11.elijido ten 0036www.iiste.org call-for_paper-60.revised

Issues in Social and Environmental Accounting
Vol. 2, No. 1 June 2008
Pp. 36-60

The Case For Reporting Pro-Active
Environmental Initiatives:
A Malaysian Experiment On
Stakeholder Influence Strategies

Evangeline Elijido-Ten
Faculty of Business and Enterprise
Swinburne University of Technology
Australia

Abstract

The purpose of this research is to gain insights on the preferred strategies chosen by various
stakeholder representatives to influence management to either provide/not provide environ-
mental disclosures in an experimental setting. A typology of resource relationships and influ-
ence strategies is adapted as a framework to make sense of the views presented by various
stakeholder representative groups. To facilitate a Malaysian experiment, qualitative interviews
with the aid of a hypothetical vignette are conducted to understand how different stakeholder
groups go about seeking what they want from the management. The findings in this exploratory
study indicate that although the model is useful to understand the influence strategies taken by
each stakeholder group, its effectiveness is tempered by the level of significance placed by
these groups on the environmental initiative and their perception of how the event will affect
their stake on the firm.

Keywords: Environmental disclosures, stakeholder influence strategy, Malaysia.

INTRODUCTION ACCA, 2005; KPMG, 2005). It is in this
regard that stakeholder theory has
Worldwide surveys show that stake- gained popularity as it offers a useful
holder pressures are one of the main framework given its basic premise that
drivers for management’s increased fo- the firm’s success is dependent upon the
cus in the area of corporate social and successful management of its relation-
environmental responsibility leading to ship with its stakeholders (Freeman,
increased stakeholder consultation in the 1983). Whilst the stakeholder literature
reporting process (Ernst & Young, 2002; is replete with research on stakeholder

Evangeline Elijido-Ten is Senior Lecturer of Accounting at Faculty of Business and Enterprise, Swinburne University
of Technology, Australia, email: eelijidoten@swin.edu.au

E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60 37

attributes and concerns on how to man- Firstly, it contributes to the development
age them (see for example, Ullmann, of stakeholder theory by extending its
1985; Roberts, 1992; Mitchell, Agle & application to the means by which stake-
Wood, 1997; Elijido-Ten, 2007), little is holders try to get what they want from
known about how stakeholders demand the firm particularly when a pro-active
what they want from the firm (Frooman, environmental initiative is involved.
1999). The purpose of this research is to Prior studies feature mainly negative
gain insights on the preferred strategies events such as corporate downsizing
chosen by various stakeholder represen- (Tsai, Yeh, Wu & Huang, 2005), possi-
tatives to influence management to pro- ble threat to ecological balance and hu-
vide/not provide environmental disclo- man life (Elijido-Ten, Kloot & Clarkson,
sures in an experimental setting. 2007) and environmental organization's
concerns and activism (Hendry, 2005;
In this study, a Malaysian experiment is Frooman & Murrell, 2003, 2005). Sec-
initiated to understand how different ondly, it uncovers relevant insights on
stakeholder groups go about seeking how various stakeholder groups demand
what they want from the management. environmental disclosures from an ex
Frooman’s (1999) typology of resource ante perspective. Much of previous envi-
relationships and influence strategies is ronmental reporting research provides
adapted as a framework to make sense evidence from an ex post perspective
of the possible environmental reporting (e.g. Wiseman, 1982; Patten, 1992; Al-
preferences imposed by the stakeholder Tuwaijri, Christensen and Hughes,
representatives on the management. To 2004) thereby excluding the possibility
facilitate the experiment, qualitative in- of gaining insights from stakeholder
terviews are conducted with the aid of a views prior to the disclosure decision.
hypothetical vignette to gain insights on Thirdly, it extends the stakeholder influ-
the possible interplay between the man- ence strategy analysis to a wide variety
agement and various stakeholder repre- of stakeholders. Previous research has
sentatives from an ex ante perspective, focused mainly on one stakeholder
that is, the environmental reporting pref- group such as environmental leaders/
erences before disclosures are made. The groups (Frooman & Murrell 2003, 2005;
hypothetical vignette features a pro- Hendry 2005) and employees (Tsai et al
active environmental initiative taken by 2005). And finally, it brings a perspec-
a prominent publicly listed firm in the tive from a developing country such as
banking industry. The findings in this Malaysia into the social and environ-
exploratory study indicate that although mental reporting literature.
the model is useful to understand the
possible influence strategies taken by The motivation for using the Malaysian
each stakeholder group, its effectiveness context is driven by its inherent back-
is tempered by the level of significance ground in terms of its economic devel-
placed by these groups on environmental opment and strategic vision. Malaysia
initiative and their perception of how the offers an interesting setting since it is the
event will affect their stake on the firm. only developing country with an explicit
timeline to achieve the developed nation
This study contributes to the existing status by the year 2020 (Vision 2020). It
body of literature in a number of ways. is also one of the fastest growing econo-

38 E. Elijido-Ten / Issues in Social and Environmental Accounting 1 (2008) 36-60

mies in Southeast Asia. Compared to its tion on the reporting preferences of vari-
neighbouring countries, Malaysia has ous stakeholder groups and how they go
recovered much quicker from the 1997 about demanding what they want from
Asian financial crisis. Along with rapid the management particularly when a
economic development, however, Ma- pro-active environmental initiative is
laysia has been experiencing intensified concerned.
environmental impact such as the defor-
estation, erosion, air and water pollution The remainder of the paper is organised
largely brought about by corporate ac- as follows. The next section provides a
tivities such as logging, large scale land brief overview of the literature on corpo-
development, open burning, mining, rate social and environmental disclo-
power stations and dam constructions sures leading to the introduction of the
(Smith, Yahya & Amiruddin, 2007; framework. An explanation of the re-
Sumiani, Haslinda & Lehman, 2007). search methodology employed is pro-
vided next followed by the discussion of
Furthermore, Malaysia has not been im- results and further analysis. Finally, the
mune to environmental disasters such as concluding comments are provided.
the 1993 Highland Towers erosion, the
1997 haze crisis (when the Air Pollution
Index exceeded the 500 mark) and the LITERATURE OVERVIEW: MA-
2004 tsunami that hit Penang along with LAYSIAN ENVIRONMENTAL RE-
other countries killing more than PORTING
200,000 people. Hence, it appeals to in-
tuition that these adverse experiences As more compelling scientific evidence
could create higher environmental link climate change and global warming
awareness on the part of Malaysian to the activities inherent in commercial
stakeholders which could then translate industrialisation, conventional wisdom
to higher pressure for firms to be more would suggest that environmental re-
environmentally pro-active and to pro- porting will continue to increase particu-
vide environmental reports. This, how- larly if stakeholders’ demand for these
ever, does not appear to be the case. A disclosures increased. Indeed, a number
case study of Tenaga Nasional Berhad, of studies provide evidence that stake-
the largest electricity producer in Malay- holder pressures are on the rise. Ernst
sia, shows that its management does not and Young’s study of 147 of the Global
see the need to provide environmental 1000 companies shows that majority of
disclosures in their annual reports de- the key drivers for the management’s
spite its adoption of a number of envi- increased focus in corporate social re-
ronmentally-friendly activities. The fac- sponsibility (CSR) are stakeholder-
tors, identified by the management, at- related:
tributing to non-disclosure include the
absence of mandatory requirements, lack Surveyed companies identify five
of awareness, knowledge and expertise key drivers as influencing the in-
as well as lack of government and public creasing business focus on CSR ...
pressure (Abdul Rahman & Ayob, These five drivers are: greater
2005). Given this, the Malaysian context stakeholder awareness of corpo-
offers a fertile ground for an investiga- rate ethical, social and environ-


