The articles chosen for this essay paper were “Corporate Environmental Reporting: A test of legitimacy theory” by Trevor D. Wilmshurst and Geoffrey R. Frost and “The Stakeholder Theory: Concepts, Evidence and Implications” by Thomas Donaldson and Preston Lee. “The legitimacy of the modern state is founded predominantly on legal authority that is commitment to a code of legal regulations”. Whereas authority denotes a specific position in an established government, the term legitimacy denotes a system of government—wherein government denotes "sphere of influence". (1996), as one possible legitimacy/accountability reporting framework, to communicate with the shareholders and clarify the importance of this relationship. Derived from EVT, the present paper The Legitimacy theory, according to Ness & Mirza (1991), argues that the voluntary disclosure of interpersonal responsibility information can be perceived as a strategy to lessen political costs. Legitimacy, popular acceptance of a government, political regime, or system of governance. According to Weber, beliefs in the legitimacy of a political system go beyond philosophy and they directly contribute to the state system stability and authority. Legitimacy Theory specifies a social contract between the organisation and society. As legitimacy theory asserts that the objective of the organisation is to obtain legitimacy; entities will aim to operate within area, ‘X,’ and to keep this area as large as possible in order to reduce, ‘the legitimacy gap,’ (O’Donovan, 2002, p. 347). Legitimacy gap acknowledges the discrepancy between social norms and organizational behavior. important' conferring publics', is to voluntarily disclose social and environmental information in the corporate annual report. The accounting theories are stakeholder theory, social contract theory, legitimacy theory and signalling theory. Stakeholder Theory vs. Racial and ethnic minority perceptions that the police lack lawfulness and legitimacy, based largely on their interactions with the police, can lead to distrust of the police. Legitimacy Theory As explained earlier, stakeholders are categorized according to their power, urgency and legitimacy. Legitimacy theory is based on the idea that a social contract exists between business and society. The role of legitimacy theory in explaining managers’ decisions is then discussed and it is emphasised that legitimacy theory, as it is currently used, must still be considered to be a relatively under‐developed theory of managerial behaviour. Legitimacy is linked to the public's belief about the police and its willingness to recognize police authority. (PhD thesis), Disclosure of information, professional ethics, environmental auditing, accounting, legitimacy theory, annual reports, environmental disclosures. This occurs when the authority of the state assumes power through democratic or constitutional means. Looking for research materials? theory (Pfeffer and Salancik 1978), legitimacy theory suggests that whenever managers consider the supply of the particular resource is vital to organisational survival, they will pursue strategies to ensure the continued supply of that resource. 5 Normally the legitimacy theory is used to explain social and environmental reports disclosure. Institutional theorists contend that an organization’s legitimacy explains survival. “A school succeeds if everyone agrees it is a school; it fails if no one believes that it is a school regardless of its success in instruction or socialization” (Meyer, Scott, & Deal, 1981, p. 59). The first meaning refers to political philosophy and deals with questions … Legitimacy theory defined that organizations are bounded by social contract in which organization agrees to do social activities and in return they get authority to meet their objectives without any interference. In his sociology, Max Weber put forward a veryinfluential account of legitimacy that excludes any recourse tonormative criteria (Mommsen 1989: 20). Legitimacy theory as an explanation for corporate environmental disclosures. 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. According to Weber, that apolitical regime is legitimate means that its participants havecertain beliefs or faith (“Legitimitätsglaube”) inregard to it: “the basis of every system of authority, andcorrespondingly of ever… 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. Legitimacy is defined by Lindblom (1992) as: "...a condition or status which exists when an entity's value system is congruent with the value system of the larger social system of which the social system of which the entity is a part. A theoretical stance that predicts companies’ behaviour towards managing and maintain the perspectives of key stakeholders though company disclosure. PhD thesis, Victoria University of Technology. It highlights the extent to which corporate social and environmental disclosures are influenced by the boundaries established by the society in order to be appreciated and avoid being penalized by the community in which the company operates. It would also be expected that disclosures would fall off again after the initial reaction suggesting a pragmatic approach to legitimacy theory. All rulers have an explanation for their superiority, an explanation that is commonly accepted but during a crisis can be questioned. By applying Expectation Violation Theory (EVT), which also acknowledges the gap between an individual’s expectation towards non-verbal behavior and actual behavior, the legitimacy gap can be theoretically explained. Legitimacy theory, on the other hand, suggests voluntary disclosures are part of a process of legitimation. His theory of political liberalism delineates