a study of external pressure groups, users of corporate social disclosure

A STUDY OF EXTERNAL PRESSURE GROUPS: USERS OF CORPORATE SOCIAL DISCLOSURE

Lauren Danastas PhD Candidate

Faculty of Business and Law Central Queensland University

Rockhampton QLD 4702

and

David Gadenne Professor of Accounting and Finance

Faculty of Business and Law Central Queensland University

Rockhampton QLD 4702

Accepted for Presentation at the Fourth Asia Pacific Interdisciplinary Research in

Accounting Conference 4 to 6 July 2004

Singapore

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ABSTRACT This research examines external pressure group usage of and influences on corporate social disclosure. The research confirms that social and environment groups are users of corporate social disclosure, however in contrast to earlier pressure group studies, such as Tilt (1994), Annual Reports appear to be no longer the preferred medium of use. The results reveal a relative consistency in pressure group viewpoints regarding corporate social disclosure across time, and show that pressure groups view corporate social disclosure as insufficient even when relevant and low in credibility. Keywords: Corporate Social Disclosure, Pressure Groups, Environmental Disclosures

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INTRODUCTION

Research by Tilt (1994) concluded that environmental pressure groups were a key user group of corporate social disclosure with Annual Reports cited as the preferred medium of use. Australian studies cite the Tilt (1994) research, highlighting the usage of annual reports by environmental groups (Deegan & Rankin, 1996;1997; Brown & Deegan, 1999; Deegan, Rankin & Voght, 2000; Deegan, Rankin & Tobin, 2002; O'Donovan, 2002), and pressure group viewpoints regarding credibility and insufficiency of reporting (Wilmshurst & Frost, 2000; Greenwood, 2001). Since 1994 the literature shows there has been a continual responsiveness by some businesses to disclose voluntary information (Elkington, 1997; KPMG, 1999; Delfgaauw, 2000; Unerman, 2000; Gelb & Strawser, 2001; Wheeler & Elkington, 2001; Deegan, 2002). However an English study by Owen, Swift and Hunt (2001, pp. 264-276) concludes that current stakeholder engagement process may be ‘little more than corporate spin’ and at best is used as a means of corporate legitimisation and cite examples of ‘corporate power riding roughshod over stakeholder interests’. The authors believe current stakeholder engagement processes do not produce credible social reports and suggest promoting corporate social responsibility ideals may be more effective in extending accountability (Owen, Swift & Hunt, 2001). Although an Australian study by Deegan and Rankin (1997) ascertained that various user groups, including environmental lobby groups, consider broad categories of environmental information contained in annual reports to be material in their decision making processes it does not illustrate the relevance of disclosures within these categories. This study aims to provide further empirical evidence that external pressure groups1 are users of corporate social disclosure, evaluate pressure group attitudes regarding corporate social disclosure, and ascertain whether available social and environmental information is relevant to external pressure group needs given the apparent increase in stakeholder engagement processes. The main objectives (consistent with those from the Tilt (1994) study) are to ascertain if social and environmental pressure groups are users of corporate social disclosure; and whether the disclosures provided are sufficient, understandable and credible. A further objective is to ascertain whether voluntary corporate social disclosures are relevant to pressure groups needs.

PRIOR RESEARCH Suggested reasons why external pressure groups have gained the attention of corporations include targeted activism (Elkington, 1997; Klein, 2000), increased media attention for environmental incidents (Deegan, 2000; Deegan, Rankin & Voght, 2000; Hooghiemstra, 2000), the strategic use of business and environmental group alliances (Elkington, 1997; Polonsky, 2001) and stakeholder engagement processes (Delfgaauw, 2000), the group’s ability to affect external parties viewpoints of companies (Deegan & Blomquist, 2001, unpub.), the stakeholder groups’ ability to affect corporate legitimacy (Deegan & Gordon, 1996; Neu, Warsame & Pedwell, 1998; O'Donovan, 2002), as well as corporate 1 For the purposes of this study external pressure groups are defined as social and environmental groups that are non-governmental sponsored or non-governmental organisations; charitable, not for profit or non-profit organisations; community based or membership based, with membership consisting of both individuals and/or other organisations.

