A stakeholder perspective on mission statements: an international empirical study

The Authors

Gertjan van Nimwegen, Faculty of Economics and Business Administration, Accounting and Information Management, Maastricht University, Maastricht, The Netherlands

Laury Bollen, Faculty of Economics and Business Administration, Accounting and Information Management, Maastricht University, Maastricht, The Netherlands

Harold Hassink, Faculty of Economics and Business Administration, Accounting and Information Management, Maastricht University, Maastricht, The Netherlands

Thomas Thijssens, Faculty of Economics and Business Administration, Accounting and Information Management, Maastricht University, Maastricht, The Netherlands

Abstract

Purpose – This study uses a stakeholder perspective to explain the content of mission statements, in particular the inclusion of stakeholder groups. The study uses stakeholder dependency theory and resource dependency theory to explain the content of mission statement. In line with this perspective, stakeholders in this study will be classified as either being resource providers, such as employees and customers, or non-resource providers, such as the community and the environment. The primary aim of the study is to find evidence for the theoretical relationship between the importance of stakeholders to the company and the inclusion of stakeholder groups in the company's mission statement.

Design/methodology/approach – The use of a large dataset with 490 observations enables a multivariate analysis of mission statement content, focusing on country-, industry-, and company-specific factors.

Findings – The study finds that stakeholder groups the company is more dependent on, are addressed in mission statements more frequently. In addition, the profile of an industry, legal origin and ownership concentration are found to be related with stakeholder inclusion in mission statements.

Research limitations/implications – The database used adopts a broad definition of a mission statement, as a result of which the study may also include documents such as vision statements. Additional factors might exist that could explain the inclusion of stakeholder groups in the mission statement. For example, Hope states that both legal origin and culture are important in explaining corporate disclosure. Therefore, literature on cultural dimensions by Hofstede and Schwartz might also be used as explanatory variables in future research. Finally, additional evidence on the industry classification developed in this study is required to further substantiate these results.

Practical implications – The observed differences in mission statement content with respect to stakeholder management signify the fact that the mission statement is not a standardized document which can simply be ignored by managers. Therefore, managers must be aware of the environment in which the company is situated, in order to approach the stakeholders which are most important to the organization. A failure to recognize and include essential stakeholders in the mission statement may be costly in the long run, particularly when competitors are better able to address these stakeholders.

Originality/value – This study adds to the existing stream of literature on mission statements by introducing the dependence of the company on the stakeholder as an explanatory factor for the inclusion of stakeholders in mission statements. Consequently, the study uses stakeholder dependency theory and resource dependency theory to explain the content of mission statement, rather than signaling theory. Furthermore, this is one of few empirical studies on mission statements that uses a large dataset with 490 observations, enabling a multivariate analysis of mission statement content.

Article Type:

Research paper

Keyword(s):

Mission statements; Stakeholder analysis.

Journal:

International Journal of Organizational Analysis

Volume:

Number:

1/2

Year:

2008

pp:

61-82

Copyright ©

Emerald Group Publishing Limited

ISSN:

1934-8835

Introduction

The importance of mission statements and the actual purpose of a mission statement have been subject to much debate in the academic literature. First of all, some authors (e.g. Wright, 2002) argue that the mission statement is primarily used as a ‘public relations statement,’ and therefore mission statements do not reflect reality. However, authors with a less cynical view to mission statements have primarily identified the mission statement as a tool for internal purposes, such as the development of company strategy, providing leadership, and performance evaluation (e.g. Drucker, 1977; Klemm et al., 1991). For example, Drucker stressed the strategic importance of the company mission (Drucker, 1977, p. 66): “Only a clear definition of the mission and purpose of the business makes possible clear and realistic business objectives. It is the foundation for priorities, strategies, plans, and work assignments.” Others have stressed the importance of mission statements for external communication purposes, for example to influence the perceptions of stakeholders (e.g. Campbell, 1997; Bartkus et al., 2000).

To empirically asses the purpose of mission statements, Bart (1997a) and Leuthesser and Kohli (1997) have studied the inclusion of stakeholder groups in mission statements and found that some stakeholder groups are mentioned more often than others. In both studies customers were the most frequently cited stakeholder group, stressing the external focus of mission statements. Campbell et al. (2001) also tried to explain the inclusion of stakeholder groups in mission statements. The study concludes that given the fact that a wide range of stakeholders are mentioned in mission statements, the purpose of these statements is not limited to internal purposes. In Campbell et al. (2001) stakeholders were classified as more or less economically dependent on the company. The results of the study indicate that mission statements more often refer to economically less-dependent stakeholders. The authors suggest that “those stakeholders that are less-dependent are those that the organization itself depends [..] upon” (Campbell et al., 2001, p. 70). The results of the study therefore would suggest that companies more often address stakeholders which they depend upon. Building on this suggestion, we argue that it is the economic dependence of the company on the respective stakeholders rather than the dependence of the stakeholder on the company, that determines the content of the mission statement.

