What does the notion of legitimacy and social contract...

What does the notion of legitimacy and social contract have to do with corporate disclosure policies? Introduction In recent years, corporations have increasingly used their annual reports to voluntarily report information relating to their social actions, particularly those concerning the natural environment (Gray et al.1995). More specifically, corporations have been changing their disclosure policy towards the triple bottom line reporting, where in addition to economic performance, social and environmental issues of the companys performance are given (Deegan 2002). This has drawn the attention of researchers, and a number of theories have been postulated as to why companies disclose such information. According to Deegan and Rankin†¦show more content†¦The organisations have no natural right to these benefits, and in order to allow their existence, society would expect the benefits to exceed the costs to society. The society allows the corporation to operate as long as it meets their expectations. Again considering the Legitimacy Theory, the organisation should consider the rights of t he public at large, not merely those of its investors. If the company fails to meet these expectations, the society would react by imposing sanctions, for example legal restrictions or high taxes, fines, demand reduction of the companys products, eliminating the supply for labour and financial capital top the business. Heard and Bolce (1981) argue that with such high social expectations, a successful corporation would react and attend to the environmental and social consequences of their activities. Thus, organisations would take various actions to ensure that their operations are perceived legitimate. They will attempt to establish congruence between the social values associated with or implied by their activities and the norms of acceptable behaviour in the larger social system of which they are part (Dowling and Pfeffer, p.110). M. Garcial-Ayuso et al. (1998) suggest three conditions to be fulfilled in order for legitimacy theory to represent a consistent basis for the analysis and understanding ofShow MoreRelated3101AFE Seminar Questions from Seminars 1 6 Sem 1 20151558 Words   |  7 Pageshow they prepare financial statements, would you have developed a positive theory or a normative theory? QUESTION 2 - Question 1.3: What is a conceptual framework, and would it be considered to be a positive or a normative theory of accounting? QUESTION 3 – Question 1.27 (NEW): The International Accounting Standards Board has a number of roles, including formulating accounting standards and developing a conceptual framework. 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