Refinements to Legitimacy Theory in Social and Environmental Accounting

" Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions " (Suchman, 1995, p. 574, emphasis in original) Legitimacy theory has become one of the most cited theories within the social and environmental accounting area. Yet there remains deep scepticism amongst many researchers that it offers any real insight into the voluntary disclosures of corporations. This brief paper outlines responses to two specific concerns identified in the literature. It will eventually form part of a much larger project addressing a range of issues associated with legitimacy theory. First, the paper brings some of the more recent developments in the management and ethical literature on legitimacy and corporations to the accounting table. Second, there are contributions to the theory that have already been made by accounting researchers that are yet to be fully recognised. The author believes that legitimacy theory does offer a powerful mechanism for understanding voluntary social and environmental disclosures made by corporations, and that this understanding would provide a vehicle for engaging in critical public debate. The problem for legitimacy theory in contributing to our understanding of accounting disclosure specifically, and as a theory in general, is that the term has on occasion been used 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 Theory). Failure to adequately specify the theory has been identified by Suchman (1995, p. 572, emphasis in original), who observed that " Many researchers employ the term legitimacy, but few define it ". Hybels (1995, p. 241) comments that " As the tradesmen [sic] of social science have groped to build elaborate theoretical structures with which to shelter their careers and disciplines, legitimation has been a blind man's hammer. " This paper begins to address these issues. An important issue which needs to be acknowledged is that there are in fact two major classes of legitimacy theory. These are graphically presented in Figure 1 below. The 'macro-theory' of legitimation, known as Institutional Legitimacy Theory, deals with how organisational structures as a whole (capitalism for example, or government) have gained acceptance from society at large. " Within this tradition, legitimacy and institutionalization are virtually synonymous. Both …