Therefore, this study adds to the existing stream of literature on mission statements by introducing the dependence of the company on the stakeholder as an explanatory factor for the inclusion of stakeholders in mission statements. Consequently, the study uses stakeholder dependency theory and resource dependency theory to explain the content of mission statement, rather than signaling theory. Pfeffer and Salancik (1978) have documented the dependence of the company on others for necessary resources in their ‘resource dependence perspective’. In line with this perspective, stakeholders in this study will be classified as either being resource providers, such as employees and customers, or non-resource providers, such as the community and the environment. The primary aim of the study is to find evidence for the theoretical relationship between the importance of stakeholders to the company and the inclusion of stakeholder groups in the company's mission statement. In addition, country-level factors are introduced as explanatory variables. Although differences in mission statement content between countries have been identified by Brabet and Klemm (1994) and Bartkus et al. (2004), the current study is among the first in the mission statement literature to introduce country-level variables in order to provide evidence on the role of international differences in mission statements, based on a multivariate analysis. The mission statement literature has suggested several other factors which can be used as explanatory variables. Peyrefitte and David (2006) found similar use of mission statement components across and within four industries. Literature on corporate social disclosure has classified sectors or industries as high-profile or low-profile (e.g. Roberts, 1992; Hackston and Milne, 1996). A similar classification will be used as an explanatory variable in this study. Lastly, company-specific factors such as company size will be employed in an attempt to isolate the effect of the dependence of companies on stakeholders as a determinant to the inclusion of stakeholders in mission statements. The empirical part of the study is based on a large sample of 490 observations, using mission statements from companies originating from 22 countries.

The study is organized as follows. Section 2 provides a review of the prior research on mission statements. In Section 3, the research question and the variables used will be introduced. Section 4 covers the research design and Section 5 presents the results of the study. Lastly, Section 6 provides the conclusion, implications, limitations, and suggestions for future research.

Prior research

Mission statement[1] literature emerged in the 1980s and since than has developed into four lines of research. The first line of research focuses on the purpose of a company's mission statement. The debate over the purpose of the mission statement has been centered on the question of whether the mission statement is a tool for internal or external use (Campbell and Yeung, 1991). A number of studies (e.g. Klemm et al., 1991; Ireland and Hitt, 1992; Mullane, 2002; Brown and Yoshioka, 2003) suggest that a mission statement is primarily used for internal purposes, but recent mission statement literature focuses more on its use for external purposes (e.g. Campbell, 1997; Leuthesser and Kohli, 1997; Bartkus et al., 2002). For example, Bartkus et al. (2000) state that the mission statement should be a communicational tool that allows current and prospective stakeholders to determine whether they would like to be involved with the company. Therefore, the use of the mission statement as an external communication tool seems to be beneficial to companies. The second line of research focuses on the specific components included in the mission statement (e.g. David, 1989; Bart, 1996, 1997b, 1998; Bart and Tabone, 1999; David and David, 2003; Bartkus et al., 2004; Peyrefitte and David, 2006). For example, analyzing 75 mission statements, David (1989) identified nine key components: customers, products and services, location, technology, concern for survival, philosophy, self-concept, concern for public image, and concern for employees. In a later study, Peyrefitte and David (2006) compared the relevance of these nine key components within and across the banking, computer hardware, computer software, and food processing industry, finding similar use of mission statement components across and within all four industries. The third line of mission statement research focuses on the relation between the mission statement and financial performance. Want (1986) depicts this relation by stating that the company mission determines the strategic business plan, which in turn influences leadership, communication and decision-making, management control, and the culture in the organization. These last four factors determine the company's structure, which in turn influences company performance. Several authors have attempted to relate the mission statement to financial performance (e.g. Pearce II and David (1987), Bart and Baetz (1998), Bart et al. (2001), Omran et al. (2002), Atrill et al. (2005) and Bartkus et al. (2006)). However, these studies do not provide an overall consistent view. According to Bartkus et al. (2006) potential explanations for this lack of consistency could be explained by the fact that as an external communication tool, the mission statement includes current activities, rather than offering a future direction.

