REGAINING LEGITIMACY IN PUBLIC PERCEPTION
Danske Bank’s quest for legitimacy
Cand.ling.merc (Master of Arts) – Spanish & Intercultural Market Studies Project: Master Thesis
Project title: Regaining Legitimacy in Public Perception – Danske Bank’s quest for legitimacy Project title (Danish): Genvind offentlighedens accept – Danske Banks jagt på legitimitet
Name: Darjana Kalember Hand-in date: 22. June 2016
Supervisor: Itziar Castelló Number of characters: 153.302
Number of pages: 67,4
08
Fall
ABSTRACT
Denne afhandling handler om Danske Banks jagt på at genvinde tabt legitimitet på baggrund af den tillidskrise som henholdsvis finanskrisen og efterfølgende kampagnen ”New Standards” skabte.
Ambitionen med opgaven var at besvare hvorvidt CSR rapporter kan bruges som et led i at skabe, vedligeholde og genskabe legitimitet i offentlighedens accept.
Dette er ikke en problematik som kun findes i den finansielle sektor, men kan anvendes til at beskrive alle legitimitetstruende situationer som en given virksomhed vil kunne komme ud for, når der sker en mobilisering af argumentation baseret på højere, understøttende værdier, også kaldet ’orders of worth.’
Opgaven er blevet besvaret ved at anvende både metodisk, data og teori triangulering for at opnå mest mulig validitet i resultaterne. Tematisk analyse er anvendt for at belyse hvilke faktorer spillede ind i sammenspil mellem Danske Banks aktiviteter og CSR forhåbninger, CSR rapporter og offentlighedens sentimentale respons. Data blev indsamlet og kategoriseret ved først at organisere stykker af information hentet fra artiklerne efter stemning; positiv, neutral og kritisk. Derefter blev de kodet så tæt på den rå data som muligt for til sidst at blive kategoriseret i temaer. Disse temaer repræsenterer de diskurser som var mest gennemtrængende i den danske debat vedrørende Danske Banks legitimitet og rolle i finanskrisen.
Analysen blev gennemført ved at trække på teorier om legitimitet, omdømme, gennemsigtighed og rollen af CSR og CSR rapportering i samfundet. Mange spændende konklusioner kunne drages ud fra analysen. Dog var tre vigtigst. Først, at der er en sammenhæng mellem ærlig og sammenhængende CSR politik og opfattelsen i offentligheden. For det andet, at der er en klar sammenhæng mellem en virksomheds CSR forhåbninger og hvordan de med tiden bliver til reelle CSR initiativer. Sidst men ikke mindst, at der er en klar sammenhæng mellem hvordan Danske Bank blev set i offentligheden og deres retorik i CSR rapporterne, samt initiativer vedtaget i rapporterne.
Den sidste konklusion bidrager derved til at skabe en bedre forståelse over for de mekanismer, som er på spil når en virksomhed forsøger at genvinde tabt legitimitet i den offentlige sfære. Det lader mest til at, for Danske Bank, den rette tilgang var at skrue ned for kommunikationen og op for klare initiativer, for at overbevise den brede offentlighed om at de faktisk har lært af deres tidligere fejltagelser.
Dette banede vejen for skabelsen af et nyt framework som adresserer de manglende elementer i de allerede etablerede teorier.
ABSTRACT 2
INTRODUCTION 5
PROBLEM DEFINITION 6
FINANCIAL CRISIS 6
FINANCIAL STABILITY 7
FROM FINANCIAL CRISIS TO CRISIS OF TRUST 7
PROBLEM STATEMENT 9
RESEARCH DESIGN 10
SELECTION OF ARTICLES 11
CSRREPORTS 12
THEMATIC ANALYSIS 12
CODING PROCESS FOR CSR REPORTS 14
SENTIMENT ANALYSIS 14
TOPIC DELIMITATION 15
LITERATURE REVIEW 16
CSR AND CSRREPORTING 16
TRANSPARENCY 19
LEGITIMACY 22
LEGITIMACY THREATS 23
DEALING WITH CRISES 23
WORKING WITH THE CONCEPTS 25
FINDINGS 27
MEDIA INFLUENCE 30
ARTICLE THEMES 33
ALL THEMES 33
ACCESSIBILITY THEME 35
CORPORATE GOVERNANCE THEME 35
CSR COMMUNICATION THEME 36
CUSTOMER FAVORITISM THEME 36
GOVERNMENT INTERVENTION THEME 37
PUBLIC ACCOUNTABILITY THEME 38
PUBLIC PERCEPTION AND TRUST THEME 39
SOCIALLY RESPONSIBLE INVESTMENTS THEME 40
TRANSPARENCY THEME 41
YOUTH ENGAGEMENT THEME 41
MAPPING RESULTS 42
ANALYSIS 44
CSR REPORTING AS A TOOL 44
2006 REPORT 44
2007 REPORT 44
2008 REPORT 45
2009 REPORT 45
2010 REPORT 46
2011 REPORT 47
2012 REPORT 47
2013 REPORT 48
2014 REPORT 49
2015 REPORT 50
ALL REPORTS 51
THE DYNAMICS OF LEGITIMACY REPAIR AND REINTEGRATION OF THE ORGANIZATION 52
DISCUSSION 55
DECOUPLING BETWEEN WORDS AND ACTION –NEW DOUBLE STANDARDS 56
FROM MASS MARKETING TO CUSTOMER FOCUS 57
FURTHER RESEARCH 58
CONCLUSIONS 59
BIBLIOGRAPHY 62
APPENDIX 66
Introduction
Almost 10 years after the crisis, the banking industry is still suffering from a tarnished reputation and a lack of trust from the public’s point of view. According to the Edelman Trust Barometer the trust in financial institutions is on 53% globally, but dividing this number in sub-sectors, and looking at the banking industry in the EU specifically, that number drops to only 34% (Edelman, 2014).
“In 2008 and 2009, the financial crisis had a profound effect on the financial services sector, at both the business and reputational levels. In 2009, public surveys indicated that banking customers in Denmark were among the least satisfied in Europe (sources include the Epsis survey, with more than 50,000 interviews throughout Europe). Since Danske Bank is the largest retail bank in Denmark, we were also affected by the general lack of trust in banks.“ (Danske Bank, 2010, p. 12).
In the wake of the financial crisis a lot of new legislation saw light, as the amount of formal regulation in the banking industry surged to new highs, but this has done little to mitigate the growing public uncertainty. This is not the first time in history that a large-scale event forces the public to take a stand. It happened before with sweatshops in the fashion industry and environmental disasters caused by the extracting industry. It can be argued, that the financial crisis did as much to bring about organizational change and introspection in the financial sector, as the supply chain issues in the fashion industry did, within their sector. The financial crisis had such grave effects on the public perception of the banking industry that it, at times, seems beyond repair. At the same time, the recent scandal #PanamaPapers for example, indicates that some banks still follow the mantra “business as usual”. Some banks, on the other hand, are trying to repair the lost legitimacy by effectively involving the public. This paper concerns one of these banks.
