Stakeholder perspectives on a financial sector legitimation process

Niamh O’Sullivan · Brendan O’Dwyer

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Corporate Social Responsibility Reporting Management and Organizational Studies Sustainable Finance and Green Bonds

Abstract

Purpose The purpose of this paper is to present an in‐depth, context rich, and stakeholder‐focused perspective on the legitimation dynamics surrounding the initiation and evolution of one of the key financial sector environmental and social responsibility initiatives in recent years, the Equator Principles. Design/methodology/approach The paper draws on a combination of in‐depth interviews with non‐governmental organization (NGO) leaders, extensive documentary analysis and participant observation in order to understand and explain, from an NGO perspective, the use of the Equator Principles as a central element in an attempt to legitimise financial institutions' project finance activities. Key aspects of legitimacy theory are used to theoretically frame the analysis. Findings The paper reveals and analyses the process through which campaigning NGOs conferred a nominal level of legitimacy on financial institutions' project finance activities. It proceeds to unveil how and why this attained legitimacy unravelled. A perceived lack of accountability at an institutional, organisational and individual project level is identified as a central reason for this reduction in legitimacy. Research limitations/implications The paper primarily focuses on one side of the story of the dynamics of the legitimation process underpinning the evolution of the Equator Principles until 2006. Future research could focus on obtaining and theorising financial institution perspectives on the Equator Principles' development, implementation, and progression as well as analysing developments beyond 2006. Originality/value The paper advances our understanding of the dynamics of legitimation processes. These dynamics are studied from the perspective of a key “relevant public” thereby prioritising perceptions that are largely absent from corporate social accountability research seeking to empirically inform legitimacy theory.

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References

1983The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields 1977Institutionalized Organizations: Formal Structure as Myth and Ceremony 2004The iron cage revisited institutional isomorphism and collective rationality in organizational fields 1995Managing Legitimacy: Strategic and Institutional Approaches 2006Demonstrating Rigor Using Thematic Analysis: A Hybrid Approach of Inductive and Deductive Coding and Theme Development 2009Building theories from case study research 1997Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of who and What Really Counts 1975Organizational Legitimacy: Social Values and Organizational Behavior

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2016Grassroots accountability promises in rights-based approaches to development: The role of transformative monitoring and evaluation in NGOs 2019Progress: engaging with organisations in pursuit of improved sustainability accounting and performance 2017International advocacy NGOs, counter accounting, accountability and engagement 2014France's new economic regulations: insights from institutional legitimacy theory

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