The fourth line of research focuses on the inclusion of stakeholder groups in the mission statement. Pearce II (1982) notes that companies must recognize and acknowledge the legitimate claims of stakeholders in defining or redefining the company mission. Leuthesser and Kohi (1997) examine the content of 63 mission statements from the Business Week 1000, which contain customers (90.5 percent), shareholders (60.3 percent), employees (66.7 percent), and suppliers (15.9 percent). In addition, Bartkus et al. (2004) compare the inclusion of stakeholder groups in mission statements between Europe, Japan, and the US, observing that on average, Japanese mission statements less often refer to employees and investors, but more often refer to society. A potential explanations for the inclusion of stakeholders in mission statements is based on the involvement of stakeholders in the design of mission statements. Baetz and Bart (1996) note that all relevant stakeholders should be included in the development process of the mission statement to safeguard the content on the different stakeholders and their potentially conflicting interests. On the other hand, Ireland and Hitt (1992) argue that too large a number or diversity of stakeholders can inhibit a successful drafting process. As a result, only a limited number of stakeholders may be included in the drafting process, as a result of which these particular stakeholders may be mentioned more often in the mission statement. There is not much empirical evidence to support the assumption that all relevant stakeholders are included in the development process of mission statements. First, Brabet and Klemm (1994) identified large international differences between the drafting process of mission statements. For example, French companies involve parties at all levels of the organization, often also involving customers and employees, in the drafting process, whereas mission statements in the UK are more commonly drawn up by managers. As a result, in the UK there is no link between the role of stakeholders in the drafting process and the inclusion of stakeholders in the mission statement. Furthermore, Bart (1997a), using a sample of 88 leading North American companies, found that while customers are frequently cited in mission statements, the group is not often involved in the drafting process.

Campbell et al. (2001) studied the inclusion of stakeholders in mission statements, looking at sector-specific effects and differences in the dependence of stakeholders to the company. Stakeholders are defined as less-dependent or more-dependent stakeholders, depending on their ability to disengage from the company. For example, less-dependent stakeholders are customers and shareholders, while more-dependent stakeholders are employees, the community and the environment. Although one of the findings is that mission statements focus more on less-dependent stakeholders the results on employees are rather ambiguous, and there seems to be little agreement among the sample companies as to which of the more-dependent stakeholders should be included in the mission statement (Campbell et al., 2001, p. 84).

The current study adds to the existing literature on the inclusion of stakeholders in mission statements by focusing on an alternative theoretical approach. While Campbell et al. (2001) explain the inclusion of stakeholder groups in mission statements by looking at the dependence of the stakeholder on the company, the current study will explain the inclusion of stakeholder groups in mission statements by focusing on the dependence of the company on these stakeholder groups. The following section will develop the theoretical approach used in this study in more detail.

Research question

Freeman (1984, p. 46) defines a stakeholder as “… any group or individual who can affect or is affected by the achievement of the organization's objectives.” While organizations can be dependent on certain stakeholders for survival, stakeholders can also be dependent on the organization. Campbell et al. (2001) use the level of economic dependency of stakeholders on companies to explain the intended audiences of mission statements. In addition, the authors argue that it is the (economically) less-dependent stakeholders upon which the company itself is most dependent (Campbell et al., 2001, p. 70). In light of this argument, the results of the study, which indicate that mission statements more often refer to less-dependent stakeholders, would thus suggest that companies more often address stakeholders which they more heavily depend upon. However, Frooman (1999) has described the various dependency relationships that can exist between a company and its various stakeholders. One of these dependency relationships is referred to as a ‘firm power resource relationship,’ where the stakeholder is dependent on the company, but not vice versa. Furthermore, a ‘stakeholder power resource relationship’ exists when the company is dependent on the stakeholder, but not vice versa. Consequently, both the firm power resource relationship and the stakeholder power resource relationship do not fit the above-mentioned suggestion of Campbell et al. (2001).

Pfeffer and Salancik (1978), in their resource dependency perspective, specifically focus on the dependency of the company on its stakeholders. Pfeffer and Salancik (1978, p. 258) note that organizations transact with stakeholders for necessary resources, and control over these resources provides stakeholders with power over the organization. Resource dependence theory suggests that power accrues to those who control resources needed by the organization, creating power differentials among parties (Pfeffer, 1981), and it confirms that the possession of resource power makes a stakeholder important to managers. Consequently, stakeholders that provide the company with valuable resources are regarded as more important. Mitchell et al. (1997, p. 854) refer to these stakeholders as “resource providers to, or dependents of the firm.” Pfeffer and Salancik (1978) and Oliver (1991) argue that organizations will be less likely to resist pressures from stakeholders when they are dependent on the resources provided by those stakeholders. The distinction between resource providing stakeholders and non-resource providing stakeholders closely follows the distinction between primary and secondary stakeholders suggested by Frederick et al. (1988) and Clarkson (1994, 1995), where primary stakeholder group are those without whose continuing participation the corporation cannot survive as a going concern. Secondary stakeholder groups are “not engaged in transactions with the corporation and are not essential for its survival, but may be opposed to the policies or programs that a corporation has adopted to fulfill its responsibilities to, or satisfy the needs and expectations of, its primary stakeholder groups” (Clarkson, 1995). According to Frederick et al. (1988), primary stakeholders include stakeholder groups such as shareholders, employees, creditors, suppliers, competitors, distributors, etc. Secondary stakeholders include local communities, governments, foreign governments, social movements, mass media, general public, etc.