Danske Bank is one of the biggest institutions and the biggest bank in Denmark. Danske Bank was among the very first banks in Denmark to start addressing stakeholders through CSR reports. During the financial crisis, Danske Bank was among the most trusted and least likely banks to fail in the public’s perception, but that all changed with the introduction of the bank packages, where it emerged that Danske Bank was severely underfunded. The public trust was even more challenged by less than successful communication practices and lack of accountability. A complete crisis of trust emerged and the public felt that their urgency of claims was not addressed.
Although we have recovered from the financial crisis, big banks continue to have a governance problem, which can have grave effects on the entire economy. They are becoming so big and important that they are too complex for the boards to run on their own. Even regulators have a hard time figuring out how to deal with banks, and their increasing importance for society (Krawcheck, 2012).
A tactic banks have undertaken to reestablish some of the lost trust has been to address some of their stakeholders through CSR reports. This thesis seeks to take a look at the initiatives that the banks have undertaken and try to explain how the discourse in the public has evolved in the context of CSR reporting.
Since 2008, the Danish government has passed a law making CSR disclosure mandatory for 1100 of the biggest companies in Denmark (Pedersen, Neergaard, Pedersen, & Gwodzdz, 2013) (Christensen
& Morsing, 2010). This has meant that a lot of banks have since then had to start reporting. At the same time, banks are faced with a lot of challenges due to the institutional pluralism that they find themselves in. Due to stakeholders becoming more diverse expectations are even more intricate, fulfilling them poses an even greater challenge to companies, and this intensifies further in the banking industry.
Figuring out how they are trying to address these multiple constituencies and how this has evolved over time is important, especially considering that CSR reporting research is still very much in its infancy. Apart from being important for reestablishing some of the lost confidence in the industry, effective CSR reporting can bring about organizational change through concrete engagements. To conclude, this thesis will look into how reintegration of a financial institution happens in the public sphere.
Problem definition
Financial crisis
In the middle of 2007 the international financial system started experiencing challenges, but the financial crisis first hit Denmark with the collapse of Roskilde Bank in 2008. This set off a systemic financial crisis in the Danish financial sector due to great losses, write-downs and liquidity challenges within some financial institutions (Rangvid, 2013). From summer 2008 to autumn 2010, Denmark was in the midst of a systemic financial crisis, which hit the banking sector harsher than other sectors and as a consequence, and for reasons of financial stability, it was necessary for the government to get involved in the sector, much to the worry and annoyance of the otherwise liberal industry. This uncertainty prompted the Danish government to get involved with “acquisitions and liquidation of distressed banks, guarantees to the sector, capital injections and extraordinary liquidity measures.”
(Rangvid, 2013, p. 13).
Once Lehman Brothers collapsed, Danish banks found themselves cut off from access to capital, due to an international crisis of trust within and in between international financial institutions and credit rating agencies (Rangvid, 2013). This further intensified their predicament.
Financial institutions in Denmark are very important to society and are therefore more strictly regulated to ensure that they are more resilient to future financial crises. To reestablish lost trust,
banks and mortgage banks were categorized into SIFI’s (systemically important financial institutions), which means that their activities are significant to the overall economy, and that they for that reason would be more highly regulated and subject to higher capital demands. As of 2013, banks account for 180% of the GDP in Denmark (Danish National Bank, 2016).
Financial Stability
Financial Stability A/S was formed in 2008 between the Danish government and the banking sector in Denmark, as a means of securing financial stability in the uncertain times during the financial crisis. In October 2008 the Danish Parliament agreed to give guarantees to cover all unsecured creditors with full security for their accounts, until September 2010. The risk was to be divided between the banks themselves and the Danish government. The total losses on Bank Package 1 have been calculated to 12 billion DKK, 2 billion already covered by guarantees and 10 billion DKK was paid by The Private Contingency Association, which is a coalition of banks that ensures that struggling banks are not taken over by Finansial Stabilitet A/S or bankrupt (The Danish Bankers Association, 2016) (Finansiel Stabilitet, 2016). A year later Bank Package 2 was devised, in which the banks were allowed to apply for hybrid loans from the state, which would entail capital injections. This was a means of securing liquidity for Danish banks that were struggling (Finansiel Stabilitet, 2016). Bank Package 3 replaced the general state guarantee from Bank Package 1, and it meant that unsecured creditors were no longer completely covered by the state. Bank Package 4 was devised to give an incentive to healthy banks to take over distressed banks, through guarantees from Garantiformuen (which is supported by the financial institutions) and Financial Stability A/S. A final bank package, Bank Package 5 was devised to give SMEs better access to funding. A total of 12 banks have been taken over by the government to this day. Although the bank packages have been massively criticized (Olsen & Koch, 2016), the Danish government ended up making around 18 billion DKK according to the Ministry of Business and Growth (Ministry of Business and Growth, 2016).
From Financial Crisis to Crisis of Trust
Danske Bank is the biggest bank in Denmark. Although it operates internationally, its largest market is Denmark, with headquarters located in the capital, Copenhagen. The main business focus is conventional banking, although the Group also trades equity, foreign exchange and fixed income products, is involved in asset management, pensions and insurance and more (Danske Bank, 2011).
The customer base is comprised of customers both private and institutional in addition to small and large businesses (Danske Bank, 2011).
Danske Bank’s business model in the years before the financial crisis followed in line with other major banks in Denmark and abroad, with high leverage on capital and a high degree of market financing. Prior to Danske Bank’s aggressive merger and acquisition policy of the 00’s, the bank did
not suffer deposit deficits. Largely due to losses on their foreign operations, especially in Ireland and Northern Ireland, in a few years, the funding gap grew to 350 billion DKK and accounted for more than half of the gap of all other Danish banks combined. It is difficult to say whether Danske Bank was more vulnerable then their foreign counterparts, but it is safe to say that Danske Bank put their own operations in a vulnerable position. Given the bank’s size, which amounted to almost 200% of the Danish GDP, it could have had detrimental effects on the financial stability in Denmark (Rangvid, 2013, p. 198).
