In terms of the future direction of the applicability of the legitimacy theory, there appears to be a number of subject areas or legitimacy threatening incidents to be researched within the context of developing nations. Financial accounting theory craig deegan 4th edition 4e. The legitimacy theory and csr disclosure accounting essay. The conventional accounting framework, with its emphasis on decisionusefulness, has largely proved unsatisfactory in explaining this practice, as have various economic theories. 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 their survival. Legitimacy theory is derived from the concept of organisational legitimacy, which has been defined by dowling and pfeffer 1975, p. Social accounting and the cocreation of corporate legitimacy. An examination of the corporate social and environmental disclosures bhp from 19831997. Legitimacy theory is one of the most discussed theories to explain the phenomenon of voluntary social and environmental disclosures in corporate communication.
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, these theories discourse the cause and consequence of variables, such as the formation of board structure, audit committee, independent. Refinements to legitimacy theory in social and environmental accounting matthew v. The description of the history of the development of legitimacy theory, and of the theorys subsequent application, provides a solid impetus for future refinements to. Pdf refinements to legitimacy theory in social and. This article presents the findings of an analysis of the role of internal social responsibility accounting sustainable management accounting in the light of legitimacy theory. First, we unpack in some detail the way in which social accounting builds local legitimacy for the reporting firm, responding to the call in unerman and chapman 2014. From legitimacy to accounting and auditing for citizenship.
These examples illustrate the raising awareness of accounting and auditing for citizenship. 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 chapter explores the notion of organisational legitimacy and emphasises that organisational legitimacy can be considered as a resource upon. If there is a formal constitutional basis, we can see legitimacy. The results of this study fail to confirm legitimacy theory as the primary explanation for social reporting in the australian case. Lipsets, for whom legitimacy involves the belief that the existing political institutions are the most appropriate ones for the society political man, p.
The global financial crisis and the instability of the financial markets put pressure on the organisations to re. Social values can be linked with economic actions with the help of accounting. The legitimacy of accountants participation in social and ethical accounting, auditing and reporting brendan odwyer introduction the recent resurgence of interest in social and ethical accounting, auditing and reporting seaar, particularly in the uk, is now well documented swift and pritchard 2000. The legitimacy theory captures this sentiment by acting as a mechanism that provides support for organizations when developing and implementing csr. In our conception, legitimacy theory has the role of explaining the behavior of organizations in. However, it also highlights possible policy implications and several possible future research issues. A social contract is used to describe how business interacts with society. 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 authorprofessor james guthriediscipline of accountingthe university of. Refinements to legitimacy theory in social and environmental accounting. 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. While the term exists beyond the political realm, as it encompasses sociology, philosophy, and psychology, legitimacy is often referred to with respect to actors, institutions, and the political orders they constitute. Links to power and authority by transforming the former into the latter turns naked power into authority. This in turn requires the adoption of a csr strategy affecting various areas of activity, including in particular management accounting.
As given in the assignment, it is stated that organizations sometimes voluntarily provide information in their annual reports which is not mandatory. 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. Social disclosure, legitimacy theory and the role of the. Corporate social disclosures csd are primarily voluntary in nature and as such provide fertile.
Figure 1 from refinements to legitimacy theory in social. The legitimacy of accountants participation in social and. Feb 27, 2012 a variable but significant pattern of social reporting is identified and compared with an earlier study of social reporting by us steel. Figure 1 from refinements to legitimacy theory in social and. How to survive alone in the wilderness for 1 week eastern woodlands duration. Some thoughts on future research agenda april 6, 2017. Similarly, stakeholder theory is a theory which is used to explain the phenomena of motivation for corporate social disclosures. 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.
