Is Disclosure the Right Way to Comply With Stakeholders the Shell Case

Is disclosure the right way tocomply with stakeholders? TheShell case

Esther OrtizMartinezandDavid Crowthern

This paper is part of an ongoing research project and builds upon a previous one in which we explain the

failure of the Agency Theory through the Shell case. In that, we analysed the behaviour of Shell

managers, who reclassied oil reserves, playing with the share price because they owned share options.

This previous paper established an important literature framework that is continued and organized

to go deeper into our analysis in this paper. The goal here is to show that the way that is supposed to be

the right tool to inform stakeholders disclosure is not enough, and even in the Shell case, no

one would have noticed the problems with the oil reserves through the mere analysis of the company

disclosure during the strange period (19982003). The methodology used in this paper is lexical

analysis, which seems to be an innovative and effective approach to the analysis of Corporate

Social Disclosure, given the un-codied nature of the latter. The conclusions obtained highlight the

problem of lack of transparency in the contents of corporate social disclosure: some rms avoid

communicating crucial contents, some others twist the results in order to camouage advantages to

shareholders or managers. If it is like this for disclosing rms, what is happening in the case of non-

disclosing rms?

Introduction

Corporations quite naturally present their activ-

ities, and the ensuing results, in the best possible

way when producing their annual reports (see

Crowther 2002) and this applies as much to their

social and environmental performance as it does

to their nancial performance. This is completely

in accordance with accepted practice, and in the

nancial arena it is only when these norms are

transgressed that accusations of creative account-

ing can be heard. The situation is much less clear

as far as social and environmental performance

are concerned, as there are virtually no norms that

can be transgressed. Consequently it is more

difcult to evaluate performance, as reported,

along these dimensions and much easier for the

charge of window dressing to be made without

either evidence or the possibility of refutation.

This means that claims can be and are made

without much evidence and it is difcult to

distinguish actual performance from the semiotic

created according to the already established

prejudice of the reader.

A growing number of writers over the last

quarter of a century have recognised that the

activities of an organisation impact upon the

external environment and have suggested that

such an organisation should therefore be accoun-

table to a wider audience than simply its share-

holders. Such a suggestion probably rst arose in

the 1970s1 and a concern with a wider view of

company performance is taken by some writers

nRespectively, Professor in the Accounting and Finance Department

of the University of Murcia, Spain, but currently on secondment as

Directora General de Economa y Planicacion of the Murcia

Regional Government; and Professor of Corporate Social Respon-

sibility at De Monfort University, Leicester, UK.

r 2008 The AuthorsJournal compilation r 2008 Blackwell Publishing Ltd, 9600 Garsington Road,Oxford, OX4 2DQ, UK and 350 Main St, Malden, MA 02148, USA 13

Business Ethics: A European ReviewVolume 17 Number 1 January 2008

who evince concern with the social performance

of a business, as a member of society at large. This

concern was stated by Ackerman (1975) who

argued that big business was recognising the need

to adapt to a new social climate of community

accountability, but that the orientation of busi-

ness to nancial results was inhibiting social

responsiveness. McDonald & Puxty (1979), on

the other hand, maintain that companies are no

longer the instruments of shareholders alone but

exist within society and so therefore have respon-

sibilities to that society, and that there is therefore

a shift towards the greater accountability of

companies to all participants. Implicit in this

concern with the effects of the actions of an

organisation on its external environment is the

recognition that it is not just the owners of the

organisation who have a concern with the

activities of that organisation. Additionally there

are a wide variety of other stakeholders who

justiably have a concern with those activities and

are affected by those activities. Those other

stakeholders have not just an interest in the

activities of the rm but also a degree of inuence

over the shaping of those activities. This inuence

is so signicant that it can be argued that the

power and inuence of these stakeholders is such

that it amounts to quasi-ownership of the

organisation. Indeed, Gray et al. (1987) challenge

the traditional role of accounting in reporting

results and consider that, rather than an owner-

ship approach to accountability, a stakeholder

approach, recognising the wide stakeholder com-

munity, is needed.2 Moreover, Rubenstein (1992)

goes further and argues that there is a need for a

new social contract between a business and its

stakeholders.