During the period, which is the focus of this thesis 2006-2016, Danske Bank has had 3 CEOs. Many regarded the first one, Peter Straarup, as a banking guru (Mikkelsen, 2008). He was the CEO during the boom years, and even as the crisis began to show, there was still confidence in his abilities to lead Danske Bank safely through it. He was both loved and hated by the public, and was involved in growing the Group’s profit from 4 to 14 billion DKK (Mikkelsen, 2008). During his time, four campaigns or initiatives to engage the public saw light:
1. Gør det du er bedst til – det gør vi (1999-2009)
“Do what you do best – we do” (1999-2009) 2. Bedre bank/Mening (2009)
“Better bank/Opinion” (2009) 3. Netto-gul bank (2010)
“Yellow and cheap” (2010) 4. Stå stærkere (2011)
“Stand stronger” (2011)
Peter Straarup stayed on until February 2012, where Eivind Kolding took his place. Under Kolding the campaign “New Standards” was launched, and subsequently a fee was introduced for a basic account that was free up until then, with immediate image and reputational repercussions in the public. 11 months later, he was fired and replaced by Thomas Borgen who pledged himself to refocus the bank on customers once again (Friis, 2013).
“Vi er nu i en fase, hvor det handler om at transformere banken, så den bliver endnu mere kundeorienteret. Bestyrelsen ønsker samtidig, at ledelse og organisation eksekverer hurtigt på alle parametre og dermed sikrer øget konkurrenceevne og lønsomhed” - Ole Andersen Chairman of the Board Danske Bank (Friis, 2013).
"We are now in a phase where it is about transforming the bank to make it more customer-oriented.
The Board also wishes that the management and organization deliver quickly on all parameters, thereby ensuring increased competitiveness and profitability" - Ole Andersen Chairman of the Board Danske Bank (Friis, 2013).
Since 2008 Voxmeter has ranked the best banks in Denmark as chosen by the public. The rankings are based on a “CEM score” which was developed by accounting for all touch points of a given customers’ experience with the banks (CEM Institute - Voxmeter, 2014).
Figure 1 - translated from "Danmarks Banker" (CEM Institute - Voxmeter, 2014, p. 6)
It is safe to say that judging from figure 1, satisfaction with Danske Bank almost could not have been lower, prompting some journalists and experts to wonder:
“De ugentlige meningsmålinger fra Voxmeter peger på kunder, der er så utilfredse, at Danske Bank ville være udsat for en så massiv kundeflugt, at den ville have svært ved at overleve, hvis der var tale om en virksomhed i en branche, hvor kundemobiliteten var større.” (Iversen, 2013)
"The weekly Voxmeter polls point to customers who are so dissatisfied that Danish Bank would be exposed to such a massive customer defection that it would find it difficult to survive if it were a company in an industry where customer mobility was larger." (Iversen, 2013).
At the same time, in these troubling times, Danske Bank continued to focus their efforts on CSR reporting, which raises some interesting questions, regarding the uses of these reports. More specifically, it could be interesting to look into which type of rhetoric Danske Bank were using in order to address this massive uproar in the public.
Problem statement
This thesis will seek to unmask the interplay of discourses used by the bank to justify their position through CSR reporting, the public perception and urgency of claims and to assess critically the role of
FINANCIAL CRISIS ERUPTS
DROP OF SLOGAN
“Do what you do best - we do”
CAMPAIGN
“Opinion is launched”
Peter Straarup apoligises
CAMPAIGN
“Yellow and cheap”
NEW SLOGAN
“Stand stronger”
“NEW STANDARDS”
CAMPAIGN LAUNCHED
Eivind Kolding apologises
NEW FEE STRUCTURE
THOMAS BORGEN REPLACES EIVIND KOLDING 134.000 CUSTOMERS LEAVE DANSKE BANK
transparency in legitimacy repair. It is the ambition of this thesis to build a bridge across different theoretical framings to better understand how a company can become legitimate again. This raises the question:
How can companies use CSR reporting to respond to public criticism and lack of trust?
And more specifically, what is the case for CSR reporting as a tool to facilitate transparency, to regain public trust and reintegrate the organization as a legitimate actor?
Research design
Qualitative research designs are primarily used for exploration, discovery and inductive logic (Patton, 1990, p. 44). Focusing on inductive analysis allows for patterns to emerge naturally, without the risks of presupposing in advance what the important dimensions will be (Patton, 1990, p. 44). The data collection was performed before the actual problem statement was devised. Interesting patterns began to emerge, followed by interesting questions. The methodology was decided upon when it became clear that a potentially large dataset might emerge from the information studied, and was chosen based on its merit in effectively organizing data for analysis.
The focus was on a holistic perspective to better understand the forces that are at play, thus unifying the nature of the particular setting (Patton, 1990, p. 49). A holistic approach seeks to gather data on multiple aspects of the setting under study in order to assemble a comprehensive and complete picture of the social dynamic of the particular situation or program (Patton, 1990, p. 50). This approach ensures that attention can be given to nuance, setting, interdependencies, complexities, and context (Patton, 1990, p. 51).
Case studies, Patton argues, are used where there is a need to study something in great depth and where the unit of analysis is rich in information and complexity (Patton, 1990). Case studies are particularly valuable when the evaluation aims to capture individual differences or unique variations from one program setting to another, or from one program experience to another (Patton, 1990, p. 54).
Due to being anchored in a human problem with human consequences and its purpose being to find an answer to improve these conditions, this thesis can only fall under the category of applied research (Patton, 1990, p. 154). In applied research, the assumption is made that the problem can be understood and solved with knowledge (Patton, 1990, p. 160). The thesis concerns applying pre-existing theories to understand a problem and how it has evolved from non-existent to existent and how it is dissolving.
Patton describes a depth versus breadth trade-off, which is a result of relying on either quantitative or qualitative approach. This researcher has tried to mitigate this dilemma by using thematic coding,
which is a discipline that functions as a bridge between the two, which will be covered in depth later on in the thesis.
Data gathering applied the strategy of opportunistic sampling, to ensure maximum credibility.
Opportunistic sampling strategy basically dictates that the importance of the data gathered emerges after fieldwork has begun (Patton, 1990, p. 179). The exact unit of analysis was not known, and focus was on gathering data until patterns emerged, that would then form the definite unit-of-analysis.
Obviously, this thesis was rooted in a specific interests, which was CSR reporting, thus the searches began there and evolved slowly into the case that is presented in this thesis.
Longitudinal studies have in effect not been possible for CSR until recent times. Although the span of ten years is quite short, compared to other longitudinal studies, it is interesting to see how the reports have evolved over time, and since reporting is a young discipline, a ten-year span should prove long enough. Holding up that contents of Danske Bank’s CSR reports against the public perception of Danske Bank’s efforts can yield interesting results with regards to how a company responds to legitimacy threats or tries to reintegrate into society.
In depth study of a single company makes sense since it would be difficult to assess response strategies across multiple sectors and companies. Danske Bank was especially interesting because they are one of the first banks in Denmark to start work on CSR, but also because of their communicational misfires during the years, and subsequent redemption.