mental behaviour; direct stake- The number of reporting compa-
holder pressures; investor pres- nies grew from 25 in 1999, to 35
sures; peer pressures and an in- in 2000, reaching 40 companies
creased sense of social responsi- by 2001. This represented 5.3%,
bility … (Ernst and Young, 2002, 7% and 7.7% of the KLSE main
p. 6) board listed companies in 1999,
2000 and 2001 respectively.
Likewise, a survey of the world’s largest (ERMM, 2002, p. 8).
250 companies reveals that, apart from
the Global Reporting Initiative (GRI) Another descriptive study (Thompson
guideline, stakeholder consultation is and Zakaria, 2004) confirms that Malay-
commonly used as the basis for CSR sian environmental reporting is still at its
report content (KPMG, 2005). infancy and that majority of environ-
mental disclosers are large companies
One of the most commonly used vehi- with seven of the top 10 companies pro-
cles to inform the public of the firm’s viding mostly general policy statement
social and environmental accountability accompanied by some unsubstantiated
is the annual reports (Wiseman, 1982; declarative statements.
Neu, Warsame & Pedwell, 1998;
Cormier, Gordon & Magnan, 2004). Al- There is, however, an increase in the
though much of the financial informa- number of studies examining the moti-
tion is mandated, today’s annual reports vations behind Malaysian environmental
contain more voluntary information than disclosures using different theoretical
before (Anderson & Epstein, 1995). So- perspectives. Adopting the contracting
cial and environmental accounting re- and political cost perspective, Ahmad,
searchers around the world appear to Hassan and Mohammad (2003) examine
agree that environmental reporting in the voluntary annual report environ-
annual reports and other communication mental disclosures (AREDs) of 299
media has increased over time (Patten, KLSE-listed companies using logistic
1992; Gray, Kouhy & Lavers, 1995; regressions. Their results suggest lack of
KPMG, 2002, 2005; Elijido-Ten, 2007). support for the general hypothesis that
firms voluntarily disclose environmental
Studies focusing on Malaysian environ- information to mitigate contracting and
mental reporting, however, have not ap- political costs. They attribute this result
peared in the literature until the turn of to the “argument that the commonly held
the millennium. In a study conducted by theoretical framework of principal-agent
the Environmental Resources Manage- relationship may not hold in the Malay-
ment Malaysia (ERMM, 2002), the sian context” (p.85). On the other hand,
analysis of annual reports and stand- Ahmad and Sulaiman (2004) employ
alone environmental reports of compa- legitimacy theory in their study of KLSE
nies listed in the Kuala Lumpur Stock Main Board listed companies from the
Exchange (KLSE) shows that environ- construction and industrial products sec-
mental reporting is not widely practised tors. Using quantitative analysis, their
in Malaysia. The report, however, high- results provide limited support for legiti-
lights an increase in environmental re- macy theory given the very low level of
porting, albeit minimal: disclosure. This implies that there is no


serious attempt on the part of the compa- quantitative studies (Ahmad, et al, 2003;
nies to appear legitimate to society. Smith, et al, 2007) seem to suggest that
some expectations from the variables
Three recently published Malaysian directly derived from developed-country
studies (Yusoff, Lehman and Nasir, studies may not hold true in Malaysian
2006; Sumiani, Haslinda and Lehman, context. Third, the theoretical frame-
2007; Smith, Yahya and Amiruddin, works used in previous studies (Ahmad
2007) adopt no specific theoretical et al, 2003; Ahmad & Sulaiman 2004)
model. In examining the AREDs of top achieve limited support. It is in this light
50 companies listed in KLSE, Yusoff, et that the adoption of stakeholder theory
al (2006) use the qualitative method of using exploratory qualitative method is
content and discourse analysis. Consis- deemed appropriate in this study.
tent with the findings by KPMG (2005),
their analysis shows that “majority of
disclosures made were around the mo- THEORETICAL FRAMEWORK:
tive of stakeholders’ concern” (p. 140). STAK EHO LDER I NF LUENCE
Sumiani, et al (2007) also examine the STRATEGIES
disclosures made by top 50 Malaysian
public companies to explore the report- The term stakeholder is originally intro-
ing behaviour of ISO-certified compa- duced by Stanford Research Institute
nies. They find that 13 companies are (SRI) to refer to those groups without
ISO14001 and all provide some form of whose support the organisation would
environmental disclosure in their annual cease to exist (Freeman 1983). In devel-
reports. Smith, et al (2007) concentrate oping stakeholder theory, Freeman
on the disclosing companies identified (1983) introduces the stakeholder con-
by the ERMM (2002) study in an at- cept in two models: (1) a business plan-
tempt to find whether relationships exist ning and policy model; and (2) a corpo-
between environmental disclosures and rate social responsibility model of stake-
certain corporate characteristics. Of the holder management. In the first model,
explanatory factors examined, only fi- the focus is on developing and evaluat-
nancial performance is found to be sig- ing the approval of corporate strategic
nificant. However, contrary to expecta- decisions by groups whose support is
tion, it is negatively associated with dis- required for the firm’s continued exis-
closures prompting their conclusion that tence. The stakeholders identified in this
“environmental reporting practices in model include the owners, customers,
Malaysia appear to differ from those public groups and suppliers. Although
elsewhere, which may be partly attribut- these groups are not adversarial in na-
able to the maturity of reporting proc- ture, their possibly conflicting behavior
ess” (p. 195). is considered a constraint on the strategy
developed by management to best match
The Malaysian studies reviewed high- the firm’s resources with the environ-
light a number of important points. First, ment. In the second model, the corporate
although environmental reporting in Ma- planning and analysis extends to include
laysia is still very limited, majority are external influences which may be adver-
driven by stakeholder concerns (Yusoff sarial to the firm. These adversarial
et al, 2006). Second, previous Malaysian groups may include the regulatory bod-


