This topic consists of information about the importance of legitimacy theory in accounting and how it is related and applied in management accounting. Legitimacy theory focuses on the impact of the CSR on the organisation and how this theory helps in determining the organisation sustainability in the external environment.
- What is Legitimacy Theory of Accounting?
- Explain the relevance of legitimacy theory in Accounting.
- How can you explain the application within the legitimacy theory in accounting?
- Explain the importance of CSR by using the legitimacy theory.
Legitimacy is a theory that helps in understanding the behaviour of the organisation in developing, implementing and communicating it's social responsibility policies. It is assumed that the legitimacy theory is completing the social contract which helps in identification of it's objectives. This requires the adoption of a Corporate Social Responsibility strategy that affects many areas of activity, particularly in Management Accounting. According to Suchman, “Legitimacy is a generalised perception or assumption that the action of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions”. Legitimacy theory is an apparatus that assists firms in developing and implementing voluntary environmental and social revelations in order to complete their social contract that allows the identification of their goals and objectives and surviving the disruptive environment.
Legitimacy Theory is very much essential in understanding the organisation's behaviour which helps in developing and executing the social responsibility policies and then evaluating the outcomes. It treats corporate environmental and social performance and revelation of this info which is a way to complete the organisation's social objectives that helps in recognising objectives. The sustainability of this theory is based on the administration practice that links conventional norms and values with today's ethics. Legitimacy is compulsory to act, to give something legal force, to approve. Legitimacy is a unspecialised perception or a premise that company's activities are suitable or coveted in social system of beliefs, norms, values and definitions. The primary assumption of this theory of Legitimacy is the belief that the firm sways the society in which it functions and at that time the company is also socially swayed which is the reason it's working is similar to a type of social declaration which focuses on maintaining and obtaining acceptance of the society. This acceptance of the activities of the firm are certainly crucial in the CSR epoch. The theory of legitimacy is seldom applied to Accounting solutions for internal needs of management. There is very less data about the significance of social responsibility accounting in the view point of management legitimacy. It was told by Burlea and Popa that the theory of Legitimacy can affect the financial and economic performance of the firm as it will render many internal controversies of the multi-dimensional construct of legitimacy, which will sway the passage from legitimacy to illegitimacy and from illegitimacy to legitimacy. Legitimacy theory in accounting is referred as the development of the social responsibilities and it's social responsibilities in order to understand the organisation behaviour. This theory helps organisation in recognising the social responsibilities and focuses on implementing and developing those responsibilities in the organisation. This includes the importance of the Corporate social responsibility(CSR) in the organisation and how the legitimacy theory plays vital role in understanding the accounting management of the organisation. Corporate social responsibility is referred as the contribution of the organisation in the development and the welfare of the society. CSR these days is considered as the important practice in the organisation as it helps in the development of the society in which organisation is operating. Legitimacy theory helps in understanding the information about the organisation regarding the performance of corporate in social and environmental and helps in deciding the way through which organisation can achieve it's goals and objectives and helps in sustaining in the external en