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. 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. How might institutional theory explain accounting disclosures. We take an indepth case study approach using interviews with both company and community actors, supported by analysis of a nineyear social accounting series. If there is a formal constitutional basis, we can see legitimacy. Legitimacy theory is a political theory and has implications on several business activities including accounting. Consistent with the notion of legitimacy theory, companies seek to gain, maintain or repair their legitimacy by using social and environmental reporting. This in turn requires the adoption of a csr strategy affecting various areas of activity, including in particular management accounting. 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. Social values can be linked with economic actions with the help of accounting. Legitimacy theory may provide useful insights for corporate social and.
A social contract is used to describe how business interacts with society. Refinements to legitimacy theory in social and environmental accounting matthew v. Stock markets reaction to disclosure of environmental violations. Thus, the results reflect consistency between attitudes towards social accounting and actions, i. The conventional accounting framework, with its emphasis on decisionusefulness, has largely proved unsatisfactory in explaining this practice, as have various economic theories. Legitimacy theory has be come one of the most cited theories within the social and environmental accounting area. 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. The research indicates that managers recognise the potential. Links to power and authority by transforming the former into the latter turns naked power into authority. In our conception, legitimacy theory has the role of explaining the behavior of organizations in implementing and developing voluntary social and. The legitimacy of accountants participation in social and. Some thoughts on legitimacy theory in social and environmental.
Moral right to rule locke and consent social contrast theory we consent to be governed. Conceptualizing legitimacy as a thing an asset or characteristic to be gained, increased and lost clearly emphasizes some attributes of a phenomenon at the. Accounting, auditing and accountability journal, 15 3, 312343. Legitimacy theory 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. Legitimacy theory has also been employed to study the adoption of ethics programs friedberg, 1998. 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. How to survive alone in the wilderness for 1 week eastern woodlands duration. The global financial crisis and the instability of the financial markets put pressure on the organisations to re. 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 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.
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. Aug 08, 2015 financial accounting theory craig deegan 4th edition 4e. The relationship between legitimacy and resources attracted and still attracts the attentions of social and accounting researchers lindblom 1994. 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. 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. Legitimacy theory, even if it is used for voluntary disclosure of social and. Apr 10, 2017 islam, muhammad azizul, csr reporting and legitimacy theory.
Legitimacy legitimacy theory looks at how organisations behave to maintain their social contract. 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. Islam, muhammad azizul, csr reporting and legitimacy theory. 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. The legitimacy theory captures this sentiment by acting as a mechanism that provides support for organizations when developing and implementing csr. Social disclosure, legitimacy theory and the role of the. 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.
Friedrichs definition is almost identical with two other common, modern social science definitions of legitimacy. 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. In his new book political standards, karthik ramanna discusses thin markets and how they let bad regulation grow. Some thoughts on future research agenda april 6, 2017.
With respect to political theory, a state is perceived as being legitimate when its citizens treat it as properly holding and exercising political power. However, these theories discourse the cause and consequence of variables, such as the formation of board structure, audit committee, independent. Download limit exceeded you have exceeded your daily download allowance. 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. 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. The legitimacy theory and csr disclosure accounting essay. 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. Pdf refinements to legitimacy theory in social and.
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. 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. Organisational legitimacy ser and discourse september 09. Legitimacy theory is derived from the concept of organisational legitimacy, which has been defined by dowling and pfeffer 1975, p. Figure 1 from refinements to legitimacy theory in social and. These examples illustrate the raising awareness of accounting and auditing for citizenship. 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. Pdf legitimacy theory in management accounting research. A variable but significant pattern of social reporting is identified and compared with an earlier study of social reporting by us steel. An examination of the corporate social and environmental disclosures bhp from 19831997. As given in the assignment, it is stated that organizations sometimes voluntarily provide information in their annual reports which is not mandatory. 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. Legitimacy theory is one of the most discussed theories to explain the phenomenon of voluntary social and environmental disclosures in corporate communication.
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. Concepts, evidence and implications by thomas donaldson and preston lee. 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. Lipsets, for whom legitimacy involves the belief that the existing political institutions are the most appropriate ones for the society political man, p. Legitimacy theory specifies a social contract between the organisation and society. 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. 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. The results of this study fail to confirm legitimacy theory as the primary explanation for social reporting in the australian case. The theory of kingship is a political and religious doctrine of royal and political legitimacy. 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. Figure 1 from refinements to legitimacy theory in social.
Similarly, stakeholder theory is a theory which is used to explain the phenomena of motivation for corporate social disclosures. Legitimacy theory is based on the idea that a social contract exists between business and society. 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. Prior applications of legitimacy theory are extended to the examination of csr disclosure by focusing on a.
However, it also highlights possible policy implications and several possible future research issues. The main assumption of legitimacy theory is fulfilling the organizations social contract, which enables the recognition of its objectives. 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. What is a social contract and how does it relate to organisational legitimacy. Social accounting and the cocreation of corporate 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.
1008 459 1112 943 538 360 828 1247 1321 1359 673 258 759 292 881 367 51 1372 1463 1193 1477 462 648 1097 1476 1169 403 1464 1392