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acknowledgment of social responsibilities (Gelb & Strawser, 2001; Moir, 2001). Owen, Swift and Hunt (2001, p. 265) state that corporations who are apparently addressing the ‘information needs and concerns of organizational stakeholders’ are also ‘engaging in a process of “dialogue” with key stakeholder groups’ although concern was expressed by the corporate sector ‘over the levels of expectations that may be engendered by such a process’. The existing body of literature shows that external pressure groups have become accepted stakeholders who are given consideration within managerial processes pertaining to social and environmental issues. Tilt (1994, pp. 56-57) concluded that for social and environmental pressure groups, the annual report is the most commonly used, sought and preferred disclosure medium although there was some identified support for multiple disclosure media practices. The annual report is recognised as the ‘primary information source’ for corporate stakeholders, which include environmental groups (Neu, Warsame & Pedwell, 1998, p. 269; Warsame, Neu & Simmons, 2002). Deegan and Rankin (1997) ascertained from a survey of stakeholder groups, that a significant proportion of users seek environmental information from the annual report. Many studies of corporate social reporting concentrate solely on the annual report because it is seen as credible, a source of specific information and is widely distributed (Unerman, 2000). The literature review for this study identified a number of studies for which the sole source of environmental information was the annual report (Deegan & Gordon, 1996; Deegan & Rankin, 1996; Neu, Warsame & Pedwell, 1998; Brown & Deegan, 1999; Tilt & Symes, 1999; Deegan, Rankin & Voght, 2000; Wilmshurst & Frost, 2000; Deegan, Rankin & Tobin, 2002; Warsame, Neu & Simmons, 2002). An identified exception is the separate environmental reports produced by large corporations, which consequently diminish the amount of corporate social disclosure included in the company’s annual report (Tilt, 2001). Therefore based on previous research, it could be concluded that the Annual Report is more frequently used by pressure groups than other forms of disclosure media. The Tilt (1994) study shows a significant result for insufficiency and low credibility regarding available corporate social disclosure across media formats, with the information not always being useful even when sufficient. However annual reports could possibly be seen as an acceptable disclosure medium given no significant bias for credibility or understanding (Tilt, 1994). Neu, Warsame and Pedwell (1998) contend that proximity to audited financial statements and auditor scrutiny could give the annual report a degree of credibility. Tilt (1994) observed that pressure groups varied in their understanding of the available social and environmental information across the different types of disclosure media; but determined there was no association between the results for understanding and credibility thereby excluding possible bias in responses . The literature suggests that pressure groups believe corporate social disclosure to be generally insufficient and low in credibility, although some forms of disclosure media may be easier to understand than others. Corporate social responsiveness is an aspect of the corporate/stakeholder relationship being examined, particularly in the area of stakeholder management focusing on the needs of stakeholders and the organisation’s ability to meet them through disclosure (Wood 1991a, cited by Stanwick & Stanwick, 1998, p. 27). Deegan and Gordon (1996) suggest changes in corporate disclosure practices across time could be seen as a response to changes in societal expectations and priorities. Owen, Swift and Hunt (2001) have concerns that the current practices of dialogue to determine stakeholder information needs could be seen as nothing more than corporate legitimisation. From the literature it appears corporations are increasingly using strategies of legitimation to engage with stakeholders, that is ensuring their

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activities are perceived by outside parties as being legitimate (Deegan & Rankin, 1996;1997; Neu, Warsame & Pedwell, 1998; Brown & Deegan, 1999; Deegan, 2000; Deegan, Rankin & Voght, 2000; Deegan & Blomquist, 2001, unpub.; Deegan, 2002; Deegan, Rankin & Tobin, 2002; O'Donovan, 2002; Warsame, Neu & Simmons, 2002). It is difficult to ascertain the level of stakeholder reaction, satisfaction or lack thereof to these legitimation strategies however it could be assumed the available social and environmental disclosure will have relevance to the users given corporate stakeholder engagement processes (Delfgaauw, 2000) and responses to societal concerns.

THEORETICAL FRAMEWORK Much of the research reviewed for this study has utilised either legitimacy theory to explain apparent corporate legitimation strategies (for example Deegan & Rankin, 1996; Deegan, Rankin & Tobin, 2002; O'Donovan, 2002) or stakeholder theory to ascertain corporate identification and interaction with stakeholders (for example Mitchell, Agle & Wood, 1997; Deegan & Blomquist, 2001, unpub.) Legitimacy theory appears to be the most frequently used theoretical basis for explaining corporate social and environmental disclosure (Hooghiemstra, 2000; Deegan, Rankin & Tobin, 2002). Legitimacy theory contends that organisations will try to ensure their business activities are seen as legitimate to outside parties and will take action in order to maintain or obtain this legitimacy through processes of legitimation (Deegan, 2000). The motivation for legitimation strategies would appear to be based on the existence of a ‘social contract’ or ‘licence to operate’ between corporations and society at large which allows or disallows the company sufficient resources and support to operate within the community, depending on their social and environmental record (Deegan, 2000, pp. 254-259). Non-compliance with societal expectations can lead to revocation of the contract and increased community lobbying a viewpoint which also appears to be embraced by corporate management (Deegan, 2000). Stakeholder theory is ‘an explicitly systems-based view of the organisation and its environment which recognizes the dynamic and complex nature of the interplay between them’ (Gray, Owen & Adams, 1996p. 45). The two branches of stakeholder theory provide variations on the perspective of stakeholder/organisation interactions. The ethical branch of stakeholder theory argues the organisation manages ‘for the benefit of all stakeholders’ regardless of stakeholder power (Deegan, 2000, p. 268) and ‘provides prescriptions in terms of how organisations should treat their stakeholders’ (Deegan, 2000, p. 294). The managerial branch considers the management of stakeholder groups for organisational survival with emphasis on stakeholder power levels (Deegan, 2000). Stakeholder theory can offer various signals in the identification of stakeholders (Mitchell, Agle & Wood, 1997); may provide a basis for determining the groups to which a corporation owes responsibilities (Moir, 2001) and may be used in attempts to explain corporate social reporting practices (Clarke, 1998). One stated view is that legitimacy theory and stakeholder theory can be seen as ‘two (overlapping) perspectives’ rather than competing theories (Gray, Kouhy & Lavers, 1995, p. 52) with the main distinction being the ‘viewpoint from which they are observed and tested’ (O'Donovan, 2002, p. 345). Although not supported by all academics, some researchers use a combination of overlapping theories to explain managerial actions from the slightly different perspectives (Deegan, 2002). It is within this context that the present research will be conducted using the theories in an attempt to explain why the social and environmental