ies, environmentalist and/or special in- what they want from the firm?”
terest groups concerned with social is-
sues. The second model enables manag- Frooman’s (1999) typology of influence
ers to consider a strategic plan that is strategies, which borrows heavily from
adaptable to changes in the social de- resource dependence theory, is used to
mands of non-traditional stakeholder extend the development of stakeholder
groups. theory that accommodates the view from
the stakeholders’ perspective. The basic
Corporate environmental responsibility premise central to resource dependence
is one area in which much community theory is that an entity’s need for re-
awareness has developed given the in- sources provides opportunities for others
creasing manifestations of the effects of to control the firm. Power is a central
global warming, deforestation, air, land theme in the argument because the na-
and water pollution. As proposed by ture of the relationship is determined by
stakeholder theory, this increased level who is dependent on whom and how
of environmental awareness creates the much. Frooman explains that operation-
need for companies to include non- alising power under resource depend-
traditional stakeholders like the regula- ence theory is quite different. He quotes
tory adversarial groups in their corporate Pfeffer and Salancik (1978):
plans to adapt to changing social de-
mands. The literature hints that compa- For the dependence between two
nies provide disclosures voluntarily for organisations to provide one or-
various reasons (Gray & Bebbington, ganisation with power over the
2001; Buhr, 2007), most of which could other, there must be asymmetry in
be related to satisfying various stake- the exchange relationship (p. 53)
holder groups including adversarial …Power, thus, is defined in rela-
stakeholders. Furthermore, given that tive terms, that is, A has power
majority of Malaysian environmental over B if B is more dependent on
disclosures are motivated by stake- A relative to A’s dependence on B
holders’ concerns (Yusoff et al, 2006) (p. 196).
and the increasing need to get the stake-
holders involved in the reporting process Drawing from this power relationship,
worldwide (KPMG, 2005), stakeholder two types of resource control strategies
theory offers a useful framework for this are suggested: (1) withholding strategies
study but perhaps not in the conven- - defined as those where stakeholders
tional way it has usually been adapted. discontinue providing a resource to a
firm with the intention of making the
The notion of ‘successful management’ firm change a certain behaviour; and (2)
appears to have been taken mostly from usage strategies - those in which the
the management’s perspective; hence, stakeholder continues to supply a re-
much of the early development in stake- source, but with strings attached, i.e.
holder theory has focused on stakeholder some conditions must be met. Frooman
attributes and concerns on how to man- and Murrell (2003; 2005) later labelled
age them. As a result, there is a scarcity ‘withholding’ as coerce and ‘usage’ as
of literature addressing the question: compromise strategies.
“how will the stakeholders try to get


Figure 1: Typology of Resource Relationships and Influence Strategies

IS THE STAKEHOLDER DEPENDENT ON THE FIRM?
NO YES
Is the firm dependent

P1: When the relationship is one P2 : When the relationship is one
on the stakeholder?

of LOW INTERDEPEND- of FIRM POWER, the stake-
NO ENCE, the stakehoder will holder will choose indirect-usage
choose indirect-withholding strategy to influence the firm.
strategy to influence the firm.
P3 : When the relationship is P4 : When the relationship is one
one of STAKEHOLDER of HIGH INTERDEPEND-
YES POWER, the stakeholder will ENCE, the stakeholder will
choose direct-withholding strat- choose direct-usage strategy to
egy to influence the firm. influence the firm.

Source: Adapted from Frooman (1999, p.200)

Another source of power is one that nor the stakeholder are dependent on
comes from relationships with others each other; (2) high interdependence –
who supply resources to a focal firm. when both the firm and the stakeholder
While some stakeholder groups do not are dependent on each other; (3) stake-
have the power to use either withholding holder power – when the firm is depend-
or usage strategies, they could form an ent on the stakeholder; and (4) firm
alliance with other stakeholder groups power – when the stakeholder is depend-
with whom the focal firm has a dependent upon the firm. The last two relation-
ence relationship. Frooman identifies ships show power asymmetry.
this concept as types of influence path-
ways which he divides into two: (1) di- Appealing to these characterisations,
rect pathways – those in which the Frooman’s typology of resource rela-
stakeholder directly manipulates the tionships and influence strategies sug-
flow of resources to the firm; and (2) gests four propositions relating to the
indirect pathways – those where a stake- choice of pathway (direct or indirect)
holder works in concordance with a and strategy (withholding or usage). The
principal despite not having formal rela- choice of pathway-strategy combination
tionships with the focal firm. Note that is conditional on the power dependence
both types of influence pathways could relationship between the firm and the
use either withholding or usage strate- stakeholders. These propositions are
gies. shown in Figure 1.

Finally, Frooman introduces a typology A number of studies have adopted
of resource relationships based on the Frooman’s model. For example,
powerdependence relationship between Frooman and Murrell (2003, 2005) used
the firm and the stakeholders. Four types experimental approach with the aid of
of relationships are observed: (1) low hypothetical vignettes to solicit re-
interdependence – when neither the firm sponses from actual environmental lead-


ers regarding events with negative im- stake on the firm AND the firm manage-
pact, e.g. recycling used car batteries in ment/stakeholder interdependence struc-
a developing country that has no envi- ture WILL determine whether or not they
ronmental regulations. Hendry (2005) will demand environmental disclosure.
conducted interviews with 28 represen-
tatives of four environmental organisa- Hence, in extending the application of
tions to understand why they choose Frooman’s (1999) typology in the field
particular types of strategies to influence of environmental disclosures, Proposi-
firms to change. And Tsai, et al (2005) tions P1 to P4 will apply, if and only if,
used the model to understand the em- there is a perceived demand for environ-
ployees’ actions of 18 Taiwanese firms mental disclosure. Furthermore, al-
involved in business downsizing. though Frooman’s typology is useful to
analyse possible strategies which stake-
Whilst these studies provide some em- holders may adopt to demand environ-
pirical support to the usefulness of the mental disclosures from the firm, it is
model, what is clear from prior research clear that the ‘withholding’ strategy as-
is that the model has not been used in sumes that the event or issue has a nega-
the context of environmental reporting. tive connotation necessitating pressure
Furthermore, the use of the model has from the stakeholder/s to withhold or
been restricted mainly on negative even withdraw a critical resource. The
events thereby limiting the possibility of typology, therefore, is not entirely suit-
gaining insights from stakeholder prefer- able when the focal event has a positive
ences when a pro-active environmental environmental impact. Hence, for this
event is involved. It is also evident that study, the propositions are slightly modi-
the use of the model has so far been re- fied to replace the ‘withholding’ strategy
stricted to a few stakeholders such as with ‘promoting’ strategy. The rationale
environmental leaders/groups (Frooman for this is clear - those stakeholders who
& Murrell 2003, 2005; Hendry 2005) can see the value of environmentally
and employees (Tsai, et al, 2005). What friendly practices adopted by the firm
is lacking is an attempt to extend the are not likely to even consider withhold-
analysis to a wide variety of stake- ing their support because of non-
holders. disclosure. Instead, they might even
‘promote’ this event either directly or
This study addresses these gaps in the indirectly. Therefore, the four proposi-
literature. Frooman’s model is adapted tions emanating from the modified
as a framework to make sense of the framework are restated as follows:
power-dependence relationships be-
tween the stakeholder groups and firm P1: If the stakeholder/s place high sig-
management. In order to apply the nificance to the proactive environ-
propositions in the context of environmental initiative and their relation-
mental disclosure demand, there is an ship with the firm is that of ‘LOW
important underlying assumption, that INTERDEPENDENCE’, the stake-
is: holder/s will adopt indirect promot-
ing strategy to demand environ-
The stakeholder’s perception of how the mental disclosures.
environmental event will affect their P2: If the stakeholder/s place high sig-


