Page 47 - SUSTAINABILITY ISSUES & COVID-19

05 Disclosure Response to a Corruption

Case of PT Lippo Cikarang Tbk:

Legitimacy Crisis of Meikarta Project

Wandita Nanda Putri, Cynthia Afriani Utama

PURPOSE

Corruption is a form of agency problem that could happen due to the existence of asymmetric information between
agent and principal (Jensen & Meckling, 1976). In order to minimalize that asymmetric information, disclosure is needed,
especially disclosure of anti-corruption practice. In June of 2004, disclosure of anti-corruption practice is determined
by United Nation Global Compact (UNGC) as the 10 principle of The Ten Principles (ACCA, 2008). In other words,
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disclosure of anti-corruption practice became a part of CSR disclosure.

One of the major corruption case that happened in Indonesia is the Meikarta Project Corruption Case which entangled
PT Lippo Cikarang Tbk in 2017. Corruption case indicated that there’s a low disclosure level in the company.
The company is demanded by investors and other stakeholders to increase their disclosure to reduce the risk, so it
could push investors and other stakeholders to give positive response to company (Krisnamurti & Adiwibowo, 2016).
Therefore, first this research aims to analyze the effects of corruption case towards anti-corruption disclosure that being
done by the company. Corruption case also bring legitimacy crisis to the company that indicated by significant sales
decline, stock price decline, and crisis of trust where costumers ask for refund to the company. In this case, disclosure
can also be used by corporation as legitimacy strategy in order to repair their reputation. Regarding legitimacy strategy,
corporation generally make disclosure based on the organizational façade framework (Blanc, Cho, Sopt, & Branco, 2019).

Organizational façade is tightly related to legitimacy concept. Corporation can apply 3 types of organizational façade
at once to repair their legitimacy because every façade has their own focus and target. Organizational façade is a
symbolic perception which is designed by company to convince the stakeholders regarding the legitimacy of the
company and its management (Norheim & Demircioglu, 2019). Those facades are rational façade, progressive façade,
and reputational façade. Therefore, this research also aim to analyze the forms of disclosure made by corporations
which is reviewed based on organizational façade framework.

Research about disclosure, specifically regarding anti corruption as a part of CSR strategy is still seldom to be found.
Blanc et al. (2019) did a research about disclosure responses of corruption scandal committed by Siemens AG. The result
of the research shows Siemens made changes in the disclosure of compliance and anti-corruption in order to repair
the legitimacy crisis he experienced. However, the research by Blanc et al. (2019) only analyzed the disclosure made
by corporation in their annual report and sustainability report. But this research also focuses on corporation’s website,
social media, and online news as corporation disclosure media. Beside of that, this research is not only analyze the
disclosure made by corporation and whether it’s already proper or not, but also the forms of disclosure itself that is
reviewed base on organizational façade framework.

STUDY DESIGN/ METHODOLOGY/ APPROACH

This research uses mixed methods. Documentation is used to collect the secondary data which includes annual report,
website, social media and online news. The method used to analyze the data is content analysis that supported by
NVivo 12 Plus software. This research used text-based as qualitative data in large quantities and it’s difficult to analyze
it with conventional method. Therefore, NVivo 12 Plus is used. Content analysis is carried out using two methods which
are text search and word frequency. First, word frequency test is used to detect dominant issue in online news that related
to the construction of Meikarta Project in 2016 to 2019. From that, we can know the legitimacy that the company
should be done to repair their reputation. And then, text search method is used to answer both research questions. Text
search is used to find the words that reflect something that related to the keywords. Based on the result, the number
of disclosure can be identified and the impact of corruption on the disclosure of anti-corruption in corporation can be
analyzed. Aside from that, the use of text search can identify quantity and substance of each disclosure regarding anti-
corruption and other disclosures and categorized it based on 3 types of organizational façades.

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