Legitimacy Theory Applied to the BP Oil Spill

Introduction

A concrete form of resource dependence is the need for organizational legitimacy, with many experts in the management field regarding organizational legitimacy as an anchor point that constructs, constrains and empowers organizational actors (Mascarenhas, 2007, p.503). Legitimization is viewed as the process whereby an organization justifies to the friends or the larger society in general about its right to exist (Muer, 1972, cited in Mascarenhas, 2007, p.503). On the other hand, Dowling and Pfeffer (1983) observe that legitimacy represents “congruence between the social values associated with or implied by organizational activities and the norms of acceptable behavior in a larger social system” (Mascarenhas 2007, p.503). At the same time, legitimacy can be viewed to exist between the organization and its cultural environment (Meyer and Scott 1983; cited in Mascarenhas 2007, p.503).

Suchman (1995) observes that the definition of legitimacy largely rests on the evaluative side and as a result, organizations are legitimate when they are understandable by and equated to the present norms or social prospects rather than when they are desirable. Hence, according to Suchman, “legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs and definitions” (Suchman, 1995). From this perspective therefore, corporations have the responsibility of being accountable to the society such that society may readily award them organizational legitimacy (Decker, 2008; Johnson, 2004, p.36).

In April 2010, BP’s oilrig that is based in the Gulf of Mexico exploded and for almost 36 hours, the flames of explosion released infinite amounts of toxins into the environment before it later sunk into the nadir of the water (Jamail, 2010, p. 1). Many people and organizations have claimed the gush of oil was done intentionally when BP oil submerged heavy use of dispersants at the wellhead that later led to ‘a volcano of oil gushing into the Gulf of Mexico’ (Jamail, 2010, p. 1).

Scientific statistics shows that even if BP Company cleans up the spilled oil from the Gulf of Mexico, evidence indicates that oil has the capability to remain trapped in the seabed for a number of years where it continues to contaminate and kill marine species such as fish, shrimp, crabs and also bird life (Jamail, 2010, p. 1). “The economic and environmental damage can linger for decades, as was the case with the Exxon Valdez” (The New York Times, 2010).This particular event has resulted into BP Oil Company to engage in numerous activities aimed at scaling down the responses related to this Gulf disaster.

In light of this BP Oil spill in USA, the research paper will largely explore key issues concerning legitimacy theory. For instance, how BP is expected to deal with its legitimacy problems, how other companies within the industry are confronted with this particular legitimacy threat, and the possibility of availability of other accounting theories that can explain and assist in understanding the nature of the response of, and expected future response of BP and other companies within the industry.

Dimensions of Organizational legitimacy

Numerous literatures have postulated on how organizational legitimacy constitutes several classifications that differ in breath, depth and delineations. For example, Aldrich and Fiol (1994) are credited with their two classifications of legitimacy which they identified as; cognitive legitimacy and sociopolitical legitimacy (Breitsohl, 2009, p.5). According to them, cognitive legitimacy denotes a kind of legitimacy that largely reflects the degree to which knowledge about an organization has spread while on the other hand, sociopolitical legitimacy focuses on the recognition of the organization “as appropriate and right, given existing norms and laws” (Aldrich and Fiol 1994 cited in Breitsohl 2009, p.5).

On the other hand, Scott (1995) formulated three types of organizational legitimacy that corresponds to three main pillars of an organization: regulative, normative and cognitive (Breitsohl, 2009, p.5). As a result, legitimacy can only be derived in accordance with legal requirements, intrinsic and extrinsic motivation, and social obligation (Breitsohl, 2009, p.5). But is Suchman (1995) who provided an elaborative typology of organizational legitimacy by identifying three major dimensions of legitimacy: pragmatic, moral and cognitive (Breitsohl, 2009, p.5). According to the author, pragmatic legitimacy constitute “exchange, influence and dispositional legitimacy” (Breitsohl, 2009, p.5) and it is based on the stakeholders’ self-interest which is calculated basing on expected value that is in turn provided by an organization, responsiveness and commitment to its greater interests.

Moral legitimacy on the other hand comprises “consequential, procedural, structural and personal legitimacy” where it reflects the normative assessment of what corporation has accomplished, technologies and procedures it make use of, the corporation’s structure and capacity for realizing results and lastly the allure exhibited by individual corporation leaders (Breitsohl, 2009, p.5). On the other hand, cognitive legitimacy constitute a kind of legitimacy taken for granted and originates from the extent to which organizational activities are able to be predicted and viewed to be permanent and inevitable (Breitsohl 2009, p.5).