This paper is intended to be a further part of an

ongoing research project into corporate reporting

and builds upon a previous one in which we

explain the failure of Agency Theory through the

Shell case (Crowther & Ortiz Martinez 2006). This

is because Agency Theory explains other kinds of

remuneration, such as share options, arguing that

this will align the interests of the managers of a

corporation with those of its owners. We analyse

the behaviour of Shell managers, who reclassied

oil reserves, playing with the share prices because

they owned share options. This is why we argue

that the simplest model of Agency Theory is

defunct, and we have to assume the addition of

more principals and more agents, which makes a

more complex model. Going deeper into our

analysis in this paper, we want to show that the

way that is supposed to be the right tool to inform

stakeholders disclosure is not enough and even

in the case of Shell, no one would have noticed the

problems with the oil reserves through the mere

analysis of the company disclosure during this

strange period, when reserves were misreported

and subsequently reclassied.

The main hypothesis in this paper is that there

is no important change from 1998 to 2003

in Shells disclosure, although during this period

there were hidden oil reserves and the trend

was to reward managers and directors with

shares and options. To prove it we have struc-

tured this paper as follows: in the rst part

the theoretical frameworks that have been used

as the basis of this paper are described, followed

by the methodology and the sample analysed.

The application to the sample of this background

and the methodology has driven us to the data

ndings, which have allowed us to draw some

important conclusions and implications that are

developed in the last part of this paper.

Theoretical frameworks

There are three main streams of theoretical

framework on which this paper is based. The rst

one stems from the previous paper we have

referred to.3 Our argument there was that Agency

Theory suggests that the management of an

organisation is undertaken on behalf of the

owners of that organisation, in other words the

shareholders. Consequently, the management of

value created by the organisation is only pertinent

insofar as that value accrues to the shareholders

of the rm. Implicit within this view of the

management of the rm, as espoused by Rappa-

port (1986) and Stewart (1991) among many

others, is that society at large, and consequently

all other stakeholders in the organisation, will also

benet as a result of managing the performance of


14r 2008 The Authors

Journal compilation r 2008 Blackwell Publishing Ltd.

the organisation in this manner. From this

perspective, therefore, the concerns are focused

upon how to manage performance for the share-

holders and how to report upon that performance

(Myners 1998).

Secondly, the background of many similar

studies has focused on the particular aspect of

disclosure to stakeholders. Disclosure is consid-

ered to be the tool that companies use to highlight

their achievements in the social arena, or to try

to prove that they cope with all the goals of

the company, not only that of providing an

ever increasing dividend stream as prot

continues to increase. The majority of these

studies examine the way that the characteristics

of disclosure are sometimes shaped depending

on the kind of report and on factors such as

country, industry or size. The previous research

on disclosure has dealt with such things as

the measurement method, the choice of the

statistical tool, the type of voluntary disclosure,

or some kind of bias among others, because the

concept of disclosure is not homogeneous and

includes all the information primarily issued

outside the nancial statements and not explicitly

required by any generally accepted accounting

principle (GAAP) or rule. Despite all these

handicaps two different effects have been

identied in the literature: size effect and

exchange effect (Atiase 1987). The empirical

results indicate that size is positively associated

with disclosure. Agency Theory shows that a

company has to satisfy the needs of creditors

and investors and so may provide more detail in

its disclosure in order to avoid information

asymmetries (Jensen & Meckling 1976). As far

as political costs are concerned, then, bigger

companies will be more in the public eye, which

will tend to make them exhibit greater disclosure

than other, smaller rms (Giner 1995). To operate

in some industries requires even more disclosure

because their activities are of keen current

interest, such as environmentally unfriendly

activities, highly risky new technology industries,

and so on. Nevertheless much of the previous

work on disclosure has been concerned with

demonstrating that this is less than adequate

because it is incomplete. We would argue that

disclosure is always less than complete and that

this kind of argument is spurious: it is always

possible to develop disclosure or to present

information from a slightly different perspective.

Our argument here is instead concerned with

intention regarding the disclosure that is made.