This analysis will be divided into 3 parts, the first focusing on public perception where the main themes of public uncertainty will emerge. The second part will focus on mapping the most prevalent issues that have been taken up by Danske Bank in their CSR reports, and comparing them to the issues that are taken up in the public sphere. The third part will consist of a discussion that will serve to answer whether there is evidence that companies are using CSR as a tool to reinstate themselves as legitimate actors.
Selection of articles
The articles have been found using the database “Infomedia”. Infomedia contains full-text articles from almost all Danish publications, which is also the reason it was chosen as a tool to gather all articles presented in this thesis. Articles containing information about changes of jobs have been eliminated, alongside articles where Danske Bank is only mentioned once or less, as the bank itself then was deemed as no longer being the focal point of the article. National daily newspapers were selected, to limit the amount of articles that would surface, as a means to ensure that enough time was left for analysis. Articles that were completely identical (as a result of, for example, an independent journalist selling his/her article in multiple papers) were also excluded from the data, because this would distort the sentiment in the public at the time. Efforts have been made to stay as objective as
possible with the selection of articles, to ensure that bias did not play a part in the selection criteria. As this thesis is about Danske Bank pre and post financial crisis, the sample was contained to articles from 2006 until the end of April 2016. This yielded many diverse units-of-analysis ensuring a balanced assessment of the public’s view of Danske Bank during these years.
The articles were found using one or a combination of the following words: Danske Bank, bankrådgiver (bank advisor), omdømme (reputation), gennemsigtighed (transparency), new standards, CSR, samfundsansvar (social responsibility), krise (crisis), ekspert (expert), tillid (trust). 329 articles were selected based on the criteria described above, and were deemed as a satisfactory number of samples that conform to the scope of the thesis.
It is not possible to completely eliminate the risks of using value-laden wording when collecting data.
This researcher has tried to limit it as much as possible, by collecting all articles based on the pre- established criteria, to ensure that the samples taken were representative of the sentiments that were prevalent during the 10-year span.
Data, theory and methodological triangulation were applied to this research in order to strengthen the data sample, the theoretical framing and the methodology used in this thesis (Patton, 1990). All these measures were undertaken to ensure that there was a reasonable validity in the results that would surface from the analysis.
CSR Reports
The CSR reports have been downloaded from the Danske Bank public website www.danskebank.com.
So-called fact-books have also been downloaded, where additional information is available.
Additionally, annual reports have been used to gain more insight where data for example on taxes and dividends paid was missing in the reports, but have not been used in any way other than to gain this specific information.
Thematic Analysis
Thematic analysis is used as a means of translating qualitative information into qualitative data. The method allows for specific codes to be developed with the purpose of organizing said codes into themes. The themes are patterns found in the information and either describe observations or interpret observations. A distinction is made based on whether the themes manifest through inductive, as close to the raw data as possible, or deductive, which is information that is at a latent level (Boyatzis, 1998, p. 4). The inductive method, and work with raw data was selected for this thesis, as it was necessary to focus on actual arguments and sentiments presented in the articles. Data-driven codes are close to raw information, which makes validity against criteria more likely (Boyatzis, 1998, p. 30).
Interrater reliability and validity is obtained by producing a good thematic code. A good code is concise, meaningful and close to the data. Efforts should be made to minimize interpretation (Boyatzis, 1998, p. 31). Pattern recognition in seemingly random information is at the heart of meaningful thematic analysis (Boyatzis, 1998, p. 32). These patterns can then be collected in a
“codebook”, and further categorized into the appropriate themes (for the full codebook see appendix).
853 pieces of code were found, and were used to shed a light on the most prevalent dilemmas or uncertainties that were materialized in public perception during the course of the period studied.
The purpose was to figure out and categorize multiple competing arguments, and organize them into meaningful and analyzable data. For example, an issue arose surrounding accessibility in the banking industry. Due to increasing digitalization, the banks started closing branches making it very difficult for customers to get access to cash or advisory services. This pattern was labeled as the
“Accessibility” theme.
Projections translate to the researcher attributing their own emotions, attitudes and beliefs to the material that is being coded. Projection contamination can occur under several different circumstances, for example, too much or too little familiarity with the phenomenon being studied may have the adverse effect of “filling in the blanks”. Useful projections occur when the researcher understands the language that is being used but does not project own conceptualizations onto the material being studied (Boyatzis, 1998, p. 13). Contamination can also be avoided by developing explicit codes, establishing consistency of judgment, using other people to encode the information and sticking as close to the raw information as possible (Boyatzis, 1998, p. 13).
To limit possible contaminations, in this thesis, codes were developed as close to the raw data as possible, often using samples of text verbatim.
The encoding of the data in this thesis will rely on the five key elements that make up a good code.
First a name will be given, second a definition of the theme, followed by instructions on how to spot the theme including exclusions and ultimately at least two examples will be given to facilitate identification (Boyatzis, 1998).
To create a valuable codebook, reliability needs to occur, if it does not, a bridging between qualitative and quantitative information has not been reached (Boyatzis, 1998). It is paramount that there is interrater reliability in order for thematic coding to be able to transition into the sphere of quantitative discipline (Boyatzis, 1998). This thesis assumes that legitimacy (Castelló & Lozano, 2011) and indeed the whole organization (Schoeneborn, 2011) are a social construct. Therefore, social construction is at the heart of this thesis, and allows for “social facts” to emerge (Boyatzis, 1998, p. 145).
Coding process for CSR reports
The CSR reports have been coded based on the same method as the articles, so the initiatives undertaken in the reports positively reflect the themes that have occurred in the work with the articles.
This was done to ensure that comparability could be accomplished. Obviously, employee health and safety formed a huge part of the CSR reports, but it was not added as a theme because a similar theme did not surface in the work with the articles. All these measures ensured that it was possible to assess the extent to which, if any, the responses from Danske Bank to public legitimacy threats truly were shepherded, at least partly, through their CSR reports.
Sentiment analysis
Evidence suggests that people often make evaluative judgments relying on feelings more commonly than relying on reason. Studies have also found that the responses are faster, more stable and more predictive of valence (Pham, Cohen, Pracejus, & Hughes, 2001). This translates to people’s general reliance on heuristics as well as the truth-effect, where statements encountered before are rated as true on more occasions (Henkel & Mattson, 2011). Sentiment analysis concerns the process of categorizing texts based on the affective state of the sender (Colleoni, Arvidsson, Hansen, & Marchesini, 2011).
A basic sentiment analysis was performed on the data samples to figure out the emotional responses experienced by Danske Bank and their stakeholders. Dividing the codes along the positive – critical spectrum facilitates deeper understanding of public sentiment and thus perception at the time.