Source of Corporation legitimacy

Zucker (1987) notes that increased conformity to the institutional environment simultaneously increases legitimacy which in turn increases access to critical resources; hence, lead to survival chances of a corporation (cited in Frankenberger, 2006, p.58). Other institutional theorists contend that the survival advantage of legitimate organizations is achieved through social support and approval from the external constituents. This external constituent legitimization promotes a corporation position in the community while at the same time deflecting questions about its genuine fitness in delivering specific products or services (Frankenberger, 2006, p.58).

Legitimacy theory which gives explanation and description to how approval or disapproval organizations become has been regarded as a systems-oriented theory, and according to Gray et al (1996), “a systems-oriented view of the organization and society permits us to focus on the role of information and disclosure in the relationships between organizations, the State, individuals and groups” (cited in Deegan, 2002, p.292). The above perspective regards any entity to be heavily influenced by, and in turn to have influence upon, the society in which it largely operates and where for many corporations, corporate disclosure policies have become one of the vital tools that the corporation management uses in order to influence external perceptions about the organization.

Organizations are largely seen to exist to the extent that particular society considers such an organization to be legitimate, and when this happens, the specific society ‘confers’ upon the organization the ’state’ of legitimacy (Deegan, 2002, p.292). Legitimacy has directly rooted in the concept of ‘social contract’ which postulates that corporation continuity can be threatened when the larger society views the corporation as engaged or attempts to breach the established social contract and when society gets dissatisfied that the corporation is acting outside an acceptable or legitimate manner, the society will revoke the corporation ‘contract’ and in the process ‘halt’ its operations (Deegan, 2002, p.293).

Revocation of contract takes many ways, for instance, consumers may reduce or eliminate the demand for the products of the corporation, factor suppliers eliminating the supply of labor and financial capital to the corporation or lobby groups may accelerate their clamor for the government to increase taxes, fines or laws with intend to forbid corporations actions that does not match with the expectations of the greater community.

Legitimacy theory and social disclosure

Preston and Post (1975) observed that social disclosures can be regarded as a means or way of responding to the dynamism being witnessed in the corporation’s perception which is being demonstrated by corporation publics (cited in Patfen, 1992). Social and environment disclosures have become important in most corporations’ strategies and as a requirement expressed by different publics. As already seen, legitimacy theory is rooted in the concept of social contract where any corporation functioning and operating in society puts its survival and subsequent growth basing on:

1. the delivery of some socially desirable ends to society in general; and
2. the distribution of economic, social, or political benefits to groups from which it derives its power (Patfen, 1992).

Today the society appears to be dynamic in all aspects and as a result, corporations can no longer claim permanency in their sources of derivative powers or the services they provide and as a consequence many corporations are forced to continuously meet the two tests of legitimacy and relevance through demonstrating how society is in need of its services and also how the groups benefiting from its rewards have society’s approval (Patfen, 1992).

As from 1970s, the society’s perception of corporation drastically was altered as many people became aware of the negative impacts that growing corporations were spearheading. Advocacy groups became vocal hence gaining prominence in their scrutiny of negative impacts of corporations in society, at the same time public confidence in business continued to deteriorate and it is at this point that society began to demand that corporations address the social issues that most corporations were implicated in (Patfen, 1992).

Social accountability according to Preston and Post (1975) gained momentum when the society started to raise key issues that were later analyzed through public policy arena and when the issues appeared to possess some weight they were legislated into law (cited in Patfen 1992). Therefore today, when a particular public become dissatisfied in relation to underperformance by any particular corporation, the specific public applies pressure to the relevant corporation in order for the corporation to fulfill expectations or if turns out to futile the public may resort to using the available legal systems to require improved performance (Patfen 1992).

Further, corporations are generally expected not only to adapt to the existing legal environment but also to the public policy process from which key issues arise. Today, social disclosures represent one of the methods that corporations put into use in order to exert influence on the public policy process. The other method includes environmental auditing and disclosure which again has become vital in influencing public policy by many corporations.

How BP Oil Company can deal with the legitimacy issues

Jee Young Chung notes that legitimacy in modern world has become a license by which corporations and other business entities need to operate in the society (Chung N.d, p.1). Such assumption draws its strength from the works of Sethi (1977) who wrote that “business is a social institution that needs a society’s acceptance for survival” (cited in Chung, N.d, p.1). For Holmstrom, his observation is that organizations in relation to social responsibility have three major functions: sensitive observation of the environment; identity, where the organization observes and describes itself; and lastly, self-presentation where the organization facilitates its observation through the environment (Holmstrom 2005, p.14).