In the current study, the resource dependence theory by Pfeffer and Salancik (1978) will be used to explain the inclusion of stakeholders in mission statements, making a distinction between stakeholders which provide resources to the company (resource providers) and stakeholders which are merely dependent on the actions of the company (non-resource providers). Due to the relative importance to the company of resource providers in comparison to non-resource providers, the former is expected to be included more frequently in mission statements than the latter. Therefore, the following research question is formulated.

Are resource providing stakeholder groups addressed more frequently in mission statements in comparison to non-resource providing stakeholder groups?

The existing literature on mission statements has suggested several other explanatory variables for the determinants of stakeholder inclusion in mission statements. Brabet and Klemm (1994) and Bartkus et al. (2004) found that international differences exist in the contents of mission statements. According to Bartkus et al. (2004), mission statements in Japan refer to less stakeholder groups in comparison to mission statements in Europe and the USA. Suggested explanations for the low inclusion of stakeholders in mission statements in Japan include the reliance on face-to-face communication and the practice of lifetime employment. From the study by Bartkus et al. (2004) it also becomes clear that Japanese mission statements less frequently refer to resource providers (i.e. employees and investors), but more frequently refer to non-resource providers (i.e. society) in comparison to mission statements from Europe and the USA. International differences between mission statements may be solely dependent on the distinctive characteristics of the individual countries. However, some countries have commonalities that might also explain the inclusion of stakeholder groups in mission statements. La Porta et al. (1998) studied the legal rules covering the protection of shareholders and creditors and the quality of their enforcement in 49 countries. Countries can be grouped on the basis of their legal tradition (code law versus common law), legal origin (English, French, German, and Scandinavian) and ownership concentration of shares, among other factors. Leuz et al. (2003) have used and adapted some of the variables by La Porta et al. (1997, 1998) to study the differences in earnings management across 31 countries. We will use some of the variables employed by Leuz et al. (2003) to test for international differences in mission statement content. In doing so, we imply that legal factors may influence the inclusion of resource providers and non-resource providers in mission statements. Although the results of previous studies indicate that country-specific factors may affect the inclusion of stakeholder groups in mission statements, so far there is no empirical evidence that the resource dependency of organizations towards specific stakeholder groups varies over countries. Therefore, we have no a priori expectation with respect to the role of country specific factors on the inclusion of stakeholder groups in mission statements.

Second, the industry of the company will be used as an explanatory factor for stakeholder inclusion. For example, Peyrefitte and David (2006) found similar use of several mission statement components across and within the banking, computer hardware, computer software, and food processing industry. Amato and Amato (2002) analyzed mission statements to find a relationship between commitment to quality of life and company size, profitability and industry. The results of the study indicate that companies in the financial services industry are more likely to include social concerns, whereas companies in the mining, metals and construction industry and light manufacturing industry are more likely to include ecological concerns. One possible explanation for the similarity of mission statement content within industries might be the ‘keeping up with the Joneses’ effect. According to Dimaggio and Powell (1983) the similarity between organizations is caused by coercive, mimetic, and normative isomorphism.[2] Coercive isomorphism results from the pressures exerted by other parties on which the company is dependent and the cultural expectations by society. In addition, failing to take into account important issues or leaving out important stakeholders in the mission statement might have adverse consequences for the company if the competition does otherwise. Then again, according to Urbany (2005), external symbolism might harm the company in the long-run if there is no internal legitimacy. That is, stakeholders will not be convinced by a company's mission of stakeholder orientation, if it is not backed up by evidence of genuine stakeholder management (e.g. by means of implementation of formal programs or management systems). This implies that isomorphic behavior within industries, regarding stakeholder inclusion in missions, will not be acts of pure symbolism. Further motivation for industry behavior can be drawn from theoretical insights from other literature, more specifically the literature on corporate social responsibility (CSR). In CSR disclosure literature, industry is frequently mentioned as a determinant (for an overview of studies using industry as an explanatory variable for CSR disclosure, see Hibbitt, 2004), based on the idea that industries that are more visible will be more inclined to engage in CSR activities. Similarly, the expectation is that the inclusion of stakeholders in mission statements is higher in highly visible industries in comparison to non-visible industries. In addition, visible industries are expected to include more non-resource providers in comparison to resource providers in mission statements. The higher level of visibility might increase the need for companies to address the interests of non-resource providing stakeholders in order to avoid negative publicity.

