Legitimacy Theory Essay

au whereforeticity is a generalised perception or precondition that the actions of an entity argon desirable, proper, or appropriate inside al just about fountainhead-disposedly constructed brass of norms, determine, beliefs, and definitions (Suchman, 1995, p. 574, emphasis in original) genuineness possibility has become star of the much or less(prenominal) cited theories within the societal and surroundal history ara. Yet in that respect cadaver deep scepticism amongst m two researchers that it offers any real insight into the instinctive manifestations of mints. This sketch paper outlines responses to dickens specific concerns set in the belles-lettres. It provide leveltually skeletal frame part of a much big project accosting a run of replications associated with authenticity theory.First, the paper brings some of the more unfermented-made ontogenys in the get laidment and ethical literature on genuineness and corporations to the accounting t able. Second, there ar contri thoions to the theory that corroborate already been made by accounting researchers that are yet to be fully recognised. The designer believes that authenticity theory does offer a powerful mechanism for instinct willing social and environmental disclosures made by corporations, and that this understanding would provide a vehicle for engaging in critical humankind debate.The trouble for authenticity theory in contributing to our understanding of accounting disclosure specifically, and as a theory in general, is that the term has on occasion been utilise fairly loosely. This is not a problem of the theory itself, and the observation could be equally applied to a range of theories in a range of disciplines (see for example Caudill (1997) on the abuse of Evolutionary speculation).Failure to adequately specify the theory has been identified by Suchman (1995, p. 572, emphasis in original), who observed that many a(prenominal) researchers practic e the term genuineness, but a couple of(prenominal) define it. Hybels (1995, p. 241) comments that As the tradesmen sic of social erudition have groped to build elaborate conjectural structures with which to shelter their careers anddisciplines, legitimation has been a covert mans hammer. This paper begins to address these issues. no One theory but Two (at least)An important issue which unavoidably to be acknowledged is that there are in fact two field classes of authenticity theory. These are graphically presented in Figure 1 below. The macro-theory of legitimation, kn cause as institutional authenticityTheory, deals with how judicature activityal structures as a whole (capitalism for example, or government) have gained word meaning from society at large. Within this tradition, genuineness and institutionalization are virtually synonymous. Both phenomena charge organizations primarily by making them search natural and meaningful (Suchman, 1995, p. 576, emphasis i n original).In price of accounting research, precondition the snip frames involved and questions loosely being considered, the current business environment, including the capitalist structure, elected government, etc. are generally taken as a given, a placid stage setting within which the research is situated. This assumption would, however, need to be carefully considered for a longitudinal direct of any authoritative length. Figure 1 Layers of Legitimacy TheoryINSTITUTIONAL LEVELGOVERNMENT devotion SOCIETY CAPITALISMORGANISATIONAL LEVEL(IN THIS baptistery COMPANY LTD BY SHARE)Establishment falsification file name extension MaintenanceFrom the Moral to the measurableOne layer down from the institutional Level is what in Figure 1 is called the Organisational Level (sometimes referred to as Strategic Legitimacy Theory). Underlying organizational authenticity is a process, legitimation, by which an organization seeks approval (or avoidance of sanction) from groups in s ociety (Kaplan and Ruland, 1991, p. 370).It is from this levelthat most accounting research plys to draw its understanding of genuineness. Mathews (1993, p. 350) provides a good definition of legitimacy at this level Organisations seek to con incorruptible congruence between the social nurtures associated with or implied by their activities and the norms of acceptable behavior in the larger social system in which they are a part. In so far as these two lever systems are congruent we poop speak of musical arrangemental legitimacy.When an actual or capability disparity exists between the two value systems there will exist a threat to organisational legitimacy. At its simplest, within the Organisational visualise legitimacy is an operational resource that organizations bow out often competitively from their cultural environments and that they employ in pursuit of their goals (Suchman, 1995, p. 575 6, emphasis in original). Legitimacy, just like m unityy, is a resource a business requires in tell to operate. Certain actions and events increase that legitimacy, and new(prenominal)s decrease it. low-spirited legitimacy will have specially dire consequences for an organisation, which could ultimately give to the forfeit of their right to operate.Although we send packing describe a firm as being legalise, and regard of amounts of legitimacy, it becomes a very subjective compute to try and straight off measure legitimacy. Although it has cover consequences, legitimacy itself is an pussyfoot concept, given frankness by multiple actors in the social environment. For a researcher to try and directly establish, or even rank, the legitimacy of assorted organisations would seem to be a necessarily subjective undertaking, preferencing the researchers own stances. As Hybels (1995, p. 243) argues, I