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pressure groups may be perceived as organisational stakeholders to whom corporations respond with voluntary corporate social disclosures. Systems-oriented theories such as legitimacy and stakeholder theory, permit a ‘focus on the role of information and disclosure (accounting and CSR) in the relationship(s) between organisations, the State, individuals and groups’ (Gray, Owen & Adams, 1996, p. 45).

PROPOSITION DEVELOPMENT In the earlier landmark study by Tilt (1994), it was found that social and environmental pressure groups are users of corporate social disclosure, and that the annual report is the most commonly used, sought and preferred disclosure medium2. However the Tilt (1994) study shows a significant result for insufficiency of available corporate social disclosure across all media formats with some respondents reporting that even when sufficient, the information was not always useful. Therefore based on the objectives and results of the Tilt study (1994) the first three propositions will test pressure group usage of corporate social disclosure and ascertain the level of sufficiency of information in relations to their needs.

P1: pressure groups are users of corporate social disclosure. P2: pressure groups use annual reports more frequently than other forms of disclosure

media to gather corporate social disclosure information. P3: pressure groups believe present corporate social disclosures are insufficient.

The 1994 Tilt study also concludes pressure groups believe corporate social disclosure to be generally low in credibility. However annual reports show no significant bias for credibility or understanding and therefore could be seen as an acceptable disclosure medium (Tilt, 1994). Neu, Warsame and Pedwell (1998) contend there is a degree of credibility given to the annual report based on its proximity to audited financial statements and the requirement for auditors to read the material. Proposition 4 is designed to test the credibility of the types of corporate social disclosure media used by companies based on the 1994 Tilt conclusions that pressure groups generally believe corporate social disclosure credibility is low.

P4: pressure groups generally believe that the published corporate social disclosure has low credibility.

As the Tilt (1994) study found no association between credibility and understanding, this should not affect the credibility of the disclosure media. However the study (Tilt, 1994) observed that understanding information across different types of disclosure media varied. For example, whilst advertisements were shown as the easiest form to understand, the more commonly used annual report scored a median of 3 on a scale of 1 to 5. Proposition 5 is designed to test whether some types of corporate social disclosure media are easier to understand than others based on the 1994 Tilt observations.

P5: pressure groups believe some types of corporate social disclosure media are easier to understand than others.

2 Although there was some identified support for multiple disclosure media practices.

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The final objective for this study is to ascertain whether voluntary corporate social disclosures are relevant to the pressure groups. Deegan and Gordon (1996) suggest changes in corporate disclosure practices across time could be seen as a response to changes in societal expectations and priorities. Fiedler and Deegan (2002, as cited in Deegan, 2002) found benefits can accrue from association with environmental groups due to the group’s perceived legitimacy. Based on previous studies Wilmshurst and Frost (2000) suggest that improved stakeholder relationships may be achieved through environmental disclosures. However the results of this research (from a managerial perspective) show no significant correlation between actual disclosures in annual reports and the influence of environmental lobby groups on the decision to disclose but report a very significant result for the influence of community concerns (Wilmshurst & Frost, 2000). This may be reflective of findings which suggest that some lobby groups are perceived as representatives of the community and its concerns (Deegan & Blomquist, 2001, unpub.). Deegan and Gordon (1996) found a correlation between an increase in environmental group membership and increased environmental disclosure. The suggestion made is that the changes in membership (1,800 percent over 16 years) was indicative of changes in society’s perceptions in the ‘state of legitimacy’ with more emphasis on ‘responsible environmental management’ (Deegan & Gordon, 1996, p. 192). Given the stakeholder engagement processes being undertaken by some corporations (Delfgaauw, 2000) and the response to societal concerns as previously discussed, it could be assumed the response will have relevance to the users. Proposition 6 is designed to test user relevance of voluntary corporate social disclosures based on an assumption that reporting has evolved through corporate response to societal concerns and a process of stakeholder consultation. P6: pressure groups believe voluntary corporate social disclosures are relevant to their needs.