nificance to the proactive environ- a useful framework for an examination,
mental initiative and their relation- the processes involved in selecting these
ship with the firm is that of ‘FIRM strategies are still not very much under-
POWER’, the stakeholder/s will stood. Inductive methodologies like
adopt indirect usage strategy to qualitative interviewing techniques are
demand environmental disclosures. generally favoured for this type of ex-
P3: If the stakeholder/s place high sig- ploratory research primarily because the
nificance to the proactive environ- choices of strategies are mainly subjec-
mental initiative and their relation- tive.
ship with the firm is that of
‘STAKEHOLDER POWER’, the Research Design and Methods
stakeholder/s will adopt direct pro-
moting strategy to demand environ- This study is organised into two phases.
mental disclosures. The first part is the pilot phase aimed at
P4: If the stakeholder/s place high sig- exploring how Frooman’s model can be
nificance to the proactive environ- used in Malaysian context given that
mental initiative and their relation- little is known about how Malaysian
ship with the firm is that of ‘HIGH business psyche may affect business de-
INTERDEPENDENCE’, the stake- cisions. This phase used both secondary
holder/s will adopt direct usage (website perusal and relevant news arti-
strategy to demand environmental cles using Factiva database) and primary
disclosures. data in the form of unstructured/semi-
structured qualitative interviews. Quali-
These propositions are consistent with tative interviews is the preferred term to
resource dependence theory in that the distinguish this method from the highly
level of interdependence between the structured line of questioning normally
firm and stakeholder plays a significant used in survey research (Rubin & Rubin,
role in the choice of strategy used. For 2005). Since the responses provided by
example, when the firm has a low level the participants in this phase are triangu-
of dependence on the stakeholder (as in lated against secondary data gathered
P1 and P2), the firm does not need to be from media and website releases, five
responsive to the stakeholder’s demands, interviews are considered sufficient.
leaving the stakeholder no choice but to
find an ally to indirectly influence the The insights gathered from this phase
firm. On the contrary, when the firm provide the platform for the identifica-
depends heavily on the stakeholder for tion of the salient stakeholders. Mitchell,
survival, the stakeholders will have no Agle and Wood’s (1997, p.873) stake-
hesitation to express their demands di- holder salience typology propose that
rectly to the firm (as in P3 and P4). “stakeholder salience will be positively
related to the cumulative number of
stakeholder attributes – power, legiti-
RESEARCH METHODOLOGY macy, and urgency – perceived by man-
agers to be present”. Although, it is not
The previous section revealed that while the purpose of this research to directly
resource dependence theory and stake- test this proposition, the typology is use-
holder influence strategies may provide ful in identifying the salient stakeholders


to be included in the main phase of this views tends to be around 15 +/- 10.”
study. Most of the interviews are conducted in
Malaysia in 2005. As all the targeted
In line with Frooman and Murrell (2003, stakeholder groups are represented and
2005), the main phase adopted an ex- given the time and geographic con-
perimental approach using a hypotheti- straints, 15 interviews are considered
cal vignette to solicit the views of the sufficient in the main phase of this ex-
interviewees representing a wide array ploratory study.
of stakeholders identified from the pilot
phase. A structured interview question- Analysis Techniques
naire is designed to include both closed
and open-ended questions (see the Ap- Analysis for the unstructured/semi-
pendix). Given that the questionnaire structured qualitative interviews in the
asks for the informant’s opinions and pilot phase is done in two stages. In the
reactions regarding the chosen environ- first stage, all the interviews are tran-
mental issue/event, it is considered im- scribed word-for-word. Then in the sec-
portant not to select the participants ran- ond stage, the transcripts are analysed.
domly. A number of authors argue that Memoing is used to summarise the re-
qualitative samples tend to be purposive sponses and to tie together different
rather than random (Kuzel, 1992; Miles pieces of data into clusters of recognis-
& Huberman 1994). Hence, the partici- able concepts. Memoing is a data reduc-
pants are chosen based on the criteria tion analytical technique that allows the
that, at least, each can represent the researcher to write ‘memos’ to self sum-
stakeholder groups identified in the pilot marise the responses and to identify re-
phase and most importantly, that their curring themes (Miles & Huberman,
current/previous positions and experi- 1994, p.72). The primary data are sup-
ence would allow them to provide realis- plemented with secondary data from
tic responses to the hypothetical ques- news reports/relevant websites.
tions asked. Snowball sampling (Patton,
1990) is used since this approach is use- In the main phase, the responses to the
ful for locating information-rich key in- closed and open-ended interview ques-
formants. Initially, the names/contact tions are separately analysed. Responses
details of prospective participants are to the closed interview questions are
taken from relevant company websites tabulated. Then, quantitative techniques
and from recommendations of the inves- such as weighting and ranking are used.
tigator’s former colleagues. Once con- On the other hand, responses to the
tacts are established, the participants open-ended interview questions are fully
introduced other prospective informants. transcribed and the qualitative tech-
niques of ‘question-by-question matrix’
Another fifteen interviews are conducted and ‘memoing’ are used. Both the quan-
in the main phase. Kvale (1996, p.101) titative and qualitative analyses are
notes that, in designing an interview linked using a ‘conceptual matrix’ or a
study, it is important to “interview as ‘pattern matching’ technique. Miles and
many subjects as necessary to find out Huberman (1994, p. 127) explain that a
what you need to know… in current in- conceptually clustered matrix has “its
terview studies, the number of inter- rows and columns arranged to bring to-


gether items that “belong together.” This practices is formulated. The vignette
outcome can happen in two ways: con- features a firm in the banking industry
ceptual – the analyst may have some a which promotes sustainability and so-
priori ideas about items that derive from cially responsible initiatives. The focal
the same theory or relate to the same event is the investment on a ‘state of the
overarching themes; or empirical – dur- art’ technology that enables recycling,
ing early analysis you may find that in- reduction of waste and energy consump-
formants answering different questions tion. Details of the vignette are shown in
are tying them together or are giving the appendix.
similar responses”. These techniques are
useful in conducting qualitative studies. Another important aspect of the pilot
phase is the identification of the salient
stakeholders. The stakeholder literature
RESULTS AND DISCUSSION hints that while there could be an infinite
number of stakeholders ‘out there’, a
Identification of Relevant Environ- coalition analysis (Freeman, 1983; 1984)
mental Issues and Stakeholders would suggest that certain stakeholders
can be grouped together as they may
The qualitative interviews and the pe- have similar demand/stake on the firm.
rusal of relevant media/website reports Utilising Mitchell, et al’s (1997) typol-
point to a number of significant environ- ogy characterised by the attributes of
mental issues that are specific in the Ma- power, legitimacy and urgency, a list of
laysian setting. For example, the popular the stakeholder groups commonly re-
media (New Straits Times via Factiva) ferred to by the respondents in the pilot
highlights a number of environmental phase is collated. The groups identified
issues such as: consist of both primary and secondary or
adversarial stakeholders. The primary
• Toxic wastes and chemicals used by stakeholders include the long-term credi-
companies destroying the ecological tors, customers, suppliers, employees,
balance; relevant government agencies and the
• Health risks due to rampant air pollu- shareholders. It is decided to split the
tion arising from toxic wastes and for- shareholder stakeholder group into two:
est fires; major shareholders and minor sharehold-
• Push for companies to adopt environ- ers, since it is conceivable that the two
mentally-friendly technology and prac- groups are able to exert their power on
tices. the firm in different manners. The sec-
ondary stakeholder groups identified by
Given that the purpose in this study is to the respondents include the media and
gain insights on stakeholder reporting the environmentalists.
preferences when pro-active environ-
mental initiative is involved, attention is Establishing Power-Dependence Rela-
focused on the third environmental is- tionship
sue. Hence, a hypothetical vignette con-
taining an environmental event that Part I of the structured interview ques-
simulates the popular media coverage on tionnaire (see the Appendix) starts by
environmentally-friendly technology and asking the participants to provide gen-