There are three different approaches to sentiment analysis. The first approach involves developing a manual code, followed by “training” a machine to automatically detect similar sentiments across a large database. The second and most commonly used, is the development of a lexicon list with predetermined polarized wording in order to detect them across a large database. The third approach, linguistic analysis, means that sentiment and valence are classified based on grammatical structures, detecting structures like idioms, context, negations etc. in the judgment process (Colleoni, Arvidsson, Hansen, & Marchesini, 2011). Most of sentiment analysis relies on the use of computational tools, but time and ability constraints, did not allow for a comprehensive analysis, and reliance on manual text by text analysis was conducted for this thesis in stead.
The sentiment assigned to each piece of data stemming from articles, was coded based on the sentiment expressed from the sender towards Danske Bank. If the sender was positive i.e. supportive, defending, applauding etc. of Danske Bank the data was coded as positive. Neutral codes were developed when there was no sentiment and the sender was merely passing information. Data containing skepticism, blame, accusations of or reporting on unethical banking practices etc. were coded as critical. Words may have a different polarity based on context, which is another reason that
this analysis relied comprehensively on contextual wording to determine the valence of the text selections (Agarwal, Mittal, Bansal, & Garg, 2015).
Sentiment analysis was not conducted for the CSR reports, which was determined to be unnecessary, as the report in many ways is one-way communication from the company to stakeholders, so any polarity would not surface there, in the same degree as it would in the articles. Danske Bank takes up some of the dilemmas surrounding their practices themselves, but there are not enough of them to give any statistical value or be representative of anything in particular, and were for that reason not coded by sentiment.
Topic delimitation
This thesis is concerned with public perception, legitimacy threats and legitimacy response strategies in the case of Danske Bank. It is the ambition of this thesis to develop a framework, which can explain some of the forces that are at play when a company is trying to regain lost legitimacy. Although a more specific stakeholder perspective could have been a fruitful avenue to investigate, this thesis will not focus on specific stakeholders and their agendas, but focus more on the actual sentiments as expressed from both sides in the public sphere. Thus, stakeholder analysis was not conducted for this thesis, due to time restraints. This researcher will further argue that it was not necessary as this thesis concerns public perception of Danske Bank and not any specific stakeholder, but all of them.
Furthermore, any agenda there might have been on the part of the different stakeholders was satisfyingly expressed in the themes that were developed.
The focus of the thesis is on Danske Bank and its operations and practices within Denmark, almost completely disregarding any involvement abroad, unless it has a direct impact on domestic processes, which will be elaborated further, later in the thesis. The empirical focus is going to be on discourses both from the company itself, through CSR reports and from the public as expressed in the articles.
Due to lack of data occurrences of employee perceptions of the bank, internal organizational focus will not be included in this thesis, although it is also a very important part of gaining the “license to operate”. There was not much disclosed in the public sphere about the repercussion of the mass layoffs that occurred at Danske Bank, and CSR reports further revealed that employee satisfaction rates remained high during the whole legitimacy crisis, which would further indicate that although there may have been issues at work, it was not as important as some of the issues that have in fact surfaced.
This thesis will only concern the intangible assets of the company without considering how the financial performance of Danske Bank has evolved during this time.
Some assumptions are made in this thesis. The first one is that Danske Bank wants to reintegrate and that there is a problem that needs to be addressed. Another assumption that is made is that a company
that is favorably portrayed in the media is a good company with good values. Therefore sentiment towards the company is in this case indicative of whether or not the company is deemed as good by the public, or at least acting in a good way.
Literature review
It is the ambition of this paper to contribute to the ongoing scientific discussion of the complex interplay between transparency, legitimacy and CSR reporting, in order to understand how these can be used to alter public perception. Seeing as the management of legitimacy and reputation in the financial industry has become a virtual minefield for companies, even established companies like Danske Bank, it is very important to figure out how these companies can navigate through the public sphere, or at least manage their crises in a better way.
CSR and CSR Reporting
A uniform definition of CSR and what it entails is not yet settled (Christensen & Morsing, 2010). This is not due to a lack of practitioner and academic interest, but more due to the fact that academics cannot seem to agree on an unbiased definition. Caroll’s pyramid model is still widely used and defines CSR as being divided by business at the bottom, legal issues in the middle and responsibility at the top. Other definitions and outlooks concern the recent triple-bottom-line approaches where CSR is defined as creating societal value through corporate sustainability, and rests mainly on the concerns of mutual value creation (Lii, Wu, & Ding, 2013). They believe that ethical considerations are important not because a company should but because a company must, to adapt to new market conditions (Christensen & Morsing, 2010). For this thesis, CSR will be defined as “as international private business self-regulation” (Sheehy, 2015, p. 635).
The banking industry has embraced a move towards sustainability, with reporting rates and calls for transparency rising to unprecedented levels (Accenture, 2010). According to the UN Global Compact, CEO’s of the largest banks acknowledge the importance of integrating sustainability in their business operations, but the “conversations with leading executives on the challenges of integration suggest that the level of confidence may be interpreted as a overconfident assessment of companies’ progress, or may be evidence of a lack of understanding of what full integration really entails.” (Accenture, 2010, p. 5) Further studies also show the existence of a significant gap between transferring CSR knowledge into CSR action (Visser, 2010). Although there are many internal challenges to incorporating sustainability into strategy, an even bigger challenge relates to consumers, investors and regulators. For the majority of these stakeholders, it is difficult to move CSR from a risk management practice to an asset for growth and innovation (Accenture, 2010).
CSR is inherently based on trade-offs, as it is very difficult to make all stakeholders uniformly happy.
Due to the fact that social and environmental reporting is so young there is still no consensus on what constitutes good reporting practices; just to name a few examples, there is little consensus on whom the reports should address, how and in what format (Deegan, 2002). To complicate matters further, some critics argue that an in-depth and sustained study of CSR reporting is not possible, because the reports are too complex to be studied through one or two theoretical lenses (Bebbington, Larringa- González, & Moneva-Abadía, 2008). Although accountability and transparency, as a result of corporate social responsibility, are prescribed as a panacea for curing most corporate illnesses (Christensen & Langer, 2009), it can often times result in polyphony in decision-making. Polyphony in this context means that a company, alongside the incorporation of social virtues has to consider many different “premises” in their decision-making, such as economic, legal and technical (Christensen & Morsing, 2010, p. 457). Aspirational CSR talk “provides articulations of ideals, beliefs, values, and frameworks for decisions—in other words, raw material for constructing the organization.” (Christensen & Morsing, 2010, p. 462). Although the pursuit of consistency in messages may in fact obscure the organizational processes, does not mean that we should not be cautious of deliberate attempts to obscure information (Christensen & Langer, 2009).