RESEARCH DESIGN AND METHOD The method of data collection was a self-administered questionnaire communicated by mail which resulted in 59 useable questionnaires equating to a response rate of 35.1 percent3. Additionally, 19 groups (12.5 percent) advised of non-participation as they did not use Corporate Social Disclosure and 31 groups (18.4 percent) advised of non-participation due to the pressures of work within their organisation. The concepts relevant to the problem were identified and given meaning through operational definitions during the survey instrument development process prior to initiating the measurement process. As changes in attitudes were being investigated a five-point Likert scale was deemed to be most appropriate for closed-choice alternatives to allow for more sensitive measurements than a simple agree/disagree response. Where possible, the same rating scales and response categories employed in the 1994 Tilt study were used in the new questionnaire to facilitate meaningful comparisons. As reliability and validity can become distorted with instrument modification (Creswell, 1994) measures were undertaken to reestablish the reliability in the extensively modified questionnaire by a clear conceptualisation of the constructs or concepts; increases in the levels of measurement; the use of multiple indicators of variables where possible; and replication of measures used in previous research. To optimise measurement validity, the questionnaire was rigorously based on the research objectives and propositions, so as to achieve the best fit between the conceptual (abstract) and the operational (specific) 3 Various authors provide a variety of opinions on what are acceptable response rates however Fowler (1988, cited in Tilt 1994) states response rates under 20 percent may not give credible statistics on the population. The response rate of 35.1% well exceeds 20%. It can also be noted that as a census was conducted this response rate represents a percentage of the population frame (168 pressure groups) and not a sample population.

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definitions. Demographic questions were included in the instrument to profile the respondents. The developed questionnaire was pre-tested for rigorous evaluation prior to final administration to allow refinement of wording and clarity; elimination of potential problems; and revision through feedback. The target population consisted of Australian environmental and social pressure groups. Tilt (1994) identified 146 Australian organisations through public listings. Research has been undertaken to identify both new and continuing groups previously surveyed by Tilt. There appears to be no single comprehensive public listing of social and environmental groups in Australia. The compilation of the population frame list was systematic utilising the internet as a research tool4. The final population list consisted of 168 Australian pressure groups. As with the Tilt (1994) study there is a relatively small population, and therefore a census of the identified pressure groups was conducted.

RESULTS The collective profile of the 59 external pressure groups (35.1 percent) who participated in this study is social and environmental organisations with 0 to 20,000+ individual members and 0 to 1,000 organisational members; between 2 and 67 years old with a total of 1,282 years of experience; involved at every level of community including local, state, national and with international affiliations; primarily interested in environmental, community involvement and resource conservation information; with the survey completed by a senior member of the organisation. Non-response bias was assessed using Mann-Whitney U tests where the late respondents, based on date of return for surveys (questionnaires 47 to 59), were used as surrogates for non respondents. The results for non demographic responses show no significant difference for the Mann-Whitney U tests at the 0.05 and the 0.01 levels. Thus it can be concluded that there is minimal chance of non-response bias. As with the 1994 Tilt study a large number of responses came from Environmental Pressure Groups. Further tests were conducted to ascertain any bias indicated by significant differences in the responses from the majority group (Environmental) and the other groups (Social & Environmental and Social). The Mann-Whitney U tests resulted in only two significant differences in variable median values at the 0.01 levels for relevance of corporate social disclosure regarding Human Resources and Products. It therefore appears that pressure groups display similar behaviour in relation to companies other for the mentioned exceptions, which is comparable behavioural pattern to that shown in the 1994 Tilt study. 4 The initial point of reference was the Earthlink website, formerly known as the Green Pages (Deegan & Gordon, 1996), http://www.earthlink.com.au/earthlink/frontpage.php. Other links and lists used to supplement this include: The Wilderness Society “Links” http://www.wilderness.org.au/links/; The National Environmental Defenders Office Network “Index of Australian Environmental Organisations” http://www.edo.org.au/ngolinks.htm; Direct Action Media Network “Internet Resources for Australian Activists” http://www.green.net.a/activism/#human-rights; Environment Australia “EA Register of Environmental Organisations” http://www.ea.gov/pcd/ppu/reo/index.html; and the Tilt (1994) Appendix “Pressure Groups Surveyed”. Additional searches were undertaken using internet search engines Yahoo Australia http://au.yahoo.com/ and Google Australia http://www.google.com.au.

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Propositions

P1: pressure groups are users of corporate social disclosure. Participants indicated usage of corporate social disclosure media on a five point Likert scale with one representing never and five representing always regarding annual reports, environmental reports, web-site reports, supplementary materials, advertising and media releases. As shown in Table I, a large majority of pressure groups use many types of corporate social disclosure media to varying degrees (sometimes to always) in the form of annual reports (71.2 percent), web-site reports (71.2 percent), environmental reports (69.5 percent), media releases (67.8 percent), supplementary booklets, leaflets or brochures (62.7 percent), and advertising (42.3 percent). The Kolmogorov-Smirnov tests for use of corporate social disclosure data shows significant bias towards the higher scores at the 0.01 level for annual reports, environmental reports, web-site reports and media releases and the 0.05 level for supplementary materials and advertising. The majority of groups actively seeks or solicits information from companies regarding the environment (62.7 percent) and to a lesser extent resource conservation (49.1 percent), community involvement (42.3 percent), products (27.2 percent) and human resources (11.9 percent) on the scale sometimes to always. Pressure groups also receive social and environmental information that is voluntarily provided by companies regarding the environment (40.7 percent), resource conservation (35.6 percent), community involvement (33.9 percent), products (15.3 percent) and human resources (10.2 percent), sometimes to always. The data suggests that the information voluntarily provided by companies is insufficient in quantity for pressure group needs. For example, a comparison of “voluntary sent” and “actively sought” at level 4 (often) and 5 (always) combined, shows a considerably greater percentage are seeking information than are being voluntarily sent information by companies. This is particularly highlighted by the respective percentages for sent and sought regarding the environment (8.5 and 39 percent), community involvement (8.5 and 20.3 percent) and resource conservation (6.8 and 25.4 percent). Therefore it could be concluded that if companies are responding to pressure groups as key users of corporate social disclosure then there is a considerable underestimation of user requirements in this instance. Overall on a scale of sometimes to always, the majority of pressure groups use (read) various forms of corporate social disclosure media to gather information about companies (86.4%); actively seek information from or about companies (74.6 percent); and are voluntarily sent information by companies (54.2 percent). This is comparable to the previous findings (Tilt, 1994) for read (82 percent), sought (52 percent) and received (71 percent) corporate social disclosure. An overwhelming percentage of respondents (89.8 percent) are using or receiving some form of corporate social disclosure. Pressure groups not in receipt of voluntarily provided corporate social disclosure actively seek this information from companies. In addition, pressure groups who do not receive or seek information from companies are identified as using freely available media such as website reports, advertising and media releases to gather the required social and environmental information. Only six respondents (10.2 percent) were identified as not using, receiving or seeking corporate social disclosure. Therefore there is strong support for the proposition that pressure groups are users of corporate social disclosure.