eral information like their current/ and pattern matching analyses con-
previous position and the type of stake- ducted. Note that despite the major
holder they are most likely to be classi- shareholders (MJS) being perceived to
fied based on their past/current experi- be the most important stakeholder group
ence. They are also asked to rank the to company survival (ranked 1), the rela-
stakeholder groups identified from the tionship established is one of high inter-
pilot phase in the order of their per- dependence. This is because their po-
ceived relevance to the company’s sur- tential to threaten firm survival is neu-
vival with 1 being the most important tralised by their high cooperation poten-
and 9 being the least important. The pur- tial. The major shareholders, by virtue of
pose here is to understand the respon- their substantial investment, are depend-
dents’ perceived power-dependence re- ent on the firm for their capital growth.
lationship between the stakeholders and However, the firm is equally dependent
the management. on them for funding. Despite the lower
ranking (ranked 4) for long-term credi-
It appeals to intuition that the higher the tors (LTC), the same rationale applies
mean ranking is (i.e. closest to 1), the for companies highly dependent on
more probable it is for that stakeholder long-term debt for funding.
group to exert their power over the firm
(i.e. stakeholder power) given that these In the absence of any urgent event, ad-
groups are most important to company versary stakeholders like the media
survival. In the same token, the lower (MED) and environmentalists (ENV)
the mean ranking is (i.e. closer to 9), the virtually have neither power nor legiti-
less probability there is for that stake- mate claim against the firm, i.e. their
holder group to have influence over the potential to threaten or cooperate with
firm suggesting firm power. This rank- the firm is generally low. As confirmed
ing analysis, however, is not likely to by the low ranking of MED and ENV
give an indication as to whether there is (shown in Table 1), the firm does not
perceived high/low interdependence. depend on them for survival, hence the
Thus, a follow-up open-ended question relationship is expected to be one of low
asking the respondents to elaborate on interdependence.
their reason for ranking is necessary to
establish the perceived potential of the While the customers (CUS) and the rele-
stakeholder to threaten or cooperate with vant government agency (RGA), to a
the firm. An analysis of the stake certain extent, may depend on the firm
holder's threat and cooperation potential for various reasons such as the supply of
is likely to give an indication on the per- goods/service (for CUS) and socio-
ceived level of interdependence between economic progress (for RGA), the analy-
the firm and the identified stakeholder sis shows that the firm is dependent on
groups. these groups more than they are to the
firm, i.e. stakeholder power. This is
Table 1 shows the overall mean ranking because of the stakeholder’s ability to
and qualitative findings summary. The threaten the firm’s existence in terms of
last column shows the established lost business (for CUS) as well as penal-
power-dependence relationship based on ties, sanction or even closure (for RGA).
the findings from the conceptual matrix


Table 1: Summary of Power-Dependence Analysis
Stake- Overall Qualitative Findings Summary: Power-Dependence
holder Mean Analysis of Threath/Corporate Potential Relationship Estab-
Group Ranking Shown in brackets [ ] are interviewee number lished
LEGEND: LO – Low; ME – Medium, HI - High
POTENTIAL FOR THREAT (PT) ð HI High Interdependence:
MJS 1 POSSESS CONTROL & POWER TO MAKE DECISIONS [6,8,11,13,16,17,20] -both the potential to cooper-
(2,30) POTENTIAL FOR COOPERATION (PC) ðHI
ate and threaten the firm are
BECAUSE OF CAPITAL INVESMENT [15,20]
equally high.

POTENTIAL FOR THREAT (PT) ð HI Stakeholder Power
CUS 2 WITHOUT CUSTOMERS SUPPORT, THE COMPANY CAN’T SURVIVE -highly important for firm
(3,36) [10,14,16,18,19]
survival with high threat
POTENTIAL FOR COOPERATION (PC) ð LO
DEPENDENT ON HOW MUCH THE CUSTOMER RELY ON THE FIRM BUT potential and low potential
GENERALLY LOW BECAUSE OF COMPETITION [10,14,19] to cooperate.

POTENTIAL FOR THREAT (PT) ð LO to HI Firm power
EMP 3 HIð Employee skills/services are vital [12,16] -although quite highly
(4,20) MEð Employee skills/dedication is needed [19]
ranked; Malaysian employ-
LOð Employee generally have not say......[18]
POTENTIAL FOR COOPERATION (PC) ð HI ees are more likely to coop-
POTENTIAL (FINANCIAL) SUCCESS IS CRUCIAL TO EMPLOYEES JOB erate than to threaten firm
SECURITY [8,14,18] survival.

POTENTIAL FOR THREAT (PT) ð LO to HI High Interdependence
LTC 4 NOT ALL COMPANIES DEPEND ON LTC BUT MANY DEPEND ON BANKS -for companies relying more
(4,67) FOR FUNDING; POSSESS POWER TO RETRACT FUNDING [11,18]
on LTC, both potential to
POTENTIAL FOR COOPERATION (PC) ð LO to HI
COMPETITIVE INVESMENT & L-TERM RELATIONSHIP [11,15] cooperate and threaten will
be high.
POTENTIAL FOR THREAT (PT) ð HI Stakehoder Power
RGA 5 DEPENDING ON THE INDUSTRY [8], POSSESS PUNITIVE & OTHER -despite low to high poten-
(4,77) POWER; COULD STOP COOPERATION IF NECESSARY [13,16,18,20]
tial to cooperate, their sanc-
POLICIES CAN PROVIDE CONDUCIVE INVESMENT CLIMATE TO ASSIST tion and punitive power is
THE COMPANY enough to threaten company
survival.
POTENTIAL FOR THREAT (PT) ð LO Firm Power
SUP 6 BECAUSE OF BUSINESS OPPORTUNITY & COMPETITION [14,15,18,19] -given the low ranking and
(5,43) POTENTIAL FOR COOPERATION (PC) ð HI
low threath potential but
MUTUAL BUSINESS RELATIONSHIP NECESSITATES SUPPLIER COOP-
ERATION [17,18,20] high cooperation potential.
POTENTIAL FOR THREAT (PT) ð LO Firm Power
MIS 7 POSSESS NO POWER INDIVIDUALLY; -given the low ranking and
(5,57) CAN’T MAKE DECISION [8,16,20]
low threath potential but
CAPITAL INVESMENT CAN BE EASILY LIQUIDATED [8,9] high cooperation potential.

POTENTIAL FOR THREAT (PT) ðLO to HI Low Interdependence
MED 8 MEDIA COULD PLAY A ROLE BUT NOT SO POWERFUL BECAUSE IT’S -without any urgent issue,
(6,77) GOVERMENT-CONTROLLED [3] [15] [18] [19] [20]
threat and cooperation
DEPENDING ON POLITICAL CONNECTIONS [18] [15] [19] potential are both low.