Some researchers even go so far as to argue that CSR as a business, ethical and governance concept has failed, due to very few companies embracing CSR as a holistic and systematic change (Visser, 2010). Today, companies are expected to take social virtues into their practices, and this adherence to social virtues is usually expressed through corporate social responsibility (Christensen & Morsing, 2010). Furthermore, CSR is often regarded as one of the best ways for businesses to address social problems and maintain legitimacy (Castelló, Morsing, & Schultz, 2013).
Supporters of social reporting consider it a necessary tool in enabling stakeholder democracy. In many ways, stakeholder engagement is necessary for developing a CSR report (Hess, 2007). Researchers argue that the CSR reporting practices of companies are serving more to move the focus of the conversation away from the main issues, thus taking the form of smoke screens. Most research into the motivations for reporting at the moment proves that the current reporting practices are at risk of clouding up the important conversations that they are intended to facilitate (O'Donovan, 2002) (Deegan, Rankin, & Tobin, 2002) (Hess, 2007). Other researchers argue that motivation in fact can be extracted from the CSR reports, because companies these days are more vocal in what they expect and want their CSR report to do (Bebbington, Larringa-González, & Moneva-Abadía, 2008). Deegan states that there are many reasons for engaging in social and environmental reporting these include:
- Complying with legal requirements.
- Taking into account business advantages, if the company is perceived as being ethical.
- The right to know. Some managers believe that the public has the right to have the information.
- Some lending institutions now require the information as part of their own risk management policies.
- As a means of complying with community expectations.
- To mitigate threats to legitimacy.
- Stakeholder management.
- To attract investments through increased rating.
- To comply with industry codes of conduct.
- To stall efforts from governments to push for more disclosure.
- To win sustainability awards.
These motivations are dynamic and often multiple motivations work in combination (Deegan, 2002).
There is a great deal of research that indicates that the motivation for corporate social reporting depends on the managerial desire to legitimize various aspects of their organizations. This is seen as a valued strategy by management when the organization’s reputation is threatened by particular events (Deegan, 2002). Nonetheless, it can be argued that any action involving environmental or social considerations is ultimately beneficial, regardless of motivation. Whether we believe that corporate responsibility claims are genuine or not, it is safe to conclude that “the ideal of an ethically alert organization able to balance its financial interests with its concerns for society as a whole” is what is expected in society today (Christensen & Morsing, 2010, p. 459).
Another issue with corporate responsibility reporting, is that it in its nature is devised to be a one way communicatory entity, but at the same time, it is trying to address multiple stakeholders with multiple, sometimes contradictory demands. Following this logic stakeholder engagement can be a very powerful tool if all the parties involved feel that they have a voice, but prior research indicates that an increasing frequency does not mean that the quality of reporting also increases, the correlation usually goes in the other direction making for a very superficial report that only serves to fulfill regulatory compliance (Pedersen, Neergaard, Pedersen, & Gwodzdz, 2013). Sustainability reporting has closely followed the interest in triple-bottom-line reporting. But as of yet there is still no consensus with regards to what a true sustainability report should contain (Deegan, Introduction, 2002).
Consequently, mandatory corporate disclosure in Denmark has affected the amount of reports, but the amount of information disclosed and the nature of the stakeholder dialogue varies significantly even within the same industries. This is consistent with previous research (Nyquist, 2003) (Pedersen, Neergaard, Pedersen, & Gwodzdz, 2013). The reactive disclosure of information is thus in contrast to the reporting approach in which managers take responsibility and are accountable for sharing
information to those who have a right-to-know (Deegan, 2002). Another important thing to keep in mind is that mandatory CSR reporting does not necessarily inspire further CSR action, but serves more as a tool for organizing initiatives that are already taking place in the company (Pedersen, Neergaard, Pedersen, & Gwodzdz, 2013). Furthermore, companies’ voluntary initiatives, for example with regards to environmental demands within their own supply chains, does not necessarily follow that these objectives are met through actual action (Hess, 2007) and can in worst cases be the result of decoupling (Weaver, Treviño, & Cochran, 1999).
Another issue raised in CSR reporting literature is that of lack of consistency in reporting, which also makes it very difficult to compare social and environmental performance of companies. There is no one size fits all when it comes to what to disclose and how. In many ways, various similarities can be drawn from the state of responsibility reporting today to the state of financial reporting in its infancy (Hess, 2007). This means that eventually, a uniform way of addressing the issue of reporting may enable companies to be compared across size, industry, involvement etc. so a meaningful classification can be devised.
Many different theoretical approaches have been applied to corporate social disclosure research, and the outlook for reaching a consensus on an “accepted” uniform theory is bleak. Most recent research has focused on community engagement also called social auditing (Deegan, 2002). There is a general lack of social auditing (Deegan, 2002) especially in the banking industry, which in a way questions the accountability intentions of the management. Critics argue that if they are held accountable for the environmental information that is supplied, they should also be held accountable for their social impact.
Transparency
“Transparency is the deliberate attempt to make available all legally releasable information—
whether positive or negative in nature—in a manner that is accurate, timely, balanced and unequivocal, for the purpose of enhancing the reasoning ability of publics and holding organizations accountable for their actions, policies, and practices...to be transparent, organizations should voluntarily share information that is inclusive, auditable (veritable), complete, relevant, accurate, neutral, comparable, clear, timely, accessible, reliable, honest, and holds the organization accountable. (Rawlins, 2009, pp. 75, 79)” (Christensen & Morsing, 2010, p. 463).
According to GRI, transparency is a catalyst for change, and considerations for public interest are crucial, as we are now living in a globalized world (GRI, 2016). For transparency to function properly, end-users must be able to obtain valuable information from the information provided. Therefore, some researchers suggest employment of intermediary groups who are able to sift through the information ensuring that the right information reaches the right audience in a format they understand (Hess, 2007). But this also increases the risk of making the information available too simple, in the sense that
the information itself loses its validity (Hess, 2007). How a company is trying to describe itself and how its stakeholders perceive its attempts can differ extensively. The public is usually portrayed as playing a passive role, next to political institutions and mass media in selecting the relevance and interest of information disclosed (Christensen & Morsing, 2010). Also within different stakeholder groups themselves, can there be massive differences as to the level of understanding, the motivation for interest in the company and power balance (Deegan, 2002).