reject this view because it is ground on a conflation of the roles of reviewer and participant in social learning.As an alternative, rather than ne rve-racking to subjectively measure a firms legitimacy directly it post instead be inferred from the fact that being legitimate enables organizations to attract resources necessary for survival (e.g., unusual materials, patronage, political approval) (Hearit, 1995, p. 2). Hybels (1995, p. 243) develops this in some time finisednessLegitimacy often has been conceptualized as exactly one of many resources that organizations must(prenominal) buzz off from their environments. hardly rather than viewing legitimacy as something that is ex transportd among institutions, legitimacy is bust conceived as both part of the background for ex switch over anda by- fruit of exchange. Legitimacy itself has no material form. It exists only as a typic representation of the embodied evaluation of an institution, as evidenced to both observers and participants perhaps most convincingly by the pay heed of resources. resources must have symbolic import to function as value in social exchange . But legitimacy is a higher-order representation of that symbolism a representation of representations. Hybels (1995, p. 243) argues that good models in legitimacy theory must analyze the relevant stakeholders, and how Each influences the flow of resources crucial to the organizations establishment, growth, and survival, any through direct control or by the communication of good will. He identifies (p. 244) four critical organisational stakeholders, from each one of which control a number of resources.These are summa burn downd in circuit board 1 below. Table 1 Critical Organisational Stakeholder STAKEHOLDER RESOURCES CONTROLLED Contracts, grants, legislation, regulation, tax ( no.e that the (1) The nation destination three of these could be both a negative or overbearing depending on the implementation) (2) The public (3) The financial community of interests (4) The media Few direct resources however, evict well influence the closes of stakeholders (2) & (3) (if not (1) ) Patronage (as customer), donjon (as community interest), labour InvestmentThe last of these has received considerable attention. The power of the media has been famed by a number of researchers, including sabot (2002, p. 153), who states that while increase media attention potty certainly lead to the potential for increase pressures from any of the three sources dissatisfaction of public new or proposed political action increased regulative oversight, increases in pressure coffin nailalso arise, particularly with respect to regulative oversight. See also Deegan et al. (2000, 2002). Companies try to manage their legitimacy because it helps to ensure the continued influx of capital, labour and customers necessary for viabilityIt also forestalls regulatory activities by the state that might come in in the absence of legitimacy and pre-empts result boycotts or other disruptive actions by external parties By mitigating these potential problems, organizational legitimacy provid es managers with a degree of autonomy to decide how and where business will be conducted (Neuet al., 1998, p. 265).Researchers need to move a guidance from trying to directly assess legitimacy, and instead focalise on measuring it in terms of the resources relevant stakeholders provide. Rather than engage in the further development of entirely abstract constructions of the legitimation process researchers should investigate the flow of resources from organizational constituencies as well as the pattern and content of communications (Hybels, 1995, p. 244).But Wait at that places to a greater extentAs shown in Figure 1 Organisational Legitimacy Theory suggests that a firm whitethorn be in one of four chassiss with regard to its legitimacy. These builds are defined below, some examples of industries/firms that might be considered to be direct in each of these somas are included (further research needs to be undertaken in this playing area). Establishing Legitimacy. (E.g. Stem C ell based bio-tech).This first phase represents the early stages of a firms development and tends to wheel around issues of competence, particularly financial, but the organisation must be aware of socially constructed standards of quality and desirability as well as perform in unanimity with accepted standards of professionalism (Hearit, 1995, p. 2). Maintaining Legitimacy. (The major(ip)ity of organisations). This is the phase that most firms would generally expect to be operating in, where their activities include (1) ongoing role capital punishment and symbolic assurances that all is well, and (2) attempts to anticipate and keep back or forestall potential challenges to legitimacy (Ashford and Gibbs, 1990, p. 183). save the maintenance of legitimacy is not aseasy as it may at first appear. Legitimacy is a dynamic construct. Community expectations are not considered static, but rather, change across time thereby requiring organisations to be responsive to the environment in which they operate. An organisation could, accepting this view, lapse its legitimacy even if it has not changed its activities from activities which were antecedently deemed acceptable (legitimate) (Deegan et al., 2002, p. 319 20). Extending Legitimacy. (E.g. Alternative Health Providers). There may come a point where an organisation enters new markets or changes the instruction it relates to its current market.This fuck give rise to a need to extendlegitimacy which is apt to be intense and proactive as management attempts to win the reliance and support of wary potential constituents (Ashford and Gibbs, 1990, p. 180). argue Legitimacy. (E.g. Uranium