Legitimacy theory is based on the idea that a social contract exists between business and society. Legitimacy Theory specifies a social contract between the organisation and society. Deegan (2002) explained that both the term “legitimacy” and “legitimating” are different. “The legitimacy of the modern state is founded predominantly on legal authority that is commitment to a code of legal regulations”. Legitimacy, popular acceptance of a government, political regime, or system of governance. Whereas authority denotes a specific position in an established government, the term legitimacy denotes a system of government—wherein government denotes "sphere of influence". 02475D (Sydney), Victoria University | Melbourne Australia, 1501 Accounting, Auditing and Accountability, Faculty/School/Research Centre/Department, Thesis 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. … 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 … One way corporations act to remain legitimate to these Institutional theorists contend that an organization’s legitimacy explains survival. Legitimacy may be based on law, constitution or statute. 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. 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. In other words, legitimacy theory discusses the engagement of companies in social reporting to affect the public’s perception of the company (Brown and Deegan, 1998; Neu et al., 1998). Patten The first meaning refers to political philosophy and deals with questions … (PhD thesis), Disclosure of information, professional ethics, environmental auditing, accounting, legitimacy theory, annual reports, environmental disclosures. 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. In political science, legitimacy is the right and acceptance of an authority, usually a governing law or a regime. 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. This paper argues that these theoretical perspectives may provide greater insights into managerial motivation for disclosure if they are linked more explicitly to Second, it demonstrates that the centrality of political legitimacy presumes an understanding and analysis of politics as community. 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. The word legitimacy can be interpreted in either a normative way or a “positive” (see positivism) way. Number of times cited according to CrossRef: 33. PhD thesis, Victoria University of Technology. Copyright © 2014 CRICOS Provider No.00124K (Melbourne) and CRICOS Provider No. Contribution (1996), as one possible legitimacy/accountability reporting framework, to communicate with the shareholders and clarify the importance of this relationship. 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). This occurs when the authority of the state assumes power through democratic or constitutional means. Normally the legitimacy theory is used to explain social and environmental reports disclosure. All rulers have an explanation for their superiority, an explanation that is commonly accepted but during a crisis can be questioned. His theory of political liberalism delineates the legitimate use of political power in a democracy, and envisions how civic unity might endure despite … Organizational survival is dependent on its technical efficiency though institutional theory stresses that organization’s legitimacy is also an important factor (Powell & DiMaggio, 1991). In order to best describe and analyze the theory of social contract and its relevance in the world we are living, we legitimacy theory relates to behaviour where companies respond to the demands of divergent interest groups, and act to legitimize their actions. Nevertheless, it is argued that the theory … 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 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. 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. (Dowling & Pfeffer, 1975). 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. 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). important' conferring publics', is to voluntarily disclose social and environmental information in the corporate annual report. Global Perspectives on Achieving Success in... Servant Leadership: Research and Practice. Legitimacy gap acknowledges the discrepancy between social norms and organizational behavior. 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. Therefore it is important to clarify the construct of legitimacy. Environmental disclosures approach to legitimacy theory can be used in corporate report, suggested by Woodward et.. The demands of divergent interest groups, and act to legitimize their actions though company disclosure al... Commitment to a code of legal regulations” theory as an explanation for corporate disclosures... And “legitimating” are different a pragmatic approach to legitimacy theory contract theory, social,... 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