[insert table I about here]

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P2: pressure groups use annual reports more frequently than other forms of disclosure media to gather corporate social disclosure information.

The preferred usage of corporate social disclosure media as indicated by the mean is: environmental reports (3.09), annual reports (3.05), web-site reports (3.05), media releases (2.93,) supplementary booklets, leaflets or brochures (2.93) and advertising (2.48). The Kolmogorov-Smirnov tests indicate significance at the 0.01 level for environmental, annual, web-site reports and media releases and at the 0.05 level for supplementary materials and advertising. Therefore it appears that pressure group preferences are changing, although this does not mean that annual reports are no longer used by Australian pressure groups. The majority of groups (refer Table I) use many types of corporate social disclosure media to varying degrees (sometimes to always) in the form of annual reports (71.2 percent), web-site reports (71.2 percent), environmental reports (69.5 percent), media releases (67.8 percent), supplementary booklets, leaflets or brochures (62.7 percent), and to a much lesser extent advertising (42.3 percent). This result shows some consistency with the Tilt (1994, p. 57) findings that reported pressure groups preferences for corporate social disclosure media as: annual reports (61 percent), separate booklets (50 percent) and the media (45 percent). However a comparison of a higher degree of usage indicated by often to always (refer Table II) relegates annual reports to third position rather than second. It can be clearly seen that pressure groups no longer use annual reports more frequently than other corporate social disclosure media. Therefore there is no support for the proposition that pressure groups use annual reports more frequently than other forms of disclosure media to gather corporate social disclosure information.

[insert table II about here]

P3: pressure groups believe present corporate social disclosures are insufficient. Participants indicated opinions regarding the sufficiency of corporate social disclosure information on a five point Likert scale with one representing highly insufficient, three representing neutral and five representing highly sufficient, regarding the environment, community involvement, resource conservation, human resources and products (refer Table III). The majority of pressure groups believe that some areas of the corporate social disclosure made available by companies are insufficient, particularly in relation to the environment (78.0 percent), resource conservation (66.1 percent) and community involvement (55.9 percent). The Kolmogorov-Smirnov tests indicate significance bias at the 0.01 level for the lower levels (insufficiency) regarding the environment, resource conservation and community involvement. The ranking of most insufficient to least insufficient is indicated by the mean for the environment (1.88), resource conservation (2.03), community involvement (2.27), products (2.39) and human resources (2.51). The percentage for insufficiency with regard to products (42.3 percent) and human resources (33.9 percent) was somewhat lower and with the majority expressing a neutral opinion (50.8 and 61.0 percent respectively) these particular results need to be treated with caution. However very few respondents believe that any social and environmental information made available by companies is sufficient for their needs (refer Table III). Overall a large majority of respondents (84.7 percent) believe that various forms of corporate social disclosure are insufficient. Therefore there is substantial support for the proposition that pressure groups believe present corporate social disclosures are insufficient.

[insert table III about here]

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P4: pressure groups generally believe that the published corporate social disclosure has low credibility.

