .143-165. test of stakeholder influenceEnvironmental Resources Management strategies”, Academy of Manage- Malaysia (ERMM) (2002) The ment Best Conference Paper State Of Corporate Environmental 2003. Reporting In Malaysia. The Asso- __________ & _________ (2005) ciation of Chartered Certified Ac- “Stakeholder influence strategies: countants, Certified Accountants The roles of structural and demo- Educational Trust, London. graphic determinants’, BusinessElijido-Ten, E., Kloot, L. & Clarkson, P. and Society, Vol. 44, No. 1, pp. 3- (2007) “Stakeholder Influence 31. Strategies on Environmental Re- Gray, R., Kouhy, R. & Lavers, S. (1995) porting: Exploring the Malaysian ‘Methodological themes: Con- Context”, Asia Pacific Interdisci- structing a research database of plinary Research in Accounting social and environmental report- (APIRA), Auckland, July 2007. ing by UK Companies’, Account-___________ (2007) “Applying stake- ing, Auditing and Accountability holder theory to analyze corporate Journal, Vol. 8, No. 2, pp. 78- environmental performance: Evi- 101. dence from Australian listed com- Hendry, J. (2005) ‘Stakeholder influence panies”, Asian Review of Account- strategies: An empirical explora- ing, Vol. 15, No. 2, pp. 164-184. tion’, Journal of Business Ethics,Ernst & Young (2002) Corporate Social Vol 61, pp. 79-99. Responsibility: A Survey of KPMG (2002) KPMG International Sur- Global Companies. Ernst & vey of Corporate Sustainability Young, Environmental and Sus- Reporting 2002, KPMG Interna- tainability Services Group, Aus- tional, USA. tralia. _______ (2005) KPMG InternationalFactiva [online] (Malaysian news arti- Survey of Corporate Responsibil- cles source) Available from Swin- ity Reporting 2005, KPMG Inter- burne Database <URL:http:// national, USA. global.factiva.com.ezproxy.lib.swi Kuzel, A. (1992) “Sampling in qualita- n.edu.au/sb/default.aspx? tive inquiry”, in Cabtree, BF and NAPC=S&fcpil=en> Miller, WL (eds.) Doing Qualita-Freeman, R. (1983) “Strategic manage- tive Research (Research Methods ment: A stakeholder approach”, for Primary Care Series, Vol. 3), Advances in Strategic Manage- pp. 31-44. Newbury Park, Califor- ment, Vol. 1, pp. 31-60. nia: Sage Publications._________ (1984) Strategic Manage- Kvale, S. (1996) InterViews: An Intro- ment: A Stakeholder Approach. duction to Qualitative Research Marshfield: Pitman. Interviewing. Thousand Oaks,
24. E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 59 California: Sage Publications. California: Sage Publications.Miles, M. & Huberman, A. (1994) Smith, M., Yahya, K., & Amiruddin, Qualitative Data Analysis: An A.M. (2007) “Environmental dis- Expanded Sourcebook (2nd edn). closure and performance reporting Thousand Oaks, California: Sage in Malaysia”, Asian Review of Publications. Accounting, Vol. 15, No. 2, pp.Mitchell, R., Agle, B. & Wood, D. 185-199. (1997) “Toward a theory of stake- Sumiani, Y., Haslinda, Y., & Lehman, holder identification and salience: G. (2007) “Environmental report- Defining the principle of who and ing in a developing country: A what really counts”, Academy of case study on status and imple- Management Review, Vol. 22, No. mentation in Malaysia”, Journal 4, pp. 853-886. of Cleaner Production, Vol. 15,Morse, J.M. (1989) Qualitative Nursing No. 10, pp. 895-901. Research: A Contemporary Dia- Thompson, P., & Zakaria, Z. (2004) logue. Newbury Parl, California: “Corporate social responsibility Sage Publications. reporting in Malaysia: ProgressNeu, D, Warsame, H & Pedwell, K and prospects”, Journal of Corpo- (1998) “Managing public impres- rate Citizenship, Vol. 13, pp. 125- sions: Environmental disclosures 136. in annual reports”, Accounting, Tsai, P., Yeh, C., Wu, S. & Huang, I. Organizations and Society, Vol. (2005) “An empirical test of 23, No. 3, pp. 265-282. stakeholder influence strategyPatten, D. (1992) “Intra-industry envi- models: Evidence from business ronmental disclosures in response downsizing in Taiwan”, Interna- to the Alaskan oil spill: A note on tional Journal of Human Re- legitimacy theory”, Accounting, source Management, Vol. 16, No. Organizations and Society, Vol. 10, pp. 1862-1885. 