POTENTIAL FOR THREAT (PT) ð LO to HI Low Interdependence
ENV 9 ðCould create a lot of trouble for company if there is a need [20] -without any urgent issue,
(7,77) POTENTIAL FOR COOPERATION (PC) ð LO to HI
threat and cooperation
ðDEPENDING ON WHETHER THE COMPANY ADOPTS ENVIRONMEN-
TALLY FRIENDLY PRACTISE OR NOT [11,15,16,18,19,20] potential are both low.

LEGEND: MJS – major shareholder; CUS – customers; EMP – employees; LTC – long term/major creditors; RGA
– relevant goverment agency; SUP – supplier; MIS – minor shareholder; MED – media; ENV – enviromentalist.

Finally, the employees (EMP), suppliers firm to find another supplier. Moreover,
(SUP) and minor shareholders (MIS) are in the Malaysian setting, the employees
found to fall under the firm power rela- (EMP) and minor shareholders (MIS),
tionship since they are more likely to rarely exercise their prerogative to ques-
depend on the firm for their survival tion management decisions. Thus, the
than vice versa. Generally in a highly power lies mainly with the firm manage-
competitive market, the suppliers need ment. Although the above discussion
the firm more because it is easy for the may appeal to intuition, without a par-


ticular event that could change the The analysis shows that 8 out of 15 re-
power/interdependence relationships, the spondents consider the featured event to
analysis is incomplete. This is where be between Very Significant (2) and Sig-
Part II of the questionnaire is deemed nificant (3). On average, however, the
useful. results suggest that the perceived ur-
gency of the event is relatively low with
Perceived Significance of the Event mean average of 3.33 indicating some-
where between Significant to Moder-
In order to understand management/ ately Significant. Furthermore, none of
stakeholder behaviour, the literature the stakeholders represented consider the
hints that there is a need to ‘feel and see’ event to be Extremely Significant (1),
the world from their perspectives. Free- whilst 4 perceive the event to be Not
man (1984) suggests that role playing is Significant (5) at all.
an effective way to synthesise and fully
understand the objectives and beliefs of It appears that pro-active environmental
particular stakeholders. Role playing, initiatives are not given much kudos as
however, can only be effective if the indicated in the following comments:
participants have some first-hand knowl-
edge of the role they are playing from …here in Malaysia, it’s quite
their own experience. This is why it is common that when you’re doing
considered crucial for this research that well, you won’t get much atten-
participants are chosen on the basis of tion. If you’re doing pretty
their exposure to Malaysian business badly ... then you get the atten-
environment and on the presumption tion… [Interviewee 7]
that their current/previous position en- In Malaysia, it’s very much profit-
ables them to represent the stakeholder oriented … It doesn’t work… In-
groups identified. terviewee 8]
I think in our environment here,
Hence, in Part II of the questionnaire, this [environmental] event is not
the interviewees are asked, after reading significant… What they care is
the hypothetical vignette, to assume the just making profit - the bottom-
role of the stakeholder they are most line. [Interviewee 9]
likely to be associated with given their
previous/current professional experi- The above sentiments are shared by the
ence. They are then asked how signifi- majority of the respondents like Inter-
cant the featured event is to them, on a viewees 12, 14, 15, 16, 18 and 19 who
scale of 1 (Extremely Significant) to 5 expressed their belief that because Ma-
(Not Significant), in deciding whether to laysian environmental awareness is gen-
provide continued support to the com- erally low, the local customers and em-
pany. They are also asked to elaborate ployees would less likely find this event
their reasons for providing such signifi- very high in their priority list. The local
cance level. The purpose here is to elicit customers and the employees are the
the respondent’s perception on how ur- closest representatives of the Malaysian
gent the environmental issue/event is to public in this study.
them.


Demand for Environmental Disclo- munication with press conference/
sures release as the most preferred medium
followed closely by some form of inter-
The purpose in Part II Questions 2 (Q2) nal communiqué such as newsletters,
and 3 (Q3) is to understand whether emails and memos. Of the 3 respondents
there is a demand for environmental dis- who expect not to receive disclosures
closures from each stakeholder represen- from other means, one represents the
tatives concerning the featured event. local customer [Interviewee 19], while
Question 2 aims to solicit the partici- the other two include a representative
pants’ Annual Report environmental from the media [Interviewee 15] and the
disclosures (AREDs) preference while environmentalist [Interviewee 17].
Question 3 asks if they are likely to de- When asked to explain why they would
mand environmental disclosures in other not expect the firm to provide disclo-
ways of communication. Of the 15 re- sures through other means, their com-
spondents, only two—a minority share- ments are:
holder and a local customer representa-
tive [Interviewees 18 and 19] - will not- I’m taking the stand that I am not
demand AREDs. The implication is such a good corporate citizen which
that while pro-active environmental means I’m not really interested
event is not given the highest priority, with pro-active environmental
there is a demand from various stake- initiatives. [19]
holders for this event to be disclosed in It’s already good, there’s no need
the company’s Annual Report. When to promote. It’s just like having a
Interviewees 18 and 19 are asked to ex- good programme, it will sell by
plain why they will not demand AREDs, itself. [15]
the necessity for government regulation Honestly, I really wouldn’t bother
is raised: whether the company do it or not
[i.e. provide ‘other’ disclosures],
You see the problem is, there is no I will still support this company.
statutory requirement to provide [17]
this type of disclosure… I reckon,
as long as the government will not Although the response provided by In-
make a legal requirement to do terviewee 19, once again, confirms ear-
so, I don’t think many companies lier comments on low environmental
will bother to provide voluntary awareness, the explanations offered by
disclosure. [18] Interviewees 15 and 17 give an entirely
I think at the end of the day, one different view, that is, not demanding
depends on the government to disclosure does not tantamount to non-
drive the environmental issues. In appreciation of the company’s pro-active
the Malaysian context, a lot de- environmental efforts. Hence, it is clear
pends on the government to take that direct answers provided to questions
that leadership role. [19] pertaining to environmental disclosure
demand are not sufficient. The answers
Furthermore, in response to Q3, all but to the open-ended questions asking them
three of the respondents prefer to see to elaborate on their reasons provide a
this event featured in other ways of com- rich data source for further analysis.


Table 2: Summary of Responses
INTERVIEW NUMBERS 13 18 10 11 16 8 9 19 20 7 14 12 15 6 17

STAKEHOLDER MJS MIS LTC LTC RGA EMP EMP CUS CUS SUP SUP MED MED ENV ENV
Q1-Perceived signifi- 5 3 4 2 2 5 5 5 2 3 2 2 4 2 4
cance of featured
event
Q2-Will demand AREDs? Yes No Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes

Q3-Will demand disclo- Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes No Yes No
sure elsewhere?
Q4-Preferred Action b a b b c b a a c b b c c c c

Legend Stakeholder MJS – major shareholder; CUS – customers; EMP – employees; LTC – long term/major creditors; RGA – relevant government
agency; SUP – supplier; MIS – minor shareholder; MED – media; ENV – environmentalist.
Legend Q1 : (5) Not Significant; (4) Moderately Significant; (3) Significant; (2) Very Significant; (1) Extremely Significant

Legend Q4: (a) Ignore the environmental event and continue supporting the company.
(b) Encourage the firm to make environmental disclosure & continue supporting the firm.
(c) Continue supporting the company and attempt to influence other to do the same.

