Social capital and integrated reporting. Losing legitimacy when reporting talk is not supported by actions
| Pages | 144-164 |
| DOI | https://doi.org/10.1108/JIC-08-2018-0132 |
| Published date | 05 December 2018 |
| Date | 05 December 2018 |
| Author | Federica Casonato,Federica Farneti,John Dumay |
| Subject Matter | Organizational structure/dynamics,Accounting & Finance,Information & knowledge management |
Social capital and
integrated reporting
Losing legitimacy when reporting talk is not
supported by actions
Federica Casonato and Federica Farneti
Department of Sociology and Economic Law, University of Bologna,
Forlì, Italy, and
John Dumay
Accounting and Corporate Governance, Macquarie University, Sydney, Australia
Abstract
Purpose –To present the continuation of a cas es tudy by Beck et al. (2017) on an Australian bank (CBD)
during the period 2004–2013 by examining whether integrated reporting affects relational capital and helps
to repair an organisat ions’reputation. Both studies examine how a bank rocked by a major scandal in 2004
has attempted to repair it s legitimacy through integrated reportin g (oIRW). The paper aims t o discuss
these issue.
Design/methodology/approach –This study is a post facto analysis based on the original research from
Beck et al. (2017). The research process involved a case study approach with an analysis framed by
impression management theory to investigate whether the information in CBD’s integrated reports is
consistent with other information available to investors.
Findings –The authors find there is a gap between what CBD discloses in its integrated reports and what is
publicly available in other media. CBD’s talk and actions are not aligned, and that asymmetry translates into
a decline of trust in CBD. The bank’s integrated reports reveal how management discloses or withholds
information to protect their own interests and at their own discretion. These conclusions indicate that the
integrated reporting paradigm is being co-opted by IM strategies to improve legitimacy through trust,
reputation and social capital.
Research limitations/implications –Future research needs to reach beyond the organisational
boundaries and understand if oIR Wadds value for society, or is just a new form of multicapitalism, being
an ideology to help the rich become richer? The answers are important if we ever hope to see misconduct
disappear from our corporations and for company reports to become documents bearing truth and not
espouse rhetoric based on organisational hypocrisy.
Originality/value –The paper adds to the growing body of research investigating oIRWin practice to
understand the impact of oIR Wand whether it is a new and useful reporting tool or just another
management fashion.
Keywords Australia, Reputation, Banking, Integrated reporting, Impression management, Social capital
Paper type Research paper
1. Introduction
This paper presents the continuation of a case study by Beck et al. (2017) on an Australian
bank during the period 2004–2013. Referred to as CBD to preserve anonymity, both studies
examine how a bankrocked by a major scandal in 2004 has attempted to repair itslegitimacy
through integrated reporting oIRW. Beck et al.’s (2017) study focused on the reasons why
CBD began its journey towards oIRWand how it developed, finding that the need for
cultural change was the impetus behind the shift in its reporting practices. However, since
incorporating oIRWinto its reporting strategy, CBD has become embroiled in even more
scandals and has beenopenly criticised in the findings of an investigation into misconductby
the Australianbanking, superannuationand finance industries. Hence,this study explores the
period since 2013 and presents the latest findings regarding the impact of oIRWon
information transparency for the providers of financial capital. We analyse how CBD
Journal of Intellectual Capital
Vol. 20 No. 1, 2019
pp. 144-164
© Emerald PublishingLimited
1469-1930
DOI 10.1108/JIC-08-2018-0132
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1469-1930.htm
144
JIC
20,1
opportunistically discloses or withholds information,which raises questions about the overall
role of intellectual capital and oIR Win cultivating trust and reputation.
While Beck et al. (2017) use legitimacy theory to explain their findings, this paper draws
on impression management (IM) theory (Brennan et al., 2009; Melloni, 2015; Diouf and
Boiral, 2017) to understand the disclosures in CBD’s Annual Reviews (integrated reports).
The use of IM helps to explore whether the bank’soIRWis steered by managers to
achieve specific outcomes (Melloni, 2015). Specifically, we examine whether oIR Waffects
relational capital and helps to repair an organisation’s reputation by analysing the latest
news, investigations into banking misconduct and CBD’s Annual Reviews.
We find there is a gap between what CBD discloses in its integrated reports and what is
publicly availablein other media. CBD’s talk and actionsare not aligned, and that asymmetry
translates into a decline of trust in CBD. The bank’s integrated reports reveal how
management discloses or withholds information to protect their own interests and at their
own discretion. These conclusions indicate that the integrated reporting paradigm is being
co-opted by IM strategies to improve legitimacy through trust, reputation and social capital.
Initially, CBD was successful in this endeavour and did repair its legitimacy to some
extent. However, the bank is still steeped in organised hypocrisy, where the underlying
corporate culture and behaviour has not changed despite normalised accounts to the
contrary in its integrated reports (Cho et al., 2015). The corporate veil remains firmly in
place, and even though oIR Woriginally helped to polish CBD’s tarnished reputation, its
new-found legitimacy collapsed like a house of cards once further scandals were exposed.
Thus, our findings add to the growing body of research investigating oIR Win practice to
understand the impact of oIR Wand whether it is a new and useful reporting tool or just
another management fashion.
The paper has the following sections. Section 2 presents a literature review on the nexus
between IC and oIR W. Section 3 illustrates the research context, while Section 4 outlines
the methodology and IM theory. Section 5 presents our findings and Section 6 provides the
discussion and conclusions.
2. Literature review
An integrated report based on the oIR Wframework represents a “concise communication
about how an organization’s strategy, governance, performance and prospects, in the
context of its external environment, lead to the creation of value in the short, medium and
long-term”(IIRC, 2013b, p. 1). This section outlines the relationship between oIR Wand IC
by examining the IC-oIR Wnexus (Guthrie et al., 2012; de Villiers and Hsiao, 2018).
oIRWcritiques found in contemporary accounting literature are also considered
(Flower, 2015; Thomson, 2015). Last, we highlight the role that corporate image or
reputation plays in disclosures as an important component of relational capital (Dumay and
Guthrie, 2017; Dumay et al., 2019).
2.1 The relationship between oIR Wand IC
oIRWdiscloses interactions between financial and non-financial information, with an
emphasis on the company’s future value-creation story (Montecalvo et al., 2018). Specifically,
IR refers to an organisation’s strategy, business plan and the six capitals, i.e., financial,
manufactured, intellectual, human, social and relationships and natural (IIRC, 2013b). IC is
reflected in three of the framework’s six capitals because, as de Villiers and Hsiao (2018,
p. 485) point out, the “three intangible capitals defined in the oIR Wframework as
intellectual, human, and social and relationship broadly align with the three components of
IC, respectively, structural capital, human capital, and relational capital”. Additionally, both
IC and the oIR Wframework claim to communicate value creation (Dumay, 2016).
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Social capital
and integrated
reporting
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