Legitimising corporate reputation in times of employee distress through disclosure: Media exposure in the electronic manufacturing services industry in China

This research examines changes over time of non-financial voluntary reporting practices in response to episodes of employee-related distress. It investigates employee-related disclosures by the four largest electronic manufacturing services (EMS) firms in China between 2008 and 2013 during a series of employment-related incidents, to investigate how the firms re-legitimate their reputation in response to the media coverage on those incidents. \ud \ud <b>Design/Methodology/Approach</b>\ud \ud A series of employee-related incidents that occurred 2010 - 2012 are selected as the focus of this study, with total coverage of employee-related disclosures between 2008 and 2013. These incidents are directly linked to three of the four sample companies: Foxconn, Pegatron and Compal Electronics. Employee-related disclosures in corporate social responsibility (CSR) stand-alone reports were coded by a set of specifically designed instructions, and newspaper articles about employee-related incidents were coded for sentiment. Results are interpreted through two theoretical lenses: the media agenda setting theory and legitimacy theory. \ud \ud <b>Findings</b>\ud \ud Newspapers reported the employee-related incidents in a way detrimental to the legitimacy of firms that directly involved in the selected industry. In the process of legitimation, firms switch between disclosing more employee-related information and reducing disclosures. The self-expectation on organizational legitimacy also affects how CSR reporting is used in legitimation. The employee-related disclosure analysed is closer to symbolic legitimation than substantive legitimation. \ud \ud <b>Value</b>\ud \ud The study contributes to reporting practice by showing that employee-related disclosure is largely vacuous and to a greater extent is used as symbolic legitimation. The quality of disclosure requires significant improvement. This study contributes to the literature by using legitimacy theory to interpret employee-related disclosure in China, addressing inadequate research efforts in the context of social and human rights dimensions of CSR reporting