Global Compact International Yearbook 2013
18
Corporations can no longer easily control their public image
by means of public relations and marketing. Clearly defined
corporate reporting requirements, rigorous third-party moni-
toring processes, and multiple media resources of watchdog
organizations help to shed light on actual business practices.
The increased transparency with regard to corporate conduct
has also enabled a larger and more diverse group of corporate
stakeholders to voice opinions and formulate demands. In
particular, large brand name companies in sensitive consumer
goods industries (like food or textiles) are now constantly
under public scrutiny. For corporations, this situation creates
newmanagement challenges. To ensure the social acceptance
of their business (corporate legitimacy), heterogeneous and
often contradictory stakeholder demands need to be managed.
Corporate legitimacy as a vital resource for corporations
Discussing “legitimacy” with corporate practitioners is tricky
because the term itself is not widely used by business people
and typically provokes a spontaneous defensive reaction.
However, in the business context, legitimacy refers to the
corporate “license to operate” – this license is potentially
threatened by many critical topics (i.e., corruption, social
issues, environmental depredation) to which practitioners
have to respond.
The management literature uses the legitimacy terminology to
describe the social acceptance of an organization. Legitimacy
is considered an essential resource for the survival of the
organization. Thus, the legitimacy of a corporation is chal-
lenged when their operations are perceived as inappropriate
and undesirable within their respective social context. Our
interviews with corporate practitioners showed that today
the majority of legitimacy challenges have their roots in the
sustainability context. So, while some corporations refer to
their “corporate responsibility / sustainability program,” and
their “reputation management,” they are in fact more broadly
managing corporate legitimacy.
According to Mark Suchman, corporations can respond to
legitimacy challenges in three ways: They can (1) provide
benefits to their constituencies, or at least give the impression
of being beneficial by way of manipulating the perceptions of
the audiences with impressionmanagement and PR (pragmatic
By Dr. Dorothée Baumann-Pauly and Prof. Dr. Andreas Georg Scherer
In this article, we explain why managing legitimacy is vital for corporations and how business
firms can employ strategies to maintain their legitimacy. We then discuss the organizational
capacities that each legitimacy strategy implies and point out their inherent tensions. Based
on the results of an empirical study, we show how two large corporations have handled these
tensions and successfully introduced organizational prerequisites for managing legitimacy. In
the final part of this article we elaborate on how participants of the UN Global Compact can
use the initiative to strengthen their legitimacy.
Managing
Corporate
Legitimacy
and the
UN Global Compact