Third, company-specific factors can be used as explanatory factors for stakeholder inclusion in mission statements. Toftoy and Chatterjee (2004) surveyed 220 small businesses in the greater Washington, DC area and found that only 29% of the companies had a formal mission statement which was accessible to all employees. Therefore, smaller businesses might be less inclined to use the mission statement to influence their stakeholders. Larger companies might have more means at their disposal to take care of the needs of the various stakeholders (e.g. Cormier et al. (2005)), which might lead to an increase the number of stakeholders addressed in mission statements. In addition, as discussed in the previous section, larger companies are more visible to society, which might demand assurances on certain activities. A similar line of reasoning may be applied to company size, in the sense that a higher level of visibility might increase the need for companies to address non-resource providing stakeholders. Therefore, larger companies are expected to include more non-resource providing stakeholders as opposed to resource providing stakeholders in their mission statement.

Research design

Dependent variables

The primary research question of this study will be tested using the frequencies of resource providing stakeholder groups versus non-resource providing stakeholder groups addressed in mission statements. Therefore, a ratio (FRACTION) is constructed. It is calculated as the number of resource providing stakeholder groups addressed in the mission statement divided by the total number of stakeholder groups mentioned in the mission statement. The interpretation of this variable is that if the fraction is lower than 0.5, the number of resource providing stakeholder groups addressed is lower than the number of non-resource providing stakeholder groups addressed.[3] In total three resource providing stakeholders are included (1) employees (EMPLOY), (2) customers (CUSTOM), and (3) shareholders (GOVERN).[4] Resources are provided to the company by employees through labor, by customers through consumption and by shareholders through capital. Also three non-resource providing stakeholders are identified, which are (1) community (COMMUN), (2) environment (ENVIR), and (3) human rights and supply chain (HUMAN). The community is represented by people living in the vicinity of the business activities of the company. The environment is represented by individuals or organizations which aim to protect the environment from any negative impact of the business activities of the company. Finally, human rights and supply chain is represented by NGOs addressing issues such as the working conditions of the employees or child labor. Whereas an employee can stop working or customers can refrain from buying goods or services, non-resource providing stakeholders are not able to exert such power over the organization since they do not control resources themselves. In this study, all stakeholders which provide resources to the company (i.e. customers, employees, and shareholders) are considered as stakeholders on which the company is dependent. Although it is possible that individual companies are more dependent on a certain stakeholder than others, for example because in certain instances some stakeholders might be fairly easy to replace[5], the data used in this study do not allow us to determine the dependence of individual companies on the resources of individual stakeholder groups.

Independent variables

Country-specific factors

La Porta et al. (1998) studied the legal rules covering the protection of shareholders and creditors and the quality of their enforcement in 49 countries. Leuz et al. (2003) have used and adapted some of the variables by La Porta et al. (1997, 1998) to study the differences in earnings management across 31 countries.[6] The following variables used by Leuz et al. (2003) will also be used in this study: (1) Legal Origin, (2) Legal Tradition, (3) Outside Investor Rights, (4) Importance of Equity Market, and (5) Ownership Concentration.[7] The factor Legal Origin, which contains four dummy variables, can be either German (LGERMAN), French (LFRENCH), English (LENGLISH), or Scandinavian (LSCANDI). The Legal Tradition of the country (LCOMMON) will be a single dummy variable (value ‘0’ for a code-law country, and value ‘1’ for a common-law country). The third factor, originally called the anti-director rights index by La Porta et al. (1998), is ‘Outside Investor Rights’ (RIGHTS), being a measure of the minority shareholder rights in the country. The fourth factor, ‘Importance of Equity Market’ (EQUITYMA), is the average score of three variables in La Porta et al. (1997).[8] The fifth factor, ‘Ownership Concentration’ (OWNERSHI), is constructed by La Porta et al. (1998).[9] The last three variables are all scale variables.

Industry factors

Industries are classified based on their visibility. Visibility has been operationalized in previous studies in various ways. Initial studies attempted to differentiate between industries by classifying them as either being high-profile or low-profile (see Roberts (1992) and Hackston and Milne (1996)). More recent CSR literature suggests that visibility consists of “organizational visibility” as well as “issue visibility.”

Organizational visibility is high when an organization “can be easily seen by relevant constituents” (Bowen, 2000, p. 93). A specific instance of “organizational visibility” is “consumer visibility”, which is based on the idea that some companies are more visible among (end)consumers whereas others are not. Carter (2006) measures consumer visibility by interaction with end consumer based on industry SIC code (Carter, 2006), although she does not provide a ready-to-use industry classification.

