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. Friedrichs definition is almost identical with two other common, modern social science definitions of legitimacy. 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. 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. Figure 1 from refinements to legitimacy theory in social.
These examples illustrate the raising awareness of accounting and auditing for citizenship. Legitimacy legitimacy theory looks at how organisations behave to maintain their social contract. Some thoughts on legitimacy theory in social and environmental. Legitimacy theory is one of the most discussed theories to explain the phenomenon of voluntary social and environmental disclosures in corporate communication. 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. 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. Lipsets, for whom legitimacy involves the belief that the existing political institutions are the most appropriate ones for the society political man, p. Islam, muhammad azizul, csr reporting and legitimacy theory. 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. 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. If there is a formal constitutional basis, we can see legitimacy. Therefore, legitimacy theory plays the role of a justifiable factor for the.
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. With respect to political theory, a state is perceived as being legitimate when its citizens treat it as properly holding and exercising political power. A variable but significant pattern of social reporting is identified and compared with an earlier study of social reporting by us steel. 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. Aug 08, 2015 financial accounting theory craig deegan 4th edition 4e. Legitimacy theory specifies a social contract between the organisation and society. Legitimacy theory is derived from the concept of organisational legitimacy, which has been defined by dowling and pfeffer 1975, p. Accounting, auditing and accountability journal, 15 3, 312343.
However, these theories discourse the cause and consequence of variables, such as the formation of board structure, audit committee, independent. We take an indepth case study approach using interviews with both company and community actors, supported by analysis of a nineyear social accounting series. The theory of kingship is a political and religious doctrine of royal and political legitimacy. Refinements to legitimacy theory in social and environmental accounting.
The global financial crisis and the instability of the financial markets put pressure on the organisations to re. Similarly, stakeholder theory is a theory which is used to explain the phenomena of motivation for corporate social disclosures. 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. 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. Conceptualizing legitimacy as a thing an asset or characteristic to be gained, increased and lost clearly emphasizes some attributes of a phenomenon at the. Corporate social disclosures csd are primarily voluntary in nature and as such provide fertile. 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. In his new book political standards, karthik ramanna discusses thin markets and how they let bad regulation grow. Legitimacy theory, even if it is used for voluntary disclosure of social and. In our conception, legitimacy theory has the role of explaining the behavior of organizations in implementing and developing voluntary social and. 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. Social values can be linked with economic actions with the help of accounting.
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. Consistent with the notion of legitimacy theory, companies seek to gain, maintain or repair their legitimacy by using social and environmental reporting. The main assumption of legitimacy theory is fulfilling the organizations social contract, which enables the recognition of its objectives. The role of theory in explaining motivation for corporate. Refinements to legitimacy theory in social and environmental accounting matthew v.
The research indicates that managers recognise the potential. Thus, the results reflect consistency between attitudes towards social accounting and actions, i. An examination of the corporate social and environmental disclosures bhp from 19831997. 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. This chapter explores the notion of organisational legitimacy and emphasises that organisational legitimacy can be considered as a resource upon. The conventional accounting framework, with its emphasis on decisionusefulness, has largely proved unsatisfactory in explaining this practice, as have various economic theories. Tilling flinders university, south australia the author wishes to acknowledge the valuable support provided by the cpa australia in funding this research through their research grant scheme. Organisational legitimacy ser and discourse september 09. The study provides evidence to show that the 2002 special issue was significant within the context of aaaj, and also within the context of the evolution of the social and environmental accounting literature. Legitimacy theory may provide useful insights for corporate social and.
Financial accounting theory craig deegan 4th edition 4e. Moral right to rule locke and consent social contrast theory we consent to be governed. From legitimacy to accounting and auditing for citizenship. Pdf refinements to legitimacy theory in social and. 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.
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 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. This paper uses a legitimacy theory framework to explain why companies engage in this type of voluntary reporting. The results of this study fail to confirm legitimacy theory as the primary explanation for social reporting in the australian case. What is a social contract and how does it relate to organisational legitimacy.
As given in the assignment, it is stated that organizations sometimes voluntarily provide information in their annual reports which is not mandatory. Legitimacy theory legitimacy theory has its foundations in the theoretical paradigm of political economy. Legitimacy theory is based on the idea that a social contract exists between business and society. This in turn requires the adoption of a csr strategy affecting various areas of activity, including in particular management accounting. Prior applications of legitimacy theory are extended to the examination of csr disclosure by focusing on a. Figure 1 from refinements to legitimacy theory in social and. 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. 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 has be come one of the most cited theories within the social and environmental accounting area. Some thoughts on future research agenda april 6, 2017.
The legitimacy of accountants participation in social and. A social contract is used to describe how business interacts with society. Pdf legitimacy theory in management accounting research. How to survive alone in the wilderness for 1 week eastern woodlands duration. Social disclosure, legitimacy theory and the role of the. Social accounting and the cocreation of corporate legitimacy. 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.
Links to power and authority by transforming the former into the latter turns naked power into authority. 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. Download limit exceeded you have exceeded your daily download allowance. How might institutional theory explain accounting disclosures.
The legitimacy theory and csr disclosure accounting essay. 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. In our conception, legitimacy theory has the role of explaining the behavior of organizations in. Stock markets reaction to disclosure of environmental violations. Legitimacy theory is a political theory and has implications on several business activities including accounting. 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. 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. Dec 28, 2016 an examination of the corporate social and environmental disclosures bhp from 19831997. However, it also highlights possible policy implications and several possible future research issues. Apr 10, 2017 islam, muhammad azizul, csr reporting and legitimacy theory. 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.
151 665 1023 1349 630 1523 880 152 971 714 679 1368 1303 475 1344 1431 1054 771 1452 120 712 516 674 1396 9 1327 795 96 939 1219 239 910 342 1422 1034 663 1230 1046 118 632 1324 625 403 1057