Essay On Legitimacy Theory

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Legitimacy Theory Legitimacy theory states that enterprises under proper agreements undertake many socially desirable steps to secure their rewards and objectives. These actions ensure their long term existence in the market and improve their competitive position. The corporations have to follow social norms and values if they want to successfully continue their business (Dowling & Pfeffer, 1975). The voluntary environmental disclosures by the firms in their annual reports can b explained by the illustrations of legitimacy theory. Corporations take all those actions which ensure their legitimacy in front of the stake holders who can have influence on the legitimacy of the respective entity. Classification and Application As far as the ways to secure legitimacy are concerned, the most important and effective one followed by the corporations is voluntary disclosure of information related to social and environmental aspects of their business in the annual reports. The firms use this policy of disclosure in order to send a signal to the society that the firm is honestly fulfilling its obligations regarding environmental protection [O’Donovan, G. (2002)]. Firms either start behaving in socially desirable manner or at least take steps to transfer a perception that the conduct of the firm is an acceptable one. The socially acceptable manner of operations and its demonstration to the society is the basis of legitimacy theory. Firms willingly follow the strategy of disclosure if they are involved in the social and environmental incidents having negative effects on their legitimacy. The application of legitimacy is induced by the perceptions of the society in which the firms operate [Deegan & Tobin (2002)]. It is a way to assess the conduc... ... middle of paper ... ...ands has acknowledged and made it a part of their CSR to ensure the structural integrity of the factories in which their products are manufactured. Conclusion: On the whole the behavior of Wal-Mart remained disappointing in the after math of the two discussed incidents. Their action and statements have severely damaged their legitimacy. Wal-Mart has not attributed any