Participants indicated opinions regarding the credibility of corporate social disclosure media on a five point Likert scale with one representing not credible, three representing neutral and five representing very credible, regarding annual reports, environmental reports, web-site reports, supplementary materials, advertising and media releases (refer Table IV). The majority of pressure groups indicated either not credible or slightly credible for annual reports (52.5 percent), environmental reports (54.2 percent), web-site reports (55.0 percent), supplementary materials (55.0 percent), media releases (62.7 percent) and advertising (62.7 percent). The Kolmogorov-Smirnov tests indicate significant bias for low credibility at the 0.05 level for annual reports, environmental reports, and web-site reports and at the 0.01 level for supplementary materials, media releases and advertising. This shows similar results to the Tilt survey (1994) where the highest to lowest credibility for disclosure media was ranked as annual reports, supplements, product labels and advertisements. The Tilt results (1994) also indicate a low credibility rating for these disclosure media. In order of slight credibility to least credibility, as indicated by the mean, the results show annual reports (2.42), environmental reports (2.35), web-site reports (2.28), supplementary booklets, leaflets or brochures (2.23), media releases (2.04), and advertising (1.96). Although nearly a third of respondents chose to remain neutral in their judgment of disclosure media, the three most credible medium show a median (2.00) and mode (2) rating indicating “slightly credible”. The annual report received the only response for 5 (Very Credible) as well as being the medium indicated as most credible by the mean (2.42). Neu, Warsame and Pedwell (1998) suggest the higher credibility rating of annual reports is due to their proximity to the audited financial information. However no conclusion can be drawn from this study as there is no indication about this contention from respondent comments. There is apparent skepticism though shown by some respondents with regards to ‘greenwash’ where good news is stressed and bad news not disclosed. As one respondent advised, there are varying degrees of credibility based on a company’s values, ethics and corporate culture. Therefore there is overwhelming support for the proposition that pressure groups generally believe that the published corporate social disclosure has low credibility.

[insert table IV about here]

P5: pressure groups believe some types of corporate social disclosure media are easier to understand than others.

Participants indicated opinions regarding the understandability of corporate social disclosure media on a five point Likert scale with one representing very easy, three representing neutral and five representing very difficult, regarding annual reports, environmental reports, web-site reports, supplementary materials, advertising and media releases (refer Table V). A number of pressure groups have indicated that some types of corporate social disclosure are easier to understand than others, although a considerable percentage of respondents chose to remain neutral as indicated by the median and mode (3.00 and 3) and the means which are grouped very close to neutral for annual reports (3.14), environmental reports (2.97), web-site reports (2.90), advertising (2.88), supplementary booklets, leaflets or brochures (2.83) and media releases (2.83). The Kolmogorov-Smirnov tests show significant bias at the 0.01 level for the neutral stance taken by respondents.

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However all media types received more responses for easy than difficult respectively regarding supplementary materials (30.5 and 15.3 percent), media releases (37.3 and 17.0 percent), advertising (32.2 and 22.0 percent), web-site reports (32.2 and 23.7 percent), environmental reports (27.1 and 23.7 percent ) except for annual reports (20.3 and 37.3 percent). It would appear that in overall terms, pressure groups’ opinions on understandability of annual reports and in general the ranking of types of corporate social disclosure media have not changed much since the Tilt study (1994) for ease of understanding in order of advertisements, supplements, product labels, and annual reports. However the results need to be treated with caution given the significant neutrality of the responses overshadowing the indications that some corporate social disclosure media are easier to understand than others. Therefore the proposition that pressure groups believe some types of corporate social disclosure media are easier to understand is not substantially supported by the data and further investigation of the neutral responses may be warranted.

[insert table V about here]

P6: pressure groups believe voluntary corporate social disclosures are relevant to their needs.

Participants indicated opinions regarding the relevance of corporate social disclosure information on a five point Likert scale with one representing highly relevant, three representing neutral and five representing highly irrelevant, regarding the environment, community involvement, resource conservation, human resources and products (refer Table VI). In relation to specific items disclosed, only the environment (57.6 percent) and resource conservation (54.2 percent) are seen as relevant to the majority of groups. The Kolmogorov-Smirnov tests indicate a significant bias for relevancy at the 0.01 level for the environment and resource conservation. To a lesser extent, relevance is also shown for community involvement (47.4 percent), products (23.8 percent) and human resources (17.0 percent). It cannot be assumed however that the available social and environmental information is irrelevant as a large number of participants responded neutrally particularly in relation to human resources (66.1 percent), products (62.7 percent) which indicates these particular results should be treated with caution. However as noted earlier the Mann-Whitney U tests resulted in significant differences in variable median values between environmental and other groups at the 0.01 levels for relevance of corporate social disclosure regarding human resources and products. The order of information relevance to pressure groups as indicated by the mean is the environment (2.17), resource conservation (2.34), community involvement (2.44), products (2.88), and human resources (3.00). However a majority of participants (71.2 percent) indicated some form of the disclosed social and environmental information was either highly relevant or relevant to their needs. Therefore there is some support for the proposition that pressure groups believe voluntary corporate social disclosures are relevant to their needs.

[insert table VI about here]

SUMMARY AND CONCLUSIONS The purpose of this research was to provide empirical evidence supporting the 1994 Tilt study conclusions that external pressure groups are users of corporate social disclosure and ascertain pressure group attitudes to social and environmental information content and disclosure media, and the relevance of this information to the user groups. This research has