If we consider the company Shell the vehicle

of exploration for this research then we see that

the company complies with all the features

of a company which increases disclosure because

of its size, due to all the previously demonstrated

arguments, and the kind of activities undertaken

by the company. As far as listing status is

concerned then the a priori hypothesis suggests

that those companies which are listed disclose

more information because of the extra disclosures

contained in the listing requirements; those

companies which are multi-listed will disclose

more information than those listed on one

exchange; and those which have foreign investors

(which list on a foreign stock exchange) will have

to satisfy their information needs with more

disclosure (Cooke 1989, Depoers 2000, Street &

Bryant 2000). Shell is a multi-listed company, and

internationally listed, and therefore issues infor-

mation to comply with the informative needs of

many different possible investors.

Specically, in the area of corporate social

disclosure there have been numerous studies

which use as their main source the examination

of the annual report (e.g. Singh & Ahuja 1983,

Andrew et al. 1989, Lynn 1992, Savage 1994,

Gray et al. 1995a, b, Kreuze et al. 1996, Nafez &

Naser 2000). All the main previous studies use

content analysis or disclosure indices to measure

the extent of disclosure or to discover if there is a

relationship between disclosure and other vari-

ables. In this paper, the analysis performed on the

disclosure is lexical analysis, because we consider

that this is the best way to reach the main goals

proposed in the paper. For this reason, the third

theoretical framework is related to the methodol-

ogy, to lexical analysis.

The use of lexical analysis has been broad but

we have no knowledge of its use in the eld of

Corporate Disclosure and hence in the eld of

Corporate Social Disclosure. The theoretical

background is wide; the most extensive studies


r 2008 The AuthorsJournal compilation r 2008 Blackwell Publishing Ltd. 15

employing Lexico as the tool to do the analysis

are the ones written by Becue (1988) and Salem

(1984, 1987, 1993).

Methodology

Lexical analysis

In order to try to analyse the extent of Shells

disclosure we have to use some kind of statistical

methodology which allows us to compare such

disclosure over a period of time, and to obtain the

main characteristics of a corpus from year to year.

The tool that complies with all these requirements

is the Lexico software, and specically the Lexico3

program (http://www.cavi.univparis3.fr). The Lex-

ico series is unique in that it allows the user to

maintain control over the entire lexicometric

process, from initial segmentation to the publica-

tion of nal results. The units that are then counted

automatically originate entirely from the list of

delimiters provided by the user, with no need for

outside dictionary resources. Beyond the identi-

cation of graphical forms, the software allows for

the study of the distribution of more complex units

composed of form sequences: repeated segments,

pairs of forms in relation of co-occurrence, among

others, which are generally less ambiguous in terms

of content than the graphical forms that make

them up. This methodology seems to be an

innovative and effective approach to the analysis

of Corporate Social Disclosure, given the un-

codied nature of the latter, because it allows us to

analyse the disclosure from a statistical point of

view, mixing statistical and lexical analysis (Muller

1977). Nowadays, the important development of

the computer has made textual statistical analysis

one of the most important research elds of

modern statistics (Lebart et al. 2000).

Analysed disclosure: the sample

The rst step necessary to use Lexico3 is to

have a text; in our case, the detailed study of

the disclosure should show if there was any

important change during the period of hidden

reserves and share rewards to managers, or even,

if the disclosure follows the same trend without

giving any evidence of anything. Thus we have

used for our analysis of disclosure the text which

was issued by Shell in its Form 20-F. The

commonly used Shell name includes The Royal

Dutch/Shell Group of companies. This is an

important global player listed on the New York

Stock Exchange (NYSE), among others, and

as such is one of the biggest multinationals

around the world. In order to choose the

disclosure to study, we decided to obtain the

Form 20-F issued by the company, because it is

the Annual Report required by the United States

Securities and Exchange Commission for foreign

private issuers.