Issue visibility is high when issues “are easily noticeable by groups inside or outside the organization” (Bowen, 2000, p. 93). This measure of visibility builds on the idea that some companies or industries are more visible due to an inherent impact of their activities on society. Brammer and Millington (2004) provide a useful classification of “politically and/or socially sensitive” industries, to account for “industries with potentially significant environmental or social consequences.” They classify industries with high environmental impact, large social externalities (alcohol and tobacco) and industries with ethical issues (pharmaceuticals and defense) as ‘sensitive.’

The measure of visibility used in this study is based on a composite of previous classifications taking into account both consumer visibility and issue visibility. Next to the Roberts (1992) and Hackston and Milne (1996) industry classifications, we use Brammer and Millington (2004) as the basis for our classification. Brammer and Millington (2004) distinguish between industries with high environmental impact (chemicals, oil, metal, Pulp and Paper, mining, water and energy production and distribution), high social impact (tobacco and alcohol), and high ethical concerns (defense and pharmaceuticals). We have complemented the resulting classification with a number of industries that that have not been classified by previous studies as highly visible, yet which industries have faced major controversies regarding social or ethical issues (Carroll and Buchholtz, 2006). Consequently, we have classified the household and personal products industries to have high ethical impact (due to animal rights issues), whereas the food, drug/health care equipment, and automobiles industries (due to safety issues), the apparel and retail industries (based on human rights issues such as sweatshops and child labor), and the telecommunication service industries (due to quality concerns as a result of privatization, see Carroll and Buchholtz, 2006) were classified as high social impact industries. An industry visibility measure was created, based on a dichotomous variable, taking the value ‘1’ if an industry was classified as having high visibility and taking the value ‘0’ otherwise.

Company-specific factors

Company size is calculated as the natural log of the number of employees (LNEMP), the total assets (LNASSET), the net sales or revenues (LNSALES), and the market capitalization (LNMCAP).[10]

Sample

From the database we collected data on 630 listed companies in 22 countries. The largest number of observations in the sample are from the UK (127), the US (100), Japan (78), Canada (48), Italy (41), France (39), and Switzerland (39).[11] In total 17 companies are eliminated from the data set. These companies are excluded since the mission statement is not publicly disclosed. The data is retrieved from the 2001-2002 SiRi Global Profiles. The SiRi Global Profiles contain data on various stakeholder issues per company, grouped under various headings such as community, corporate governance, customers, employees, the environment and human rights and supply chain.[12] These headings correspond to the various stakeholder groups identified in this study. Directly relevant for this study is the identification of specific stakeholder issue groups as they are addressed in the mission statement for each company.

Empirical results and discussion

Descriptive statistics

Table I contains the descriptive statistics for the independent and dependent variables. Out of the total sample of 613 companies, 490 companies (80 percent) disclose a mission statement, 100 companies (16.3 percent) do not disclose a mission statement, and for 23 companies (3.7 percent) the existence of the mission statement cannot be confirmed.

Descriptive statistics of the dependent variable

For the total sample, the descriptive statistics of the dependent variable, FRACTION, show a minimum value of 0.20 and a maximum value of 0.80. The minimum value of 0.20 relates to companies that only includes stakeholder issue groups in the mission statement which do not provide resources to the company, such as the environment, the community and human rights. Alternatively, the maximum value of 0.80 is achieved when a company only includes stakeholder issue groups that do provide resources to the company, such as employees, customers, and corporate governance. The mean value of 0.5853 indicates that on average companies address stakeholder issue groups which provide resources to the company more frequently than stakeholder issue groups that do not provide resources to the company. The one-sample t-test of FRACTION indicates that this score is significantly higher than 0.5 at the 0.01 level.

Table II contains the number of stakeholder issue groups addressed by companies in their mission statement, separated per country and per industry. The variable FRACTION is lowest in Japan (0.5136) and highest in Hong Kong/Singapore (0.6423) and the US (0.6325). Based on a series of one sample t-tests, the finding that FRACTION is significantly higher than 0.5 holds for all country groups, except for Japan. With respect to industries, although some differences can be found with respect to the mean of FRACTION, the finding that the mean is significantly different from 0.5 holds for all individual industries.

Table III contains the descriptive statistics for the individual stakeholder issue groups. The stakeholder issue group which is most frequently addressed in the mission statement is Customers (84 percent), followed by Employees (71 percent), Community (55 percent), Environment (53 percent), Corporate Governance (47 percent), and Human Rights and Supply Chain (14 percent). The average number of stakeholder issue groups in a mission statement is 3.23. In total, 21 companies (3.4 percent) address zero stakeholder issue groups, whereas 41 companies (6.7 percent) address all six stakeholder issue groups. A paired sample t-test confirms that resource based stakeholders groups are mentioned more often than non-resource based stakeholder groups. Table III also indicates that the average amount of stakeholder issue groups addressed in mission statements tends to vary between countries and industries. The highest amount of stakeholder issue groups are addressed in Australia/New Zealand (3.92), whereas the lowest amounts of stakeholder issue groups are addressed in Canada (2.19) and Japan (2.59). However, Japan is the only country where the number of resource based stakeholders groups is not significantly higher than the number of non-resource based stakeholder groups. With respect to industry differences, the number of stakeholder groups mentioned is particularly low in the information technology industry (2.54) and relatively high in the energy industry (4.62). However, for all individual industries the number of resource based stakeholder groups is significantly higher than the number of non-resource based stakeholder groups.