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also illustrated consistency by Australian social and environmental pressure groups across the period 1994 to 2003 as many of the present study results are consistent and comparable with the Tilt results (1994). This study has provided further evidence that social and environmental pressure groups are users of corporate social disclosure. However the research has also shown that the pattern of usage has changed since the 1994 Tilt study concluded the annual report was the most commonly used disclosure medium. The medium most used by pressure groups currently is environmental reports, followed by website reports and annual reports. The ‘paramount importance’ of information accessibility (Tilt, 1994, p. 57) may indicate reasons for the changed usage behaviour given the increase in publication of separate environmental reports (ease of information access) and web-site reports (ease of physical access). This is also consistent with research (Tilt, 2001) which indicates increasing trends regarding both the information content and production of separate environmental reports in parallel with a recognised decrease of disclosure within the annual report and ease of access through increased availability of information on companies’ web-sites. The confirmation of multiple usage of corporate social disclosure formats (94.9 percent) is consistent with findings from the Tilt study (1994, p. 57) that ‘groups support the use of multiple media for disclosure rather than a single medium’. The change in pressure group usage however is dependant on the reporting style and preferences of corporations. Recent findings (Tilt, 2001) suggest that further predicted changes in company reporting practices regarding annual reports, separate environmental reports and web pages may alter future research directions given the present preponderance of researchers to use the annual report disclosures and justify not examining the other media. This present study also supports a need for change in research emphasis on the annual report (Unerman, 2000) given the apparent shift in pressure group (stakeholder) behaviour away from annual reports as the primary tool for social and environmental information access (Deegan & Rankin, 1997; Neu, Warsame & Pedwell, 1998; Warsame, Neu & Simmons, 2002) to include similar usage of other media such as the separate environmental reports and web-site reports. Pressure groups overwhelmingly believe corporate social disclosure media has low credibility but remain relatively neutral on the issue of understandability. The 1994 Tilt study also reported low credibility of corporate social disclosure. Additionally the present study has identified pressure group skepticism regarding the information reported within the media with suggestions the information should show the good and bad; beneficial and detrimental; as well as including honest reporting and true costs of all information that is available from companies. Pressure groups substantially endorse the insufficiency of present corporate social disclosures made available by companies and any mandatory reporting regulations relating to these disclosures. Interestingly a majority of pressure groups believe that the voluntarily provided information regarding the environment and resource conservation is relevant to groups’ needs. However the insufficiency of available CSD is further supported by the additional comments provided by pressure groups (78 percent) regarding what social and environmental information should be disclosed by companies. This suggests that even when relevant, the amount of information provided by companies is not sufficient. So whilst this survey suggests that stakeholder engagement processes (Delfgaauw, 2000) and responses to societal concerns may produce relevant corporate social disclosure, other influences obviously need to be considered otherwise all social and environmental information reported by companies would be rated as both relevant and sufficient.

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Implications Tilt (1994) suggested there were implications for companies regarding disclosure practices from the perspective of: prioritisation of pressure group needs and preferences; annual reports as the best medium for disclosure; and improvement of disclosure practices. However, the current study shows that the annual report is no longer the preferred medium of many companies when disclosing social and environmental information or the preferred medium of pressure groups accessing information. This indicates implications for researchers in the changed pattern of usage by pressure groups regarding annual reports and a consequent need to change from a research emphasis on the annual report to inclusion of other primary corporate social disclosure sources such as environmental reports and website reports. Limitations A possible limitation is an incomplete population frame as the population list of social and environmental groups used by Tilt (1994) is no longer published in this format. However a number of comprehensive lists, websites and search engines were cross referenced to compile the population frame. The larger number of environmental groups compared to other community groups is a reflection of Australian society; however statistical tests have ascertained a similarity of responses between the groups. Interconnections between groups were identified during the compilation of the population list. Although some were identified as having an individual identity apart from the component groups, branches of national organisations were excluded where they only existed as a link from the main website to ensure limited attitudinal replication due to interconnections. As this survey is specific to pressure group attitudes and behaviour it is possible that biases regarding present activities and anticipated outcomes could prejudice responses (Tilt 1994). However use of the literature in formulating the propositions and questions highlighted any major shift in pressure group behaviour which required further analysis. Additional limitations included the possibility that some respondents were less informed or less active than the average member of pressure groups or that some pressure groups are formed from a local perspective for a very limited objective, which does not require access to corporate social disclosure. Pressure group profile information indicated that the surveys were completed by senior members of the organisation. From this research it would appear that a local perspective or a limited objective does not preclude the use of corporate social disclosure. General survey limitations were identified and actions taken during the questionnaire design phase in an attempt to minimise any impact on the research conclusions. Further Research Research is required to ascertain which types of social and environmental information is relevant to specific groups and who are the primary users of corporate social disclosure. The changed pattern of usage by pressure groups away from Annual Report as the preferred medium warrants further research to gauge whether this is a general trend across all user groups. This research has also indicated that an overwhelming number of pressure groups (94.9 percent) use multiple formats of corporate social disclosure media. Information regarding why user groups utilise a particular type of media or multiple formats of corporate social disclosure would be useful for both regulators and preparers of corporate social disclosure when considering how social and environmental reports should be presented.