These comments clearly have further who either feel strongly about environ-
implications in their preferred action mental issues and/or see the need for the
which is discussed next. firm to publicise its pro-active environ-
mental initiatives. Table 2 provides the
Preferred Stakeholder Action summary of direct answers to the
closedended questions Q1 to Q4 in Part
In Question 4 (Q4), participants are II of the structured questionnaire.
asked to choose the most likely action
they would take if they are aware of the The result shows that majority (12 out of
featured environmental event and the 15 respondents) see some value in en-
company did not provide any environ- couraging the firm to make environ-
mental disclosure. Three ‘possible ac- mental disclosures (Options b and c)
tions’ are provided as follows: with six respondents going further as to
promote and influence others to do the
(a) Ignore the environmental event and same (Option c). Only three respondents
continue supporting the firm. choose to ignore the event (Option a). Of
(b) Encourage the company to make en- these three, the local customer
vironmental disclosure and continue a nd e mpl o ye e r e pr e s e nt a t i ve s
supporting the company. [Interviewee 19 & 9] believe that the
(c) Continue supporting the company environmental event is not significant
and attempt to promote this initiative (consistent with their response to Q1),
by influencing others to do the same. hence they do not see the need to compel
the management to provide disclosures.
Option (a) is likely to be chosen by those It is, however, interesting to probe
who believe that environmental consid- deeper as to why the minority share-
erations are not significant and/or are not holder representative [Interviewee 18]
likely to affect their stake on the firm. consider the event significant and yet he
On the other hand, Options (b) and (c) chose to ignore the event (Option a).
are likely to be chosen by stakeholders


Figure 2: Analysis of Stakeholder/Firm Interdependence & Strategy

FURTHER ANALYSIS OF RE- Recall, however, that these power-
SULTS dependence relationships established
earlier is based from the respondents’
As is clear from the results presented in general perception of how crucial each
the previous section, the answers to the stakeholder is to company survival with-
closed questions (Q1 to Q4) do not pro- out particular consideration of the fea-
vide sufficient basis for further analysis. tured pro-active environmental event.
Cognisant of this limitation, these an-
swers are analysed further together with The experimental approach is particu-
the answers to open-ended questions larly useful for further analysis as it al-
probing deeper into the reasons for their lows the injection of a particular sce-
choice. nario in a relatively controlled environ-
ment. As is the case in this study, a pro-
The four power-dependence quadrants active environmental initiative is intro-
of ‘Low Interdependence’, ‘Firm duced by a fictitious bank, Keluarga
Power’, ‘Stakeholder Power’ and ‘High Banking Berhad (KBB), and the respon-
Interdependence’ and the respective in- dents are asked to comment and explain
fluence strategies corresponding to their views. In order to gain insights on
propositions P1 to P4 developed earlier the preferred strategies chosen by vari-
are reproduced in Figure 2. In addition, ous stakeholder representatives to de-
the stakeholders identified to belong in mand/not demand environmental disclo-
each power-dependence quadrant are sures, the answers to the openended
now superimposed in each of the four questions provide a rich data source. The
quadrants. For example, the media purpose here is to explore the possibility
(MED) and environmentalists (ENV) that if there is a demand and the firm
fall into the Low Interdependence Quad- does not provide environmental disclo-
rant while the major shareholders (MJS) sures, then these stakeholders may exer-
and long-term creditors (LTC) are in the cise their power possibly either directly
High Interdependence Quadrant. or indirectly through usage or promote
strategy. The results from this further


analysis are discussed here. sent to the media. [6]

Low Interdependence Quadrant Interviewee 6’s desire to promote
KBB’s initiative through discussions
The low interdependence quadrant in with other stakeholders including the
Figure 2 includes both the environmen- mobilisation of the media is characteris-
talists (ENV) and the media (MED). tic of an indirect attempt to help pro-
Since neither the firm, KBB, nor the mote this event. Furthermore, the influ-
stakeholders, ENV and MED rely on ence of the media to inform the public as
each other to fulfil their goals, the rela- shown in the following comments pro-
tionship is one of low interdependence. vides some evidence on its ability to use
One can even argue that these groups do indirect promoting strategy.
not really have a stake on KBB. How-
ever, because of the nature of the fea- This is why I said before that the
tured proactive environmental initiative environmental awareness is more
and the nature of the role played by both or less on the increase because of
the environmentalists and the media, it is the activities publicised by the
conceivable that both groups could take media. The media plays a very
this opportunity to use KBB as an exam- important role because they are
ple to promote this activity. If both the one who inform the public on
groups feel strongly about increasing what is happening… [15]
environmental awareness, this event cre-
ates an indirect stake on the firm. As This view is shared by other respon-
such, the slightly modified model pre- dents including the two top executives
dicts that both the media and environ- interviewed in the pilot phase.
mentalist representatives will adopt indi-
rect promoting strategy. This is evi- Firm Power Quadrant
dent from the responses toQ4 (shown in
Table 2) with both the environmentalists Since the employees (EMP), minor
[Interviewees 6 & 17] and media repre- shareholders (MIS) and suppliers (SUP)
sentatives [Interviewees 12 & 15] choos- depend more on KBB to fulfil their goal,
ing Option c. The following direct the relationship is one of firm power.
quotes describe their attempt to influ- Hence, P2 suggests that indirect usage
ence others to follow KBB’s example: strategy is likely to be adopted but only
if the stakeholders place high signifi-
Since they are doing something cance to the environmental event as sug-
good, it would be good to let other gested in the main assumption as indi-
stakeholders know so they can set cated earlier. The following quote ex-
a good example. [17] plains why the minor shareholder repre-
An environmentalist will be most sentative [Interviewee 18] ignores the
comfortable lending a hand to a environmental event (Option a) despite
reputable company that does not the fact that he considers the event sig-
just talk but takes the necessary nificant:
action… I’m happy to discuss this … I won’t even consider encour-
initiative with other stakeholders aging the company to make envi-
and write an article which can be ronmental disclosure – they won’t


