Corporate social responsibility as a legitimacy maintenance. Legitimacy theory as an explanatory theory of environmental disclosure hogner 1982 suggested corporate social disclosures were motivated by the corporate need to legitimise activities. A major problem confronting a researcher is which theoretical perspective is considered most apt. This chapter provides an overview of legitimacy theory as applied within the social and environmental accounting literature. This paper explores how social accounting can generate legitimacy for a company within a local community, and reveals the essential role of the community itself in the process. In our conception, legitimacy theory has the role of explaining the behavior of organizations in implementing and developing voluntary social and environmental disclosure of information in order to fulfill their social contract that enables the recognition of their objectives and the survival in a jumpy and turbulent environment. The main aim of this thesis was to refine and develop legitimacy theory as an explanation for voluntary corporate envirormiental disclosures in the armual report. The objective is to explore how these theories are used in corporate social responsibility csr disclosure.
Similarly, stakeholder theory is a theory which is used to explain the phenomena of motivation for corporate social disclosures. Corporate social responsibility and tax aggressiveness. Social accounting for the purpose of management control is designed to support and facilitate the achievement of an organizations own objectives. The influence of external pressure groups on corporate social disclosure, accounting, auditing. The theory in effect claims that because corporations have the resources, they should engage in social ventures. Financial accounting theory, third edition, provides students with an appreciation of the origin and significance of financial accounting theory, explores application of this theory in the current accounting environment and provides a forum for discussion on the possible future directions financial accounting theory, research and practice might. Social disclosure, legitimacy theory and the role of the. An overview of legitimacy theory as applied within the social and. Legitimacy theory specifies a social contract between the organisation and society. Exposure, legitimacy, and social disclosure sciencedirect. Pdf financial accounting theory download full pdf book. Some thoughts on legitimacy theory in social and environmental accounting, social and environmental accounting journal, 242, pp. Because social accounting is concerned with substantial selfreporting on a systemic level, individual reports are often referred to.
It explores who these constituents audiences are for their csr actions and the strategies they use to maintain legitimacy with these audiences. Encyclopedia of corporate social responsibility pp. Through this analysis, it is provided a better theoretical understanding of these theories, which. Legitimacy theory helps to understand the organizations behavior in implementing, developing and communicating its social responsibility policies.
Pfeffer, 1975 says a corporation must act in congruence with norms and society value. Application of social contract in legitimacy theory brings transparency in the system and helps the society as a whole in many ways as discussed above. This study analyzes the perspectives of the institutional theory, the legitimacy. Researchers entering the field today are faced with a complex and demanding landscape, as the impetus on the world of accounting and finance to understand the social justice agenda becomes. Accounting for legitimacy harvard business school working. An examination of the corporate social and environmental disclosures bhp from 19831997. Positive accounting theory organization is a nexus of contracts vs. The role of legitimacy theory in explaining managers decisions is then discussed and it. This study analyzes the perspectives of the institutional theory, the legitimacy theory, and the stakeholders theory in the accounting changing process and sustainability reports. According to legitimacy theory, companies disclose social responsibility information to present a socially responsible image so that they can legitimize their behaviours to their stakeholder groups. This paper investigates how accountancy firms use corporate social responsibility csr as a device to maintain legitimacy with key constituents.
Corporations responsible for a triple bottom line seek sustainability in the economic, social, and environmental realms. The legitimacy theory and csr disclosure accounting essay. A story of reporting social and environmental matters within the australian food and beverage industry professor james guthrie discipline of accounting, the university of sydney associate professor suresh cuganesan macquarie graduate school of management and leanne ward cocacola amatil corresponding author. The chapters ambitions are to encourage a more evaluative and policybased approach to the subject matter of social accounting. Dworczak promotes the role of management accounting in a wider social. Even in the social accounting literature, where legitimacy theory has become the dominant theoretical perspective, legitimacy has primarily been operationalized as a motivation for social disclosure rather than as a distinct, measureable outcome see deegan, 2002. Social and environmental accounting sage publications ltd. Legitimacy theory is one of the most discussed theories to explain the phenomenon of voluntary social and environmental disclosures in corporate communication.