The descriptive statistics presented here are in line with the findings of prior research. According to Bartkus et al. (2004), mission statements in Japan contain on average the least amount of stakeholders in comparison to mission statements in Europe and the US. The descriptive statistics support this outcome, since the amount of stakeholder issue groups in the mission statement is lower in Japan (2.59) than in Europe (3.37) and the US (3.38). In addition, Bartkus et al. (2004) found that Japanese mission statements contain less frequently employees and investors, but contain more frequently the society in comparison to mission statements from Europe and the US. The descriptive statistics also support this outcome. For example, the stakeholder issue group ‘Community’ is addressed in the mission statement in both Europe and the US in 54% of the cases, whereas in Japan the “Community” is addressed in 69 percent of the statements.

Univariate analysis

Table IV contains the Pearson correlations between the dependent variable and the independent variables. Table V shows the correlation matrix. First, several country-specific variables correlate significantly with the dependent variable (FRACTION). The dummy variable “German Legal Origin” (LGERMAN) shows a significant negative correlation, whereas the dummy variables “English Legal Origin” (LENGLISH) and “Legal Tradition: Common Law” (LCOMMON) show significant positive correlations. Also the variable “Ownership Concentration” (OWNERSHI) shows a positive correlation to the dependent variable. Since these country-specific variables have not been used before as independent variables in mission statement research, no clear expectation on the correlations has been formulated.

The dummy variables LENGLISH and LCOMMON have identical correlations to the dependent variable since the variables are perfectly correlated to each other.[13] Therefore, the dummy variable LCOMMON will be excluded in the multivariate analysis. Second, the visibility of the industry (VISIBLE) shows a significant negative correlation to the dependent variable. Therefore, companies which are positioned in a highly visible industry address relatively more stakeholder issue groups which do not provide resources to the company in comparison to stakeholder issue groups which do provide resources to the company. The negative correlation is expected since a higher level of visibility might increase the need for companies to provide assurances to non-resource providing stakeholders in the attempt to avoid (any) negative publicity. Third, the company-specific variables “Number of employees” (LNEMP) and “Net Sales or Revenues” (LNSALES) have a significant negative correlation with the dependent variable. The negative correlation is expected since larger companies are expected to include more non-resource providing stakeholders as opposed to resource providing stakeholders in their mission statement because a higher level of consumer visibility and political risk might increase the need for companies to address non-resource providing stakeholders.

The variables LNEMP, LNSALES, LNASSET, and LNMCAP all have a significant positive correlation with each other. In addition, the variable LNEMP has a significant positive correlation with the stakeholder issue group “Employees.” Therefore, the variable LNSALES will be used in the multivariate analysis as a proxy for company size.

Multivariate analysis

Table VI contains the output of the multivariate regression analysis[14].

Several significant variables are identified in the multivariate analysis. First, from the country-specific variables, “German Legal Origin” (LGERMAN) and “French Legal Origin” (LFRENCH) have a significant negative relationship with the dependent variable (FRACTION). Countries with a German Legal Origin are Austria, Germany, Japan, and Switzerland. Countries with a French legal origin are Belgium, France, Italy, and Spain. According to Hope (2003) both legal origin and culture are important in explaining corporate disclosure. He states that, having common law as a reference group, French and German legal regimes are associated with lower disclosure, whereas the Scandinavian (Nordic) legal regime is associated with higher disclosure. Second, the variable “Ownership Concentration” (OWNERSHI) has a significant positive relationship with the dependent variable at the 5 percent level. Countries with a low level of ownership concentration are the US, UK, and Japan, whereas countries with a high level of ownership concentration are Italy, Germany and Belgium. The positive relationship might be explained by reduced information asymmetries in companies with a higher level of ownership concentration. Since information can more effectively be communicated via private channels in high concentration companies, these companies might have a lesser need to focus on public disclosure to provide assurances to shareholders. Third, the industry-specific variable VISIBLE has a significant negative relationship with FRACTION at the 1 percent level, suggesting that, as expected, high-profile companies might be inclined to address non-resource providing stakeholders in the attempt to avoid negative publicity. Lastly, in concordance with the univariate analysis, the multivariate analysis indicates that the company-specific variable LNSALES has a significant negative correlation with FRACTION. As the size of a company appears to be positively related to the level of corporate disclosure (Cormier et al., 2005), the size of a company similarly is related to the content of the mission statement where larger companies address more non-resource based stakeholder groups compared to smaller companies.