take notice of me as a minor between KBB and those of the relevant
shareholder anyway. [18] government agency (RGA) and custom-
ers (CUS) is one of stakeholder power
Despite the different preferred actions since KBB is dependent upon these
chosen by the employees [Interviewees stakeholder groups to continue its exis-
8 & 9], suppliers [Interviewees 7 & 14] tence. In the modified model, P3 sug-
and minor shareholder [Interviewee 18] gests that, if there is a demand for envi-
representatives as shown in Table 2, it is ronmental disclosure, a direct promot-
clear that none of them choose Option c ing strategy is predicted. However, simi-
suggesting that either they do not put lar to the Low Interdependence Quad-
high significance on this event or they rant, it is important to highlight the fact
do not care whether it is disclosed or that these strategies will only be
not. This is confirmed in the following adopted, if and only if, these stakeholder
comments by the employee representa- groups feel very strongly about the pro-
tives: active environmental initiative, thereby
creating a sense of urgency to promote
If this is a good thing, as in this this event. Hence, it all boils down to the
case, it doesn’t matter to us personal convictions of the stakeholder
whether they disclose or not. But representatives. It is promising to see
if there is any risk on health… that the relevant government officer and
then we would like to know.[8] one customer representative
I personally think that if the com- [Interviewees 16 & 20, respectively]
pany does something good, they place a high significance level on this
should do it willingly. It’s not nec- event (2) and choose Option c (see Table
essary to let other people know so 2) suggesting that they both find KBB’s
I don’t care whether they publi- environmental initiative valuable. In
cise it or not. [9] fact, the only respondent in the Stake-
holder Power Quadrant who choose to
As such, it is highly unlikely that anyone ignore this event (Option a) is the local
of them will use the indirect usage customer representative [Interviewee 19]
strategy. A close examination of the who consistently takes the stand of a
responses to open-ended questions con- ‘bad’ corporate citizen. It is clear, how-
firms that none of the respondents in the ever, that even the socially responsible
firm power quadrant intend to make an customer is very much aware that Ma-
alliance with other stakeholders. This is laysian customers generally are not will-
hardly surprising particularly since ear- ing to forego their own interest in the
lier findings from the pilot phase reveal name of sustainability:
that economic concerns are likely to su-
persede environmental concerns magni- If this expenditure of $20 million
fied by the fact that environmental is out of the bank’s pocket and it’s
awareness in Malaysia is still very low, not affecting their interest rates…
albeit increasing slowly. they will continue supporting this
bank. They might not want to sac-
Stakeholder Power Quadrant rifice their benefits though. [20]

The analysis reveals that the relationship Despite this, perhaps the best display of


direct promoting strategy is the one management to pay the newspa-
portrayed by the relevant government per, underline the word “pay”, to
representative in this direct quote: publicise this as a major event
with pictures. I can easily do that
Because this event is more of a since I’m a major shareholder.
private sector initiative, we’ll look [13]
at this positively. What we, as
relevant government agencies, This suggests that because both the firm
will do is to establish good net- management and the stakeholders are
working so that we can look after highly interdependent, the major share-
them as one of our partners – as a holders and creditors could directly de-
good example for other companies mand the use of all means of environ-
to follow. [16] mental disclosures since they have the
ability to set certain conditions in their
High Interdependence Quadrant relationship with the management. Fur-
thermore, since the featured event pro-
Finally, there is high interdependence vides an opportunity to improve com-
between the management of KBB and pany image, both parties are in a win-
those of the major shareholder (MJS) win situation as confirmed in these
and long-term creditors (LTC) represen- quotes from long-term creditor represen-
tatives because of mutual dependence to tatives:
achieve profitability goals. Hence, di-
rect usage strategy is expected in I’ll encourage the bank to use dif-
proposition P4. It is clear from Table 2 ferent communication media to
that the major shareholder [Interviewee advertise this initiative since it’s
13] and longterm creditor representa- good for our image. [10]
tives [Interviewees 10 & 11] prefer to …if we’ve been dealing with this
encourage KBB to provide disclosures company for years, we would feel
(i.e. their most preferred Option is b) very comfortable with this rela-
mainly because it is good for company tionship … so we would encour-
image. Their ability to ‘attach strings’ is age them to disclose this since it’s
inherent particularly in this comment a win-win situation. [11]
from the major shareholder representa-
tive: Hence, further analyses reveal that the
level of interdependence between the
I’ll just invite the CEO one morn- management and the stakeholder groups
ing over coffee and ask him to as well as the perceived significance of
explain what is happening. I’ll events have some bearing on the type of
encourage him to make disclo- influence strategies used by the stake-
sures – call a press conference, holders to demand environmental disclo-
make posters and brochures; sures. It is also clear that the stake-
sponsor environmental cam- holder’s perception of how the event
paigns– these are mainly exploit- will affect their stake on the firm will
ing mechanisms to enhance our determine the demand.
public image. Yes, I will ask the


CONCLUDING COMMENTS veals the usefulness of Frooman’s
(1999) typology to understand how dif-
The purpose of this research is to gain ferent groups of stakeholders go about
insights into the preferred influence seeking what they want from the man-
strategies adopted by various stake- agement. From the results, it is clear that
holder groups in demanding environ- there is a demand for environmental dis-
mental disclosures. These insights are closures to be provided in the annual
important given that worldwide surveys report and other means of communica-
show that stakeholder pressures are one tion, particularly in the case of a pro-
of the main drivers for increased corpo- active environmental initiative as fea-
rate social and environmental respon- tured in this Malaysian experiment. The
siveness. underlying assumption that ‘the stake-
holder’s perception of how the environ-
In examining stakeholder influence mental event will affect their stake and
strategies and disclosure preferences, the firm/stakeholder interdependence
this research extends the application of structure’ has, indeed, determined
stakeholder theory in the environmental whether the stakeholders demand envi-
reporting area particularly when a pro- ronmental disclosures. The insights
active environmental initiative is in- gathered from the stakeholders’ demand
volved. This is a first-of-its-kind as prior for environmental disclosures lead to the
studies feature mainly negative events. following conclusion.
Likewise, unlike other studies which
focussed mainly on one group of stake- From a practical perspective, the most
holders, this study extends the stake- pivotal conclusion drawn from this in-
holder influence strategy analysis to a vestigation is that although the model is
wide variety of stakeholders such as the useful to understand the influence strate-
major shareholders, minor shareholders, gies adopted by each stakeholder group
customers, suppliers, relevant govern- represented, its effectiveness is tempered
ment agency, long-term creditors, em- by the level of significance placed on the
ployees, media and environmentalists. environmental event by the stakeholders.
Furthermore, it uncovers relevant in- Given the considerably low level of en-
sights into the environmental reporting vironmental awareness in Malaysia, it is
preferences in the context of a rapidly clear from the analysis that proactive
developing economy such as Malaysia efforts such as the one featured in this
from an ex ante perspective. Much of study is not given a very high signifi-
previous research conducted mainly in cance level by the stakeholders closely
developed countries provides evidence identified with the general public such as
from an ex post perspective thereby ex- the employees and the local customer
cluding the possibility of gaining an representatives. The implication is such
appreciation of the processes and ration- that without mobilising public aware-
ale behind the decision to either disclose ness, it is not surprising to see few com-
or not disclose environmental informa- panies adopting environmentally
tion. friendly activities. Hence, while the me-
dia and the environmentalists are seen to
The analysis conducted in this research, push the agenda of increasing public
although based on a small sample, re- awareness, the onus is still on the rele-


vant government agencies to exercise typology, in particular, and stakeholder
their power. Many of the stakeholders theory, in general, has much to offer in
represented in this study rely on the rele- our understanding of management/
vant government agencies to regulate the stakeholder behaviour and the demand
company’s environmental activities and for corporate environmental disclosures.
disclosures. Thus, without sufficient
government regulations mandating envi-
ronmental protection and disclosures, References
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that whilst voluntary environmental dis- Australia and New Zealand
closures are used by corporate entities to (AFAANZ), July, Melbourne, Aus-
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