15

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18

Table I: Use of Corporate Social Disclosure Media Never Seldom Sometime

s Often Always Mea

n Count

7 7 24 12 6 Annual Reports % a (11.9%

) (11.9%

) (40.7%) (20.3%

) (10.2%

)

3.05

Count

9 6 16 21 4 Environmental Reports % a (15.3%

) (10.2%

) (27.1%) (35.6%

) (6.8%)

3.09

Count

6 9 22 16 4 Web-Site Reports % a (10.2%

) (15.3%

) (37.3%) (27.1%

) (6.8%)

3.05

Count

6 11 19 17 1 Supplementary Materials % a (10.2%

) (18.6%

) (32.2%) (28.8%

) (1.7%)

2.93

Count

12 17 13 11 1

Advertising % a (20.3%)

(28.8%)

(22.0%) (18.6%)

(1.7%) 2.48

Count

6 10 25 12 3 Media Releases % a (10.2%

) (16.9%

) (42.4%) (20.3%

) (5.1%)

2.93

a percentage of total respondents, including non-responses (therefore percentages do not total 100 percent) Source: Compiled from Analysis of Data Set Table II: Ranked Comparison of Percentage of Users and Degrees of Usage

Ranking By % of Users (Often to Always) By Degrees of Average Use (Mean)

1 Environmental Reports (42.4%) Environmental Reports (3.089

)

2 Web-site Reports (33.9%) Annual Reports (3.054

)

3 Annual Reports (30.5%) Web-site Reports (3.053

)

4 Supplementary materials (30.5%) Media Releases (2.929

)

5 Media Releases (25.4%)

Supplementary materials (2.926)

6 Advertising (20.3%) Advertising (2.481

) Source: Compiled from Analysis of Data Set

19

Table III: Sufficiency of Available Corporate Social Disclosure Highly

Insufficient

Insufficient

Neutral

Sufficient

Highly Sufficien

t

Mean

Count

22 24 12 1 The Environment % (37.3%) (40.7%) (20.3

%) (1.7%) 1.88

Count

14 19 23 2 1 Community Involvement % (23.7%) (32.2%) (39.0

%) (3.4%) (1.7%)

2.27

Count

21 18 18 1 1 Resource Conservation % (35.6%) (30.5%) (30.5

%) (1.7%) (1.7%)

2.03

Count

12 8 36 3 Human Resources % (20.3%) (13.6%) (61.0

%) (5.1%)

2.51

Count

15 10 30 4

Products % (25.4%) (16.9%) (50.8

%) (6.8%)

2.39

a percentage of total respondents, including non-responses (therefore percentages do not total 100 percent) Source: Compiled from Analysis of Data Set

20

Table IV: Credibility of Corporate Social Disclosure Media Not

Credible Slightly Credibl

e

Neutral Credible

Very Credibl

e

Mean

Count 11 20 18 7 1 Annual Reports % a (18.6%) (33.9%

) (30.5%

) (11.9%

) (1.7%) 2.42

Count 14 18 16 9 Environmental Reports % a (23.7%) (30.5%

) (27.1%

) (15.3%

) 2.35

Count 15 18 17 7 Web-site Reports % a (25.4%) (30.5%

) (28.8%

) (11.9%

) 2.28

Count 15 18 20 4 Supplementary Materials % a (25.4%) (30.5%

) (33.9%

) (6.8%) 2.23

Count 24 13 18 2 Advertising % a (40.7%) (22.0%

) (30.5%

) (3.4%) 1.96

Count 21 16 17 3 Media Releases % a (35.6%) (27.1%

) (28.8%

) (5.1%) 2.04


21

Table V: Rating for Understanding of Corporate Social Disclosure Media Very

Easy Easy Neutral Difficul

t Very

Difficult

Mean

Count 2 10 24 22 Annual Reports % a (3.4%

) (16.9%

) (40.7%

) (37.3%

) 3.14

Count 1 15 28 13 1 Environmental Reports % a (1.7%

) (25.4%

) (47.5%

) (22.0%

) (1.7%) 2.97

Count 2 17 24 15 Web-site Reports % a (3.4%

) (28.8%

) (40.7%

) (25.4%

) 2.90

Count 1 17 31 9 Supplementary Materials % a (1.7%

) (28.8%

) (52.5%

) (15.3%

) 2.83

Count 4 15 26 10 3 Advertising % a (6.8%

) (25.4%

) (44.1%

) (16.9%

) (5.1%) 2.88

Count 1 21 26 7 3 Media Releases % a (1.7%

) (35.6%

) (44.1%

) (11.9%

) (5.1%) 2.83


22

Table VI: Relevance of Voluntary Corporate Social Disclosure Highly

Relevant

Relevant

Neutral

Irrelevant

Highly Irrelevan

t

Mean

Count

22 12 19 5 1 The Environment % (37.3%

) (20.3%

) (32.2

%) (8.5%) (1.7%) 2.17

Count

13 15 25 4 2 Community Involvement % (22.0%

) (25.4%

) (42.4

%) (6.8%) (3.4%)

2.44

Count

13 19 22 4 1 Resource Conservation % (22.0%

) (32.2%

) (37.3

%) (6.8%) (1.7%)

2.34

Count

4 6 39 6 4 Human Resources % (6.8%) (10.2%

) (66.1

%) (10.2%) (6.8%)

3.00

Count

5 9 37 4 4

Products % (8.5%) (15.3%

) (62.7

%) (6.8%) (6.8%)

2.88


a study of external pressure groups, users of corporate social disclosure

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