Although there is an increasing amount of information available from companies, with the advent of the Internet among other things, it is argued that simple access to information not necessarily translates to more transparency (Christensen, 2002). Three major assumptions about organizational transparency and external audiences are usually made. The first assumption is that external audiences want and demand transparency through more communication, and secondly that by demanding this increase in communication they are demanding more information (Christensen, 2002). Thirdly, it is presented that audiences with more information will have a more sophisticated view of the company in question, regardless of their information processing capacity and information access (Christensen, 2002). There is also a need to address the existence of an element of cognitive bias in interpreting of information and the reliance on heuristics in information processing. Usually, information processing is divided into two heuristic and systematic processing. Three things influence whether or not we activate systematic processing, prior knowledge, cognitive capacity and motivation. Cognitive capacity dictates that the people have a limited capacity to process information. It is presumed that the less prior knowledge we have about a subject, the more likely we are to activate the systematic processing of the information, and base our judgment rationally (Zuckerman & Chaiken, 1998). This view disregards the recent findings that suggest that humans rely on heuristics much more than we are aware of, utilizing them to process the vast majority of informational input we encounter on a daily basis (Ariely, 2009) (Kahneman, 2011). Keeping that in mind, more information sharing should not necessarily mean more transparency for the organizations, as this researcher proposes that transparency has to involve some level of not only information disclosure but also information processing.
Nonetheless, it is argued that access to information breeds trust and credibility (Adams, 2008). Some go even further and state that transparency is a “precondition for trust, collaboration, dialogue, insight, accountability, rationality, and freedom” (Christensen & Langer, 2009, p. 130).
Although research supports that more communication is better for some audiences, for the general public it does not seem to be interesting. All consumers are interested in is that the company is not breaking its social contract (Christensen, 2002). O’Dwyer found that in an Irish context, not disclosing could assist in making issues go away, simply because there is general skepticism towards managerial
action in Ireland (Deegan, 2002). Christensen argues therefore, that it is wrong to equate transparency with sheer access to information but look at it as “as a social phenomenon shaped by expectations and strategies among central corporate actors” (Christensen, 2002, p. 166). To view transparency as anything else than presenting the information that the companies want the audiences to read, and not the complete inner workings of the company, would be a massive error. It can be argued that the notion of transparency is about creating a system of meaning, which is consistent across the corporate landscape. If the public and the company for example agree on their understandings, then can there be talk of transparency (Christensen, 2002). Simplified, this means that to achieve transparency, a company has to be open and honest about its processes, while at the same time communicating it in a fashion where all stakeholders understand and receive the information as it was intended. Critics argue that this is not attainable because that would involve multiple constituencies having the same perspective (Christensen & Morsing, 2010).
Researchers have pointed to transparency as the solution to gaining trust from stakeholders. Both corporate communication and corporate culture are a company’s effort to project a cohesive self- transparency. Efforts of self-transparency can in some cases lead to exposure of pluralism. This means that representing a business as a whole is too simplified (Christensen, 2002). But, if we accept the theory of social system’s premise that organizations are made up of “interplay of decisions and the inherent necessity to execute follow-up decisions that reproduce organization in the course of successive communicative events” (Schoeneborn, 2011, p. 677) and that this communication is subject to polyphony and strategic ambiguity (Christensen, Morsing, & Thyssen, 2015), it is imperative to look at companies’ CSR reporting as a vital part of the organization, but not necessarily as a truthful assessment of their performance.
Thus, from an organizational perspective, communicating about what a company aspires to be might be more motivating to stakeholders than being honest about where the company is at the moment (Christensen, Morsing, & Thyssen, 2015). Absolute consistency between corporate action and corporate communication can in fact inhibit organizational change (Christensen & Langer, 2009).
Actually, “in the current business environment, internal and external stakeholders not only expect to have unrestricted access to corporate information but also demand that organizations are held accountable for their strategic choices.” (Christensen, 2002, p. 163). Effective transparency requires symmetry, which is a constant communication “climate of arguments and counterarguments”, and
“draws on the logic of systems (seeking balance), rhetoric (establishing balance in discourse), and social exchange theory (involving some evaluation of the quality of exchange)” (Christensen &
Langer, 2009, p. 130). The concept of symmetry and transparency are mutually dependent meaning that one cannot exist without the other.
Legitimacy
Lindblom defines legitimacy as “…a condition or status, which exists when an entity's value system is congruent with the value system of the larger social system of which the entity is a part. When a disparity, actual or potential, exists between the two value systems, there is a threat to the entity's legitimacy.” (Deegan, 2002, p. 293). Taking into account the communicative view of CSR,
“legitimacy is constituted and re-constituted in communicative dynamics” (Schultz, Morsing, &
Castelló, 2013, p. 685), which means that companies are effectively constructing their legitimacy in collaboration with their stakeholders. It is based on the premise that companies need to continuously renew their “license to operate” with their stakeholders (Castelló & Lozano, 2011). This also means that there is virtually no control of the companies’ image and reputation in the public sphere. The loss of control over one’s communicative efforts should therefore also mean more transparency, but this is not always the case, as was touched in the previous section. Legitimacy is usually divided into three types: pragmatic legitimacy, meaning the fundamental benefit that a given company has for its stakeholders, cognitive legitimacy, which results from acceptance of available cultural models and ultimately moral legitimacy depends on whether the public evaluates an organizations activities as
“the right thing to do” (Castelló & Lozano, 2011, p. 12-13).
Legitimacy is systems-oriented, which entails that legitimacy and the environment it operates in are jointly influenced. Perspectives provided by legitimacy theory indicate that the organization cannot exist without being perceived as legitimate by the society. The idea of legitimacy is that it can act as a metaphorical contract between the public and the organization in question (Deegan, 2002). The terms of this contract are not known and can (and often do) vary significantly between different stakeholders and most importantly in the perception of importance by the managers. Managers will pursue different strategies for seeking legitimacy including targeted disclosure and collaboration with already established and legitimate parties (Deegan, 2002). This is clear, for example, in corporations acquiring different stamps from different NGO’s and governmental agencies like Global Compact.
Neo-institutional theory would predict that an organization may try to gain legitimacy by devising visible, largely symbolic compliance programs but at the same time decoupling those structures from core processes (MacLean & Behnam, 2010). CSR programs have been thought to be easily decoupled, and become a legitimacy facade (MacLean & Behnam, 2010). False sense of security can arise from formal standards facilitating “business as usual” (MacLean & Behnam, 2010). Studies have shown that CSR talk can give a façade of sincerity while allowing for the same practices to continue.
Conflicting values and ideas may also be at the root of different communication across different channels (Christensen, Morsing, & Thyssen, 2013). Call for consistency in CSR actions and CSR
communication can threaten the legitimacy of any organization (Christensen, Morsing, & Thyssen, 2013).
Legitimacy threats
Any organization can lose its reputation or legitimacy, either because social expectations have changed or because of key incidents that have threatened the very operation of the organization.
Perceived legitimacy gap and the threat of losing legitimacy is in a sense individual, and can vary between managers, for example, two managers might not react in the same way to the same threats, or within different groups in society (Deegan, 2002) (Patriotta, Gond, & Schultz, 2011). Legitimacy can be gained, maintained and regained through communication (Deegan, 2002). More often than not, research has concluded that information disclosure can be linked to legitimacy actions, and it is thusly not consistent with the view that managers disclose information to be accountable to the public (Deegan, 2002). That is why sharing information is detrimental, if there is a perceived social contract (Deegan, Introduction, 2002). Legitimacy theory is based on perception, any action that a manager employs must involve disclosure to be effective (Deegan, 2002). This posits that for legitimacy to be regained or maintained needs to involve some level of disclosure.