Sethi (1977) elaborated the concept of organizational legitimacy by establishing and explaining a concept known as ‘legitimacy gap’ which he defined as the discrepancy between business behaviors and actions and societal expectations and that when the gap widens the organization’s ability to survive largely gets threatened (cited in Chung, N.d, p.1). Several literature exist on how organizational legitimacy can be managed, for example, Dowling and Pfeffer (1975) gives three ways the management of legitimacy can be achieved: “conforming to the prevailing definition of legitimacy, altering the definition through communication and communicating symbolic meanings” (Chung, N.d, p.2).

Ashforth and Gibbs (1990) on the other hand identifies two types of legitimacy management: Substantive management, which involves actual changes in organizational operations in terms of organizational structures, goals or socially institutionalized practices; and Symbolic management, that intents to make the organization congruent with social values and expectations (Chung, N.d, p.2). Suchman (1995) on his part sees organizational legitimacy management can be seen in two broad approaches: Strategic approach which adopts a management view that corporations can manage and manipulate legitimacy whereby public relations become the key instrument in spearheading this approach; and Institutional approach which explains that organizational legitimacy is derived from external influence on an organization and in most cases, communication is the key source in management of legitimacy problems in an organization. This communication aspect was reinforced by Dowling and Pfeffer (1975) who noted that, communication was important in resolving organization’s legitimacy issues especially with its publics since most social values and expectations are reflected in communications (Chung, N.d, p.2).

Patrick Zapata, on the other hand is convinced that scandals when they happen they provide an ample opportunity to generate more knowledge about the process in which organizational legitimacy can be restored (Zapata, 2007). On management of organizational legitimacy, Zapata (2007) content that organization will react and defend its legitimacy as a result of external pressure and after a varying period of adaptation, restructuring and symbolic changes an organization legitimacy become rejuvenated (Zapata, 2007, p.28).

As to summarize his work, Zapata (2007) concludes that organizations that wish to restore their legitimacy after a major scandal need to agree with its environment and as such should try to avoid the transgression of norms, errors and other causes of scandal. At the same time, organizations in a way should strive to satisfy all the demands originating from the environment without conflicting answers in order to appear normal as fast as possible (Zapata, 2007, p.28). Moreover, organizations need to deal with conflicting demands from the environment through decoupling and also organizational hypocrisy, learn to handle the media better, establish disaster management routines and ensures the right information reaches the right forum (Zapata, 2007, p.28).

Future response to Crises by BP Oil Company

Tony McMurtrie observes that many corporations have utilized Corporate Annual Reports as the principle means of Corporate Social Disclosure. More studies again show how corporation are turning to media to publish CSD with aim to target particular public groups (McMurtrie, N.d). Timothy Coombs and Sherry Holladay (2010), notes that a crisis normally threatens the legitimacy of an organization and its constituents (Ulmer and Sellnow 1997, p.1) and in such circumstances; communication can be used to restore the legitimacy of the organization. Argenti, Howell and Beck (2005) argue that organizations can well use integrated strategic communications that largely incorporate federal regulations, organizational complexities while at the same time increasing credibility (Lanham, N.d, p.1; Lukaszewski 1999, p.1).

In essence, repairing an organization’s legitimacy image may follow four strategies: preparation of a normalizing account, demonstration of institutional conformity, strategic restructuring and reacting calmly (Linsey, N.d. p.1). In its broad function, these steps ensures that organization is restructured with the aim to implement positive strategies of mending the organization’s legitimacy. “Organizational image management is a rhetorical process requiring communication strategies designed in a way to establish and maintain a particular corporate image” (Millar and Heath, 2004, p.234).

Conclusion

As evidence indicates organizational legitimacy is largely derived from the organization interaction with its environment and key public. In essence an organization has to respond to key issues as a result of public concern. In most cases crises in major organizations occurs with subsequent effects to the environment and hence organization will be in a god position to strategically resolve the issues to the satisfaction of its publics. Communication has been identified as key component that can be utilized to resolve organization’s legitimacy. But it is through proper following of crisis communication procedures that a concrete resolution and repair of organization’s legitimacy will be realized.

References

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