The research indicates that managers recognise the potential. Concepts, evidence and implications by thomas donaldson and preston lee. Legitimacy theory, even if it is used for voluntary disclosure of social and. The political economy paradigm suggests that the economic sphere may not be deliberated in separation from the political, social and institutional framework in which the economy is positioned gray et al. Download limit exceeded you have exceeded your daily download allowance. An aspect of legitimacy theory, investigated in this research, is that in order to continue to exist a corporation will act to remain legitimate in the eyes of whom it considers is able to. Legitimacy legitimacy theory looks at how organisations behave to maintain their social contract. Stakeholder determination and reporting a thesis submitted in fulfillment of the requirements for the degree of doctor of philosophy mr kevin russell adams master of economics university of new england bachelor of business in accountancy rmit school of accounting college of business rmit university march 2011. This paper uses a legitimacy theory framework to explain why companies engage in this type of voluntary reporting. 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. Apr 10, 2017 islam, muhammad azizul, csr reporting and legitimacy theory. Some thoughts on legitimacy theory in social and environmental. How might institutional theory explain accounting disclosures.
Conceptualizing legitimacy as a thing an asset or characteristic to be gained, increased and lost clearly emphasizes some attributes of a phenomenon at the. Indeed, it is probable that legitimacy theory is the most widely used theory to explain environmental and social disclosures campbell, craven and shrives, 2003, p. Legitimacy theory has also been employed to study the adoption of ethics programs friedberg, 1998. The aim of this study is to explore the possibility of using the legitimacy theory as a plausible explanation for csr reporting practices by organizations within the context of developing nations. Stock markets reaction to disclosure of environmental violations. The purpose of this dissertation is to fill a gap in the literature on internal audit and legitimacy theory by examining the nature of internal audits oversight of governance systems and its.
Aug 08, 2015 financial accounting theory craig deegan 4th edition 4e. Therefore, legitimacy theory plays the role of a justifiable factor for the. Legitimacy theory has be come one of the most cited theories within the social and environmental accounting area. Moral right to rule locke and consent social contrast theory we consent to be governed. The relationship between legitimacy and resources attracted and still attracts the attentions of social and accounting researchers lindblom 1994. Based on deliberations on the legitimacy of csr from the perspective of stakeholder and legitimacy theory on the one hand and the more critical view of milton friedman and michael jenson on the other hand, this paper analyses how major energy companies legitimise their csr activities in their annual reports and their csr reports.
What is a social contract and how does it relate to organisational legitimacy. 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. 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 authorprofessor james guthriediscipline of. Friedrichs definition is almost identical with two other common, modern social science definitions of legitimacy. Accounting, auditing and accountability journal, 15 3, 312343. The potential of discourse analysis dr helen tregidga faculty of business and law auckland university of technology private bag 92006 auckland 1142 new zealand tel. With respect to political theory, a state is perceived as being legitimate when its citizens treat it as properly holding and exercising political power. The role of theory in explaining motivation for corporate.
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. A variable but significant pattern of social reporting is identified and compared with an earlier study of social reporting by us steel. Legitimacy theory is a political theory and has implications on several business activities including accounting. Legitimacy theory specifies a social contract between the organisation and society. Islam, muhammad azizul, csr reporting and legitimacy theory. In todays era, application of social contract to legitimacy theory in accounting plays an important role as it provide satisfaction that organizations actions are appropriate and desirable without harming the interest of the society.
Prior applications of legitimacy theory are extended to the examination of csr disclosure by focusing on a. The theory of kingship is a political and religious doctrine of royal and political legitimacy. In our conception, legitimacy theory has the role of explaining the behavior of organizations in implementing and developing voluntary social and. We take an indepth case study approach using interviews with both company and community actors, supported by analysis of a nineyear social accounting series. In his new book political standards, karthik ramanna discusses thin markets and how they let bad regulation grow. 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. Thus, the results reflect consistency between attitudes towards social accounting and actions, i. Pdf legitimacy theory in management accounting research. The main assumption of legitimacy theory is fulfilling the organizations social contract, which enables the recognition of its objectives. Dec 28, 2016 an examination of the corporate social and environmental disclosures bhp from 19831997.
336 1538 931 348 31 1423 576 695 546 1015 575 1571 201 124 188 1589 351 1348 1389 131 466 1014 1252 929 895 1218 1339 889 1043