Bearing in mind that the main hypothesis to

prove is that there is no important change from

1998 to 2003 in the nature of Shells disclosure,

although during this period there were hidden oil

reserves and the trend was to reward managers

and directors with shares and options, we down-

loaded Shell Forms 20-F from 1998 to 2003. To

study this form is to study the most international

disclosure issued by the company, and at the same

time to study disclosure that complies with the

legal requirements of arguably the most developed

capital market in the world. So, whatever impor-

tant information is issued by the company must be

included in this kind of Annual Report. But this

Form 20-F includes not only disclosure, but also

the company nancial statements.4 For this reason

we removed from the six Forms 20-F the nancial

statements and took only all the other disclosure.

This information was pasted into six Word les,

one for each analysed year, in order to include all

of them in a .txt le correlatively organised

according to the year. This .txt le, with all the

disclosure included in the Shell Form 20-F from

1998 to 2003, is the corpus on which we based our

study; it allows us to study the whole text and then

to separate it depending on the year to prove the

main hypothesis which supports that, from 1998 to

2003, there was no signicant change in the nature

of Shells disclosure.

Data findings

Firstly, Lexico3 shows the principal characteris-

tics of the analysed text, in this case disclosure




issued in Form 20-F. These main features are

shown in Table 1, in which it can be seen that

28,349 words have been analysed and that from

1998 to 2003 there was an increase in the

amount of information disclosed (by 40%), as

counted by the number of words included.

Perhaps it can be interpreted that Shell made a

bigger effort from year to year in giving more

information in order to comply with the

transparency principle or at least to give this

appearance.

One of the more important tools provided for

statistical analysis of texts is the analysis of

characteristic elements, because it allows an

evaluation of the frequency of each of the textual

units in each part of the corpus. The characteristic

element index is calculated for all the words with a

frequency of more than 10, with a probability

threshold set at 5%. The characteristic element

diagnostic contains two indications:

(a) the sign (1 or ) indicating an over- or under-

use in the selected part in comparison to the

whole corpus.

(b) the quantity, which indicates the degree of

signicance of the different use, so a bigger

absolute number indicates that the word is

more over- or under-used in one part of the

corpus than in others.

In Table 2 are included the characteristic elements

of each part of the corpus, which means that we

can see the evolution in the over- or under-use of

important words.

In determining the contents of Table 2, we have

selected words that might be expected to appear

with some frequency and which are pertinent to

our research. Thus it is important to highlight that

there are important words that have clearly to do

with our main hypothesis examples being such

words as reserves and shares.

Here we can see that the use of the word

reserves is signicant in that it is under-used in a

really important way from 1998 to 2001, having

the biggest absolute characteristic element index

obtained in these years. The trend changes

radically in 2002 and 2003, when the word

reserves is over-used compared with other

words. In 2003 the over-use of the word reserves

in the disclosure is double that of the second most

over-used word (the word restatement).

The evolution of the use of the word shares is

similar, although not as marked as the changes in

the word reserves. The change from under-use to

over-use matters two years earlier than in the case

of the word reserves. During 1998 and 1999 Shell

under-used the word shares and then in the 2000

and 2001 over-used it, changing the trend. In the

last analysed years of hidden reserves, 2002 and

2003, there is not an under- or over-use of the

word, which is signicant.

The importance of the words reserves and

shares is a clear result but some other words

included in Table 2 can be important for our

analysis, although out of context, the study of its

characteristic element index is not relevant, so it is

necessary to use the display of the concordance.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 1: Principal characteristics of the analysed disclosure

Words Hapax (Word that

only appears once

in the text)

Frequency of the word

with the maximum

frequency

Word with the

maximum frequency

1998 4057 1754 1593 The

1999 4105 1734 1840 The

2000 4596 1905 2308 The

2001 4572 1884 2458 The

2002 5387 2088 3648 The

2003 5632 2217 4245 The

Corpus 28,349 1483 16,092 The

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .



The concordance tool allows the visualisation a

chosen word in context. The last step in this

analysis will be to analyse all the words with a

signicant evolution in the characteristic element

index in their context, to discover whether or not

they are related to the disclosure about hidden oil

reserves and the trend to reward managers and

directors with shares and options (an example of

the concordances of the word acquisitions in the

1999 disclosure is included in Table 3).

The evolution of the use of the word acquisi-

tions is related to the fact that the company

had hidden oil reserves, because in the last years

of the analysed period, 2002 and 2003, the

disclosure tries to explain that there have been

enough acquisitions and discoveries of oil to

ensure a strong competitive position for Shell.