the legitimate use of political power in a democracy, and envisions how civic unity might endure despite … In order to best describe and analyze the theory of social contract and its relevance in the world we are living, we Legitimacy Theory: A Case Study For an organization to survive, it must have a clear understanding and ability to negotiate the numerous environmental factors that affect its operations. Much of this investigation was concerned with exploring new areas and attempting to establish relationships between variables identified as important to the development of legitimacy theory. Citing Literature. If legitimacy is interpreted descriptively, it refers topeople’s beliefs about political authority and, sometimes,political obligations. The word legitimacy can be interpreted in either a normative way or a “positive” (see positivism) way. A number of senior management personnel from three large Australian-based companies were the primary source of data in relation to corporate environmental disclosure decision processes. Number of times cited according to CrossRef: 33. LEGITIMACY THEORY Legitimacy theory Legitimacy theory Introduction Legitimacy is referred to a common assumption or perception which is related to action of a business or entity as proper, appropriate desirable under socially developed system of values, norms, definitions and beliefs (Suchman, 1995, p. … ... two concepts that could be explained independently. First, it shows that in terms of epistemology and methodology, addressing the question of political legitimacy calls for being mindful of the specificity of social reality, as contrasted with physical reality. 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 affect its legitimacy. Organizational survival is dependent on its technical efficiency though institutional theory stresses that organization’s legitimacy is also an important factor (Powell & DiMaggio, 1991). These theories were explained and discussed from a corporate social responsibility point of view, this was done by identifying the conditions that best suits these theories. But the legitimacy theory can be used in corporate report, suggested by Woodward et al. The main assumption of legitimacy theory is fulfilling the organization’s social contract, which enables the recognition of its objectives. Copyright © 2014 CRICOS Provider No.00124K (Melbourne) and CRICOS Provider No. One way corporations act to remain legitimate to these Distrust of police has serious consequences. Patten Second, it demonstrates that the centrality of political legitimacy presumes an understanding and analysis of politics as community. Shareholder Theory Economist Milton Friedman, whose work shaped much of 20th-century corporate America, was a believer in the free-market system and no government intervention. In political science, legitimacy is the right and acceptance of an authority, usually a governing law or a regime. Legitimacy theory posits that for a corporation to continue to exist it must act in congruence with society's values and norms (Dowling & Pfeffer, 1975). Critical race theory offers a way of seeing the world that helps people recognize the effects of historical racism in modern American life. legitimacy theory relates to behaviour where companies respond to the demands of divergent interest groups, and act to legitimize their actions. Further, this study explored changing disclosure levels in the context of a number of categories of social and environmental disclosures developed later in this paper. Deegan (2002) explained that both the term “legitimacy” and “legitimating” are different. Search inside this book for more research materials. Since symbols influence citizens in ways that reinforce the legitimacy of courts, the connection between institutional attitudes and acquiescence posited by Legitimacy Theory is both supported and explained. Legitimacy theory explained the relationship between corporate social disclosure and communities as company are bound by the social contract to meet the communities’ expectations and … 02475D (Sydney), Victoria University | Melbourne Australia, 1501 Accounting, Auditing and Accountability, Faculty/School/Research Centre/Department, Thesis Legitimacy theory posits that for a corporation to continue to exist it must act in congruence with society's values and norms legitimacy theory. (Dowling & Pfeffer, 1975). Legitimacy may be based on law, constitution or statute. Nevertheless, it is argued that the theory … It was decided that a field study approach, using mainly interview-based qualitative data, was the optimal research methodology to achieve the objectives of this investigation. To Support Customers in Easily and Affordably Obtaining the Latest Peer-Reviewed Research. Copyright © 1988-2020, IGI Global - All Rights Reserved, Additionally, Enjoy an Additional 5% Pre-Publication Discount on all Forthcoming Reference Books, Learn more in: Analysing the State of Sector-Specific CSR Reporting: Evidence From Pakistan, Learn more in: Corporate Social Responsibility and Financial Information: Theoretical Approaches and Recent Developments, Learn more in: Social Responsibility Reporting in Higher Education Institutions: A Systematic Literature Review, Learn more in: Sustainability Reporting in Transitional Economies. This paper argues that these theoretical perspectives may provide greater insights into managerial motivation for disclosure if they are linked more explicitly to The word legitimacy can be interpreted in either a normative way or a “positive” see... Therefore it is argued that the centrality of political legitimacy presumes an understanding and of... 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