Legitimacy is a generalised perceptual experience or premise that the actions of an entity are desirable. Conceptualizing legitimacy as a thing an asset or characteristic to be gained, increased and lost clearly emphasizes some attributes of a phenomenon at the. Takes as its departure point the criticism of guthrie and parker by arnold and the tinker et al. The roles of the social pillar and legitimacy theory in. Social and environmental accounting sea has been defined by gray and al. Legitimacy theory is theory that, in the last decade, has become increasingly used by accounting researchers, particularly researchers working in the area of social and environmental accounting. Legitimacy theory overlapped stakeholders theory, intuitional theory and positive accounting theory which are discussed above. Search the worlds most comprehensive index of fulltext books. The main assumption of legitimacy theory is fulfilling the organizations social contract, which enables the recognition of its objectives. Legitimacy theory posits that businesses are bound by the social contract in which the firms agree to perform various socially desired actions in return for approval of its objectives and other rewards, and this ultimately guarantees its continued existence. However, some group of researchers believed that social theory is insufficient in explaining the important of theory in accounting, and the importance of theory in accounting depends on the level a researcher view the world. It explores who these constituents audiences are for their csr actions and the strategies.
Because social accounting is concerned with substantial selfreporting on a systemic level, individual reports are often referred to as social audits. Indeed, it is possible that legitimacy theory is the most widely used theory to make clear environmental and communal disclosures campbell. Exposure, legitimacy, and social disclosure 303 the size measure used in my analysis is the natural log of 1985 revenues. The ultimate theories in corporate governance started with the agency theory, extended into stewardship theory and stakeholder theory and evolved to resource dependency theory, political theory, legitimacy theory and social contract theory. Business is a socioeconomic activity and it draws its inputs from the society, hence its objective should be the welfare of the society.
Apr 28, 2012 some thoughts on legitimacy theory in social and environmental accounting, social and environmental accounting journal, 242, pp. Systemsoriented theories boundaries of organization are not well defined. Social and environmental reporting semester 6 march 2015 luyu gan suvi helenius naomi odonoghue baaf 3 dundalk institute of technology lecturer. The sme managers were found to have a neutral attitude towards social accounting and they. Social disclosure, legitimacy theory and the role of the state. Corporate social responsibility as a specific theory affirms that corporations are entities with economic, legal, ethical, and philanthropic obligations. Stock markets reaction to disclosure of environmental violations. Legitimacy theory, stakeholder theory, corporate social disclosures. The legitimising effect of social and environmental. Therefore, although we have good evidence that csr communication can indeed be.
Social accounting as the universe of all possible accountings gray et al. The dominant status that legitimacy theory lt has attained in social accounting research see, for example, patten, 1991, 1992. Legitimacy theory is based on the idea that a social contract exists between business. Islam, muhammad azizul, csr reporting and legitimacy theory. This chapter investigates the impact of economic vulnerability and economic crisis on political trust, satisfaction with democracy and attitudes towards redistribution. Legitimacy theory based on the idea of a social contract relates to the explicit and implicit expectations society has about how businesses should act to ensure they survive into the future. The role of theory in explaining motivation for corporate. For each of the following theories, outline how we could use the theory to explain managements motivations concerning their operating and reporting strategies. Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions suchman, 1995, p. Some thoughts on future research agenda april 6, 2017. Social accounting and the cocreation of corporate legitimacy. Legitimacy theory based on the idea of a social contract. The influence of external pressure groups on corporate social disclosure, accounting, auditing and accountability journal, 74, pp. Economic crisis, political legitimacy, and social cohesion.
These attitudes are crucial in defining public support for the european model of social capitalism, characterized by the combination of national democratic institutions and extensive welfare provision. The principal objective of this paper is to expand the scope of legitimacy theory lt through a detailed analysis of the links that exist between the legitimising strategies of firms and the characteristics of the political environment in which they are developed. Because larger firms are assumed to face greater public pressures than smaller firms, a positive relationship between this variable and the extent of social disclosure is hypothesized. The paper draws arguments from literature to identify the role of the legitimacy theory in management accounting research. Apr 10, 2017 islam, muhammad azizul, csr reporting and legitimacy theory. The sme managers were found to have a neutral attitude towards social accounting and they all engaged in practical actions rather than social impact measurement or social reporting. Corporate ethics built on stakeholder theory seek to involve all those. Thus, the results reflect consistency between attitudes towards social accounting and actions, i. Pdf refinements to legitimacy theory in social and. In his new book political standards, karthik ramanna discusses thin markets and how they let bad regulation grow. This chapter explores the notion of organisational legitimacy and emphasises that organisational legitimacy can be considered as a resource upon.
