Please enable JavaScript.
Coggle requires JavaScript to display documents.
Legitimacy Theory and Environmental Practices : Short Notes, Can provide…
Legitimacy Theory and Environmental Practices : Short Notes
Introduction
Objectives
To explain the gap of research into framework of legitimacy theory.
To bring some coherence to the framework of legitimacy theory and corporate environment practices.
To give a clear understanding that will help in explaining corporate environmental practices
To reviewing the literature of legitimacy theory on an attempt to identify the necessary characteristic of the legitimacy theory.
• Although the investigation of corporate social and environmental reporting practices has utilized a variety of different theoretical perspectives in an attempt to explain the reason for disclosure, but legitimacy theory is the dominant perspective.
• Legitimacy theory is used to explain disclosures with regard to the environmental and social behavior of companies.
• The importance of corporate social and environmental disclosure is cause by the number of environmental laws and pressure from stakeholders on its performance.
• Firm commit in environmental issues betterment because there is an advantage to form clean public image and limiting corporate environmental liabilities.
• Legitimacy framework will help in the understanding of these practices and procedures.
Perspective of legitimacy
• The concept of legitimacy is important in analyzing the relationships between companies and their environments.
• The scholars define the legitimacy as the appraisal of action in terms of shared or common values in context of the involvement of the action in the social society and a process of organization justification to a peer or superordinate system its right to exist.
• Legitimacy theory derived from the concept of organizational legitimacy which exist when an entity’s values system is congruent with the values system of the large social system of which the entity is a part.
• Legitimacy is achieved by demonstrating that companies' activities are concordant with social values.
• The social contract is explained as unavoidable understanding by any institution or business that operate in a society.
• Therefore an institution must meet the twin test of legitimacy and relevance by demonstrating the society contract request and company is expected to comply with the terms of this contract.
• Organization have no right on the community resources but to allows their existence, society would expect the benefits to exceed the costs to society.
Literature Review
• However the method and data analysis technique that adopted in legitimacy studies are criticized and the issue related can be concluded as follows:
Lack of measure for social and environmental disclosure
• Moreover different ways have constructed to measure community concern or social pressure.
• Utilized media coverage as a proxy for community concern measure
• A number of variables or measure such as company size, profitability, ownership and industry sector.
• The data related to these variables and the ways which employed to measure them are different perhaps unsurprising that different studies have come up with different results.
• Some studies adopted legitimacy perspective to explain companies motivation by focusing on measure for the amount of these disclosure without using designing or suggesting measure for companies motivation behind the disclosure.
• This literature indicate that the results of a number of researches are confirmed and others are insignificant statiscally.
The Data and research method
• Most of the studies has use the content analysis to collect data from annual reports.
• Content analysis is method of coding the text of a piece of writing into various group depending on selected criteria.
• The limitation for this content analysis data collector is:
• Defining and identifying social disclosure data
• Establishing the reliability associated with the coded data or data set
• The coding instrument themselves, assuming that the significance of disclosure can be presented meaningfully by the quantity of disclosure
• Other limitations:
• Use of ex-post content analysis of annual reports and other publish data that only allows for explanation about data that were disclosed.
• Maximized when small sample of disclosures is examined
• Use several measures of reliability to examine the fact that the coded data and the performance of the coding instruments from the coders have met certain standards of reliability.
• Literature on legitimacy theory suggests that communications is one of the strategy of legitimatize.
• Annual report is the major communication medium and data sources for research investigation motivation for environmental disclosure.
• Annual report also serve as the legitimating device and it can be seen as a strategic document that projects selective impressions about the firm’s activities.
• Companies use corporate social reporting as a corporate communication instrument and the main aim is to influence people’s perceptions of the company and design to offer reassurance and to help with feel-good image building.
• The UK financial executives see the most important role of annual reports as being to help to improve the image or reputation of the company and UK companies use the report as a means of advertising their social responsibility.
Environmental disclosure may give companies the opportunity to gain many benefits such as
• In terms of activities threats, industry members sought to address this threat by increasing environmental disclosure to retain legitimacy.
• One way to maintain or regain their legitimacy in the eyes of society
• Media attention are significantly associated with companies with higher levels of annual reports environmental disclosure.
• Use to alter public perception about the legitimacy of the company
• Competitive advantage and many more
General steps to suggest a conceptual framework of legitimacy theory
The Concept of legitimacy theory
Can be regarded as a conceptual framework based on the existence of social and exchangeable relationship
Aims to explain why company may engage in particular social and environmental disclosure
How to do as well as what is impact environmental
Objectives of legitimacy theory
Explain companies motivation for social and environmental disclosure
May help in predicting management responses to particular events or crisis
Explicit hypotheses
A company's survival
Depends on obtaining and maintaining social approval
Company should accept accountability for the social and environmental implicatio
Can't engage with bad public event
Impact on the public's perception
Ultimate survival depend on developing and maintaining a recognizable image and favorable reputation
Company attempt to offset or mitigate the negative impact of any bad incident
Focusing on strong points (favorable information)
Companies is reluctant to provide any information within their annual report about any negative environmental implication
Study findings indicate a positive relationship between reputation for social responsibility and profitability
Companies provide environmental information which favorable to their corporate image
Company may gain benefits when they have good image
Self protection
Companies publicise their social and environmental responsibility towards society to legitimized their operation as mean of self protection
This protection helps a company to emphasis survival
Improve their future to gain the acceptances of their existences
Testing the hypotheses
Theory must be capable of being refute
That it is the propositions advance from the theory must be testable against evidence or phenomena
Empirical testing of hypotheses is beyond of this study
Suggesting principle of legitimacy theory
Regarded as as a set of idea, which makes companies behave in particular way or rule which explain the way of something such as the phenomena of voluntary social and environmental disclosure
Self -laudatory claims
The lobby group were users of corporate social disclosure and annual reports
Survey on individual investor need these information and found that 82% investor wanted to see that information
These result indicate investor interest and information requirement are more heterogeneous than is often assume
Providing that environmental information to interested party can provide them with source of power to drive changes to corporate behavior
However corporate social and environmental reports are the most effective way to improve the image or reputation of a company by making self-laudatory claims
The benefit
motivation for environmental disclosure might include the desire to comply with legal requirement
Business opportunities arise from good environmental practice
Marketing benefits arising from reputation towards environmental protection
Conclusion
• Legitimacy theory have been confirmed as an explanatory factor for voluntary social disclosure however an analysis by Guthrie and Praker (1989) has fail to support legitimacy theory as an explanation for corporate social reporting.
• Studies report that environmental disclosure strategies of management appeared to be tied to the extent of media attention devoted to environmental issues.
• Annual report disclosure are used as a strategy to change perceptions about a company.
• Literature indicate that changes in social norms and values as well a public pressure are the reasons for the need of organizational legitimation.
• A number of researches are theoretical when describing what is being disclosed there has been much debate about how to measure and classifying social and environmental disclosure
Can provide hypotheses as primarily or underlying
SETUPATHY RATHA KRISHNAN
Article 9 : Legitimacy Theory and Environmental Practices : Short Notes