When an illegitimate organization is successful in actually distracting the public, it can continue to operate in a society within which its operations can contribute negatively to the social progress of several groups. Furthermore, these superficially legitimizing activities can distract from important regulation being passed (Deegan, 2002), simply because politicians in many ways regulate as certain issues surface. To ensure change in corporate behavior, disclosure of information needs to lead to stakeholder accountability (Hess, 2007).
Legitimacy undoubtedly overlaps with neo-institutional theory. The main differences are whether managers are able to influence legitimacy. In institutional theory, mangers have to conform to survive (Deegan, 2002), which is expressed through isomorphism.
Viewing the world through multiple theories can help to give a more detailed view of any particular occurrence (Deegan, 2002). In recent years there has been a push in legitimacy theory to divide it into multiple branches to make it more applicable on micro level as opposed to the traditional view.
Although legitimacy theory is not able to predict managerial behavior, it provides insight into the decision-making process itself (Deegan, 2002).
Dealing with crises
Crises can affect any organization, and are defined as a rhetorical challenge. A crisis is an event, which transpires, if an organization’s stakeholders perceive it as existing, and usually entails a fair amount of uncertainty on behalf of the stakeholders affected (Coombs, 2009). In other words, a crisis is very much a social construct in the same way that legitimacy and reputation are social constructs. In
order to manage a crisis, managers have to look at the issues from the affected stakeholder’s perspective, be it one or many.
Crises pose “rhetorical problems”, also defined as violations of social legitimacy, for the management, which are defined as “a perceived or actual gap between what stakeholders believe or how they behave and what stakeholders should believe and how they should behave.” (Coombs, 2009, p. 238).
Crisis communication can eliminate or at least mitigate the existence of uncertainty in stakeholder perceptions, and managers should address the issues that are creating the “rhetorical problem” so it does not spread and affect reputation or purchase intent (Coombs, 2009). The basic crisis management model is a three-phase model consisting of a pre-crisis phase, crisis phase and post-crisis phase.
Seeing as most rhetorical studies focus on the crisis and post-crisis phases, crisis management can be said to be reactive. Customers need to know how the crisis affects them, employees need to know how their jobs are threatened, shareholders need to know how the crisis will affect their gains and ultimately the media needs to have information to address what has happened (Coombs, 2009).
According to Coombs, the “crisis response” addresses the issues raised by the public in the crisis phase either by sharing instructing information, adjusting information or reputation management.
Instructing information warns stakeholders and primarily concerns any efforts to avoid or protect from physical harm. Adjusting information focuses on the psychological effects of a crisis, where an organization is expected to share expressions of concern and corrective action to avoid a repeat of the events that caused the crisis. Although these two responses do have an effect on an organization’s reputation, they are not meant as actual efforts to repair any reputational threats, but are more concerned with convincing the public that the organization can handle the “rhetorical problem”.
Communicative “promises” are made to the public during this phase that is to deliver information when it is available and updates on development. Reputation management efforts are most likely addressed in the post-crisis phase (Coombs, 2009).
Reputation management concerns information sharing and recovery (Coombs, 2009). The dilemma occurs when information is detrimental to the company, and the likelihood and motivation for sharing it diminishes. A failure to share information gravely affects the company’s ability to successfully manage out of the reputational crisis. Closure is obtained by the organization if all phases are successfully carried out, but there is no guarantee that the stakeholders feel the same closure resulting in a lingering reputational threat (Coombs, 2009).
“A reputation is an aggregate evaluation stakeholders make about how well an organization is meeting stakeholder expectations based on its past behavior” (Coombs, 2009, p. 240).
Legislation can be the right path if a company does not correct its processes (Coombs, 2009).
Ideally, an organization should respond to a crisis quickly, consistently and openly. Disclosing information seems to be the right approach once legitimacy is threatened.
Working with the concepts
Seeing as the question posed in this thesis is looking at the both the how and why of the issues it seems pertinent to include elements of both reputational considerations and legitimacy, where these two coincide. Some researchers argue that they coincide often and should therefore not be held as two separate concepts (Adams, 2008) (Pfarrer, Decelles, Smith, & Taylor, 2008). Others on the other hand, argue that they should be held separate because of legitimacy theory’s lack of ability for explaining disclosure (Bebbington, Larringa-González, & Moneva-Abadía, 2008). Combining all these seemingly different schools of thought, might seem tricky at first. But close inspection reveals that there is quite a bit of overlap between all these different theories.
The analysis in this thesis will draw on the framework devised by Patriotta et al. to explain how Danske Bank has moved across the different stages towards establishment of a new social order, in the media and through their CSR reports. For the purpose of this thesis both legitimacy and reputational considerations fall under the definition of “public perception and trust”. Public perception and trust encompass whether the company is deemed as legitimate and whether they are viewed positively in terms of reputational forces.
Distinctions are often made between strategic and institutional legitimacy, where the first one is typically concerned with conflict amongst social organizations and the second is concerned with how cultural environments and symbolic systems affect legitimacy processes (Patriotta, Gond, & Schultz, 2011). In institutional legitimacy an organization acquires legitimacy through adherence to
“rationalized myths and dominant institutional logics” (Patriotta, Gond, & Schultz, 2011, p. 1805).
When there is a dispute over the “justness of a social order”, legitimacy maintenance is the result of negotiations of “orders of worth” that function to sustain harmony between things or persons (Patriotta, Gond, & Schultz, 2011, p. 1805). Orders of worth are defined as “legitimate forms of common good” and are challenged in the public sphere. Challenges to these established orders of worth are coined “legitimacy threats” and serve as an indicator of when justification of a worth is needed (Patriotta, Gond, & Schultz, 2011, p. 1805). To maintain legitimacy, the social order needs to be under a constant process of “justification across available orders of worth” (Patriotta, Gond, &
Schultz, 2011, p. 1806). Most researchers agree that legitimacy is a “rhetorical endeavor shaped by underlying institutional logics” (Patriotta, Gond, & Schultz, 2011, p. 1807).
The reintegration theory states “that reintegration is a stakeholder-driven process” and should therefore “focus on those organizational actions or behaviors in each stage that respond to the specific demands of stakeholders in that stage,” meaning that the “reintegration can be observed by parallel changes in stakeholder demands and organizational actions.” (Pfarrer, Decelles, Smith, &
Taylor, 2008, p. 730). The same process has been observed in the work with the data. An organization