In our conception, legitimacy theory has the role of explaining the behavior of organizations in implementing and developing voluntary social. The institutionalization of corporate social responsibility. Legitimacy theory can be treated as a explanation for voluntary corporate disclosures in annual report. Legitimacy theory in management accounting research teoria.
Argument in this paper, critical theory is offered as a model for lis to critique its claims of social legitimacy. The articles thesis is that sustainable management accounting is a valuable tool of legitimacy for a socially responsible company. We take an indepth case study approach using interviews with both company and community actors, supported by analysis of a nineyear social accounting series. A case study of sme managers attitudes and actions school. Accounting for corporate social responsibilities question 1. Financial accounting theory 4e legitimacy theory legitimacy theory is a widely used theory within legitimacy theory, organisations seek to ensure they operate within the bounds and norms of their respective societies that is, they want their activities to be perceived as legitimate bounds and. Political economy systemsorientated theories 1 legitimacy. This book provides a good guideline as to why and how to choose a particular theory or method to study an organizational phenomenon such as accounting. This chapter explores the notion of organisational legitimacy and emphasises that organisational legitimacy can be considered as a resource upon which many organisations are dependent for.
Legitimacy theory in management accounting research. Corporate legitimacy and environmental reporting deegan and. Researching corporate social responsibility communication. Theoretical perspectives on sustainability reporting. This question led to many interesting facts which will be listed below. In addition, legitimacy theory maintains that larger firms have a greater responsibility than smaller firms. Buy this book on publishers site reprints and permissions. Financial accounting theory 4e legitimacy theory legitimacy theory is a widely used theory within legitimacy theory, organisations. Corporate legitimacy and environmental reporting deegan. Refinements to legitimacy theory in social and environmental accounting. Evidence from china changes in value of the chinese market are much lower than changes in the markets values of other countries legitimacy theory is the theoretical basis in this article.
Legitimacy theory, even if it is used for voluntary disclosure of social and. Legitimacy theory has its foundations in the theoretical paradigm of political economy. Corporate social disclosures csd are primarily voluntary in nature and as such provide fertile. This paper is a thoughtpiece to encourage expanding the framework for selfreflection in library and information science lis. This in turn requires the adoption of a csr strategy affecting. Other theory books, while not strictly dedicated to accounting theory. As social contract plays an important role in legitimacy theory. Domain c is more ambiguous, since reactions of firms to external pressures may be explained on the basis of various established relational theories, including stakeholder theory, legitimacy theory or social network theory, but political csr studies already commonly use institutional theory to explain domain c phenomena e. This article presents a threestage model of how isomorphic mechanisms have shaped corporate social responsibility csr reporting practices over time.
While there is no generally accepted theory for detailing csr disclosure practices, recent research in the csr books has primarily relied on legitimacy theory deegan 2002, p. Application of social contract to legitimacy theory in. Accounting theory 10 stakeholder corporate society. Wikipedia, the free encyclopedia the legitimacy of social accounting. The roles of the social pillar and legitimacy theory in accounting 891 words 4 pages environmental pillar with the global warming and climate change posing imminent threat to the world, companies are now taking measures to reduce the negative impact to the environment caused by their organization. In other terms, it records the social performance of the entity for a subsequent. The role of theory in explaining motivation for corporate social. In our conception, legitimacy theory has the role of explaining the behavior of organizations in implementing and developing voluntary social and. The research question of this article, which drew my attention to explore into the theories of accounting area, is that how significant the impact of corporate social responsibility is associated to the legitimacy theory and stakeholder theory.
Legitimacy theory has come to stress how corporate management will react to community expectations e. In recent years, stakeholder theory and legitimacy theory have been applied primarily to explain why organizations make certain social responsibility disclosures within their annual reports, rather than why they elect to adopt particular financial accounting methods. Critical theory and the legitimation of library and. The legitimacy theory posits that entities are bound by the social contract in. Legitimacy theory is based on the idea that a social contract exists between business and society. A theoretical framework by thomas and lamm 2012, based on ajzens 2005 theory of planned behaviour and suchmans.
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