Mining). Legitimacy may be threatened by an hazard (internal or external), and therefore require vindication. Legitimation activities tend to be intense and reactive as management attempts to counter the threat (Ashford and Gibbs, 1990, p. 183). still barring a major misadventure it is believably in the Western capitalist sy stem that almost every corporation will regularly need to make its legitimacy, by the mere fact that corporations must fulfil both a competence and community requirement to realize legitimacy Satisfaction of stockholder interests often occurs at the expense of community concerns (e.g., the despoiling of the environment, the use of labour) while, conversely, office to the larger community often occurs at the expense of the stockholder (Hearit, 1995, p. 3).It is this last phase that has tended to be the main focus of accounting researchers. It also provides us with the clearest opportunity to examine the crucial link between legitimacy and resources. Lindblom (1994), a key paper cited by many cordial and Environmental accounting researchers, also seems relevant specifically to this phase only. An example of work in this area is Deegan et al.s (2000) study of five major incidents (including the Exxon Valdez oil spill and the Bhopal Disaster) which provided a context to examine the annual incubates of related (in industrial terms) Australian firms to see if there had been a significant change in their social or environmental reporting.They concluded The results of this study are consistent with legitimacy theory and show that companies do appear to change their disclosure policiesaround the time of major company and attention related social events. These results highlight the strategic nature of conscious social disclosures and are consistent with a view that management considers that annual report social disclosures are a multipurpose device to reduce the effects upon a corporation of events that are perceived to be unfavourable to a corporations image (Deegan et al., 2000, p. 127).The Diagnosis Needs subtletyThis is where the traditional legitimacy model stops. and my ownresearch, into the tobacco industry, Tilling (2004), and that of other researchers, including experimental research undertaken by ODonovan (2002), suggest a further development of t he Organisational Legitimacy Level, as depicted in Figure 2 below. Added to the model is the surmise that a firm may not successfully (or may be uneffective to) defend the threat to its legitimacy and really start to lose legitimacy. Figure 2 Refinement of the Organisational Level of Legitimacy TheoryEstablishment LossDefence Disestablishment ExtensionMaintenanceIn this model the defence phase is usually entered by an organisation after some form of one-off incident or accident which threatens its legitimacy. This phase could be characterised as being acute, it can be serious, some times even fatal, but usually, with proper management, the organisation can maintain, or at least recover, its legitimacy. However should there be an ongoing serial of events,indicative of a systemic issue, e.g. the thermonuclear power industry, or a wizard event with permanent consequences which cannot be effectively managed, e.g. realisation that the organisations product is not safe such as the tobacco industry, an organisation is likely to have its legitimacy eroded over a period of time (the loss phase), which can be characterised as chronic. The issue can be difficult to manage, and generally leads to declining legitimacy, however the loss may be managed and slowed over a long period of time, or significant change could lead to reestablishment of legitimacy.The loss phase is most likely to be preceded by sustained media and nongovernmental organization scrutiny, and accompanied by increasing government regulation, monitoring and possibly taxation. Within this phase there are likely to be periods where the company will increase its voluntary social and environmental disclosure in an effort to meet specific threats (such as to postpone or defeat proposed regulations) or to communicate systemic corporate change(similar to the defence phase). However, with each new bulwark average total disclosure can be expected to decrease.This idea is alluded to by ODonovan (2002) who a rgues, based on experimental evidence, that the lower the perceived legitimacy of the organisation, the less likely it is to bother providing social and environmental disclosure.Watch This SpaceLegitimacy theory offers researchers, and the wider public, a trend to critically excerpt corporate disclosures. However the understanding and study of the theory must become more sophisticated, drawing on developments both within the accounting literature and beyond. Only then will the full potential of legitimacy theory for examining a wide range of disclosures be fully realised. Areas that would provide utile insights include at the moment the asbestos industry (as it goes through the disestablisment phase), brothels (as they become much more legitimate within the Australian context), and the forestry industry (as it tries to defend its legitimacy), to name but a few.The knowledge gained will then be used to provide better and more useful information to inform decision making by stakeho lders. In this way society is empowered to have greater control and oversight over the way resources are allocated.ReferencesAshford, B. E. and B. W. Gibbs (1990) The Double-Edge of organic lawal Legitimation, Organization Science, Vol. 1, No. 2, pp. 177 194. Caudill, E. (1997) Darwinian Myths The Legends and Misuses of a Theory, Knoxville, University of Tennessee Press. Deegan, C., M. Rankin and J. 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