This event is investigated in light of the company’s behavior post the oil spill and their consequent reaction in front of the press and as expressed in their annual reports. More specifically, this paper looks at how BP’s reaction post the disastrous oil spill ties in with the theories about company behavior.
There is extensive secondary research that discusses company behavior and explains how and why a company might behave in certain specific situations. According to the legitimacy theory, an organization only acts according to the behavior that is deemed correct and wanted by society it operates in and as deemed fit by other potentially influential parties; the actions performed by the company should thus be ‘socially acceptable’ otherwise the company will have trouble operating in a society that thinks of it as ‘unethical’, ‘immoral’ or ‘unable to comply with social norms or requirements’ and will be fast rolling downhill on its way to failure. (O’Donovan, 2002, p.344). Results of some empirical researches confirm the legitimacy theory (Branco and Rodrigues, 2006, p.232; Deegan et al., 2002, p.312) while on the other hand, some scholars and their studies outright reject the concept put forward by the legitimacy theory (Guthrie and Parker, 1989, p.343).
According to research, the stakeholder theory explains how a company may be portrayed with regards to the internal relations between different units and individuals that comprise it and that this may manipulate the firm’s performance. According to this theory, the company’s stakeholders include not only shareholders, but also other groups such as employees, suppliers, society, etc that have an inherent stake in how the company performs. (Freeman et al., 2010, p.28; Jones, 1995, p.407). critics of the stakeholder theory say that the nature of the relationships between the management and investors are always different from the nature of the associations