The trend of the word additional is parallel to

the one of acquisitions, because sometimes the

company uses both words together during 2002

and 2003 to point out the effort made to increase

reserves.

The word additional is also strongly used with

the word information; in order to identify the

trend of this we use the tool of repeated segments,

which are dened as a series of consecutive forms

found several times in the text. Hence, the

expression additional information has increased

from not being used in 1998 and 1999, to being

used four times in 2000, ve times in 2001, 12

times in 2002 and 11 times in 2003 being used in

the latter years arguably to disguise the lack of

important information with the profusion of

disclosure. This is also in line with the character-

istic element indices of the words disclosure and

information, which change from negative values

at the beginning of the period to be over-used in

2002 and 2003.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 2: Characteristic elements of the analysed disclosure

Word 1998 1999 2000 2001 2002 2003

Acquisitions 3 3 15 13Additional 3 3 3 12 14Adjusted 12 13 13 5 5Amendment 12 11 13 13 120 114Disclosure 2 2 14 14Estimates 3 3 3 14 13Future 2 3 3 4 14 15Global 4 4 3 13 14Information 4 4 3 3 15 15Option 12 12 3Prices 4 4 5 16 16Profit 4 3 2 14 13Proved 6 4 6 6 18 110Reserves 13 13 16 15 119 127Restatement 8 8 11 11 111 115Shares 7 9 15 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 3: Concordance of the word acquisitions in 1999 disclosure

1% (147% excluding 1999 divestments and acquisitions). Additions through revisions and discoveries

2% before and 56% after divestments and acquisitions, the 3-year rolling average replacement

Fourth quarter of 1999 as well as other acquisitions and capacity additions made during the year

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .




The characteristic element indices of the words

adjusted and amendment are not relevant to

the main hypothesis of this paper; the rst one is

mainly used for giving details of adjusted earnings

and the second one to explain amendments

included in the 20-F Form.

The word estimates analysed in context results

in it being shown to be used sometimes together

with the word reserves (the repeated segments

indicate that the frequency of use was once in

1998 and 1999, twice in 2000, three times in

2001, and four times in 2002 and 2003). Hence,

the disclosure can give only a very approximate

idea of the amount of reserves presented by

the company, which can be importantly con-

trasted with the more important over-use of the

word proved strongly linked to the word

reserves (the characteristic element index of

estimates is 14 and 13 in 2002 and 2003,

smaller than the 18 and 110 indexes of the word

proved; the repeated segments show a large

change: the use of proved reserves is six times

in 1998, 13 times in 1999, 10 times in years

2000 and 2001, 90 times in 2002 and 115 times in

2003).

The word reserves, when analysed in

its context with the tool of the concordances,

is also strongly linked to restatement;

the repeated segments show that reserves restate-

ment is not used from 1998 to 2001, but it is

used 65 times in 2002 and 85 times in 2003

(Table 4).

The trend of the characteristic element indices

of the words future and global is also similar.

It tends to change to a future vision in 2002

and 2003, highlighting, through an over-use of

this phrase, that Shell operates on a global

basis.

The analysis of the words option and prices

must be done together, because the concordances

of prices show that it is mainly used to refer to

the oil, crude and gas prices. The company over-

uses the word to note the high prices of its main

resource. While for the case of the option prices

the analysis of the repeated segments shows that

its use is not so important (it is only used ve

times in 1998, three times in 1999, six times in

2000, three times in 2001 and in 2002, and four

times in 2003), which shows no trend or important

change.