17, No. 5, pp. 471-475. Ullmann, A. (1985) “Data in search of aPatton, M. (1990) Qualitative evaluation theory: A critical examination of and research methods. Newbury the relationship among social per- Park, California: Sage Publica- formance, social disclosure and tions, economic performance”, AcademyPfeffer, J. & Salancik, G. (1978) The of Management Review, Vol. 10, external control of organisations: No. 3, pp. 540-577. A resource dependence perspec- Wiseman, J. (1982) “An evaluation of tive. New York: Harper and Row. environmental disclosures madeRoberts, R. (1992) “Determinants of in corporate annual reports”, Ac- corporate social responsibility counting, Organizations and Soci- disclosure: An application of ety, Vol. 7, No. 1, pp. 53-63. stakeholder theory”, Accounting, Yusoff, H., Lehman, G., & Nasir, N. M. Organizations and Society, Vol. (2006) “Environmental engage- 17, No. 6, pp. 595-612. ments through the lens of disclo-Rubin, H. & Rubin, I. (2005) Qualitative sure practices: A Malaysian Interviewing: The Art of Hearing story”, Asian Review of Account- Data (2nd edn). Thousand Oaks, ing, Vol. 14, No. 1/2, 122-148.
25. 60 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 APPENDIX: STRUCTURED QUESTIONNAIRE PART I: GENERAL INFORMATIONINTERVIEW NUMBER: ________NAME: ________________________________________________________What/is was your current/previous position? _________________________________________________________RELEVANCE OF STAKEHOLDER: Please rank the following stakeholder in the order of their importance to acompany’s survival with 1 (most important) to 9 or 10 (least important).Stakeholder Type RANK RANKMajor shareholders (Owns>5% shareholding Top 20) CustomerMinor shareholders (Owns<5% shareholding non-Top 20) SuppliersMajor / Long-term Creditor MediaRelevant government agency EnvironmentalistEmployees Other (please indicate) In your current/previous job or situation, please indicate which type of stakeholder you would most likely be classi- fied: ____________________________________________________________________ PART II : CASE-SPECIFIC INFORMATION Instruction: Please red the following hypothetical vignette. THEN, answer the question below taking the role of the stakeholder you are most likely to be classified with. Keluarga Banking Berhad (KBB) is a large publicly listed company operating profitability since 1975. The company has been an active supporter of socially responsible initiatives including sustainable development. Its corporate mission and vision specifically includes environmental and social concern and this is reflected in the cor- porate environmental policies which are regularly revised in line with the social audits conducted annually. Re- cently, KBB spent RMS 20 million for a state of the art technology which will enable the following: Reduce energy consumption by 25%; Make paper and other stationery recycling easy; Reduce wastes and rubbish collection by 20%; Promote paperless transactions thereby reducing the use of paper.1) How significant do you believe this environmental event is to you in deciding whether to provide your support to the company? Please indicate the significance level as shown below: 1 2 3 4 5 Extremely Significant Very Significant Significant Moderately Significant Not SignificantCan you elaborate as to the reason for your choice?2) If you are aware of the environmental event featured in this vignette, would you demand Annual Report environ- mental disclosures (AREDs) regarding this even? Please elaborate on your reason for demanding not demanding AREDs.3) Will you be expecting the company to use other ways of communication to provide environmental disclosures re- garding this event? If yes, please indicate other means of disclosure and explain why?4) If you are aware of the environmental event identified in this case and the company did not make any disclosure, choose the most likely Possible Action that you would likely take.Possible Action (Tick)a) Ignore the environmental initiative and continue to support the companyb) Encourage the company to make environmental disclosure and continue supporting the companyc) Continue supporting the company and attempt to promote this initiative by influence others to do the samed) Others? Please specify. Please elaborate on the reasons for your choice.
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