Conclusion

This study introduces the dependence of the company on the stakeholder as an explanatory factor for the inclusion of stakeholders in mission statements. Utilizing the resource dependence perspective by Pfeffer and Salancik (1978), stakeholders which provide resources to the company are assumed to be more important to the company than stakeholders which do not provide resources. As a consequence, mission statement content is expected to be more focused on the first group in comparison to the latter. The results show that, on average, stakeholder groups which provide resources are addressed more frequently in mission statements in comparison to stakeholder groups which do not provide resources, confirming our main research question. These results hold for all individual countries in our sample except Japan, and for all industries. Consequently, stakeholder dependency theory can be used to explain the content of mission statements, in particular the frequency of references to stakeholder groups in these statements. Therefore, further studies that try to explain the content and role of mission statements might be based on the dependence of the company on stakeholders, rather than the dependence of stakeholders on the company as used in previous studies.

In addition, several further explanatory variables have been tested in this study. First, due to the large sample size of 490 observations, international differences in mission statement content are observed using legal factors introduced by La Porta et al. (1997, 1998). Second, industry-specific differences are captured by classifying industries as either high-profile or low-profile. Third, the size of the company is used to account for company-specific differences. Descriptive statistics on country-specific differences in mission statement content appears to be consistent with the study by Bartkus et al. (2004). The multivariate regression analysis confirms that both country-specific variables and industry-specific variables have an influence on the dependent variable (the number of stakeholder issue groups which provide resources to the company divided by the total number of stakeholder issue groups). First, with respect to the country-specific variables, “German Legal Origin” and “French legal Origin” have a significant negative relationship and “Ownership Concentration” has a significant positive relationship with the proportion of resource-based stakeholders mentioned in mission statements. Second, the visibility of the industry appears to have a highly significant negative relationship with the dependent variable as well as the size of a company.

The findings of this study have several implications for organizations. The observed differences in mission statement content with respect to stakeholder management signify the fact that the mission statement is not a standardized document which can simply be ignored by managers. According to this study, stakeholder inclusion in mission statements appears to be dependent on both country- and industry-specific factors. Therefore, managers must be aware of the environment in which the company is situated, in order to approach the stakeholders which are most important to the organization. A failure to recognize and include essential stakeholders in the mission statement may be costly in the long run, particularly when competitors are better able to address these stakeholders. Therefore, this result is particularly important for organizations which currently do not have a mission statement or for organizations where stakeholder management has no significant role in the creation of the mission statement.

The main limitations of this study are threefold. First, the database used adopts a broad definition of a mission statement, as a result of which the study may also include documents such as vision statements. Second, additional factors might exist that could explain the inclusion of stakeholder groups in the mission statement. For example, Hope (2003) states that both legal origin and culture are important in explaining corporate disclosure. Therefore, literature on cultural dimensions by Hofstede (1980) and Schwartz (1994) might also be used as explanatory variables in future research. Finally, the industry classification scheme partly was newly developed in this study and some additional evidence with respect to the classification of various industries will be required to further substantiate the industry results found in this study.

The results of the study indicate that further research on the use of the mission statement for external purposes is called for. This study uses a separation of stakeholder groups based on the resource dependence perspective, focusing on the dependence of the company. In this study, the definition of both groups has been kept constant over all companies and industries. However, it may be argued that not all companies or industries are equally dependent on a particular stakeholder group. For example, within the service industry, companies may be particularly dependent on employees whereas companies within the chemical sector may be more dependent on investors for providing funds to invest in plants and technologies. Future studies should therefore develop more precise measures of the dependency of companies on stakeholder groups. In addition, stakeholder groups can also be classified in other ways which might provide further explanations of stakeholder inclusion in mission statements. A second issue for further research is the international differences in mission statements. In comparison to previous studies, this is the first study where country-specific variables have been used in order to explain mission statement content. Since both German legal origin and ownership concentration are found to be significant explanatory variables, additional research on the influence of legal and institutional factors on mission statement content is needed.

Table IDescriptive statistics of dependent and independent variables

Table IINumber of stakeholder issue groups

Table IIIDescriptive statistics of stakeholder issue groups

Table IVUnivariate tests

Table VCorrelation matrix

Table VIMultivariate results

References

Amato, C.H., Amato, L.H. (2002), "Corporate commitment to quality of life: evidence from company mission statements", Journal of Marketing Theory and Practice, Vol. 10 No.4, pp.69-87.