Being transparent

Transparency, as a principle, means that the

external impact of the actions of the organisation

can be ascertained from that organisations

reporting (Crowther & Jatana 2005) and pertinent

facts are not disguised within that reporting. Thus

all the effects of the actions of the organisation,

including external impacts, should be apparent to

all stakeholders from using the information

provided by the organisations reporting mechan-

isms. Transparency is of particular importance to

external stakeholders, as these users generally lack

the background details and knowledge available

to internal users of such information (Tapscott &

Ticoll 2003). Transparency therefore can be seen

to be a part of the process of recognition of

responsibility on the part of the organisation for

the external effects of its actions and equally part

of the process of transferring power to external

stakeholders. Often, however, there is strong

resistance by corporate managers, often argued

on the grounds that more transparency would

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4: Number of times of use of the repeated segments in the analysed disclosure

Repeated segment (no. times used) 1998 1999 2000 2001 2002 2003

Additional information 0 0 4 5 12 11

Estimated reserves 1 1 2 3 4 4

Proved reserves 6 13 10 10 90 115

Reserves restatement 0 0 0 0 65 85

Option prices 5 3 6 3 3 4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .



erode their competitive advantage (Aras &

Crowther 2007).

The analysis we have undertaken shows the

changes in some signicant words used in the

disclosed information for Shell. It is equally

important of course to consider the words which

are not used or the signicance of their absence.

Thus, for example, the analysis in Table 2 shows

that the word reserves is used extensively in the

later years when there is a continual re-evaluation

of proven reserves, or a gradual disclosing of the

truth already known to Shell directors. We would

argue, however, that its under-use in the earlier

years is equally signicant, the purpose of this

being to imply that there is nothing to disclose

and that everything is ne with the reserves5 in

other words that it is a completely uncontroversial

and therefore insignicant aspect of Shells

activity. Transparency therefore is partly about

what is said and partly about what is not said.

Thus we argue that the language present or absent

is employed in an Orwellian (1970) sense of being

used as a device for corrupting thought, by being

used as an instrument to prevent thought about

the various alternative realities of the organisa-

tions activity.

The most important conclusion from this deep

analysis of Shells controversial period is that

stakeholders are at the very end of the process,

and that the previous steps of the process include

to obtain more rewards and to increase prot

the traditional goal of the companies to maximise

prot is still in the mind of the managers and even

in the mind of shareholders. And the new ways

to give an accounting to the stakeholders, such as

through increased disclosure, and especially vo-

luntarily disclosure, are not enough to comply

with the wider goals that a company is supposed

to have.

Conclusions

It is apparent for Shell, in line with general

experience, that the actual trend is to increase the

extent of disclosure, but it is questionable whether

it is for improving the information given to

stakeholders or to hide the important questions

in the totality of disclosure. After the deep lexical

analysis of Shells disclosure during this critical

period, the results show that only sometimes is

there some slight evidence of the truth about the

hidden reserves and the managers remuneration

through stock options. Based upon this, we argue

that disclosure is not used in a proper way.

Signicantly, we claim that it is not really very

probable that such analysis can be done by any

one of the stakeholders, even if they recognise the

need from the information provided and not

provided in the disclosure. Inevitably, when the

truth becomes known, this affects the level of trust

which stakeholders place in both the management

of the company and the efcacy of the corporate

social disclosure which does take place. Equally

inevitably, this lack of trust affects other compa-

nies also.

The implications and conclusions obtained

highlight the problem of the lack of content in

corporate social disclosure: some rms avoid the

communication of crucial content, some others

twist the results in order to camouage advan-

tages to shareholders or managers. If it is like this

for disclosing rms, what is happening in the case

of non-disclosing rms? This last question may

give us an idea of the important gap that there

may be between corporate reality and the image

that is produced through disclosure.

Notes

1. Although philosophers such as Robert Owen were

expounding those views more than a century earlier.

2. The benets of incorporating stakeholders into a

model of performance measurement and account-

ability have, however, been extensively criticised.

See, for example, Freedman & Reed (1983), Stern-

berg (1997, 1998) and Hutton (1997) for details of

this ongoing discourse.

3. This paper is entitled No principals, no principles

and nothing in reserve: Shell and the failure of

Agency Theory and is currently under review by an

international refereed journal.

4. As we have previously explained, the concept of

disclosure is non-homogeneous and includes all the

information primarily issued outside the nancial




statements and not explicitly required by any GAAP

or rule.

5. See our earlier paper Crowther & Ortiz-Martinez

(2006) for full details of the reserves and their re-

evaluation.

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Is Disclosure the Right Way to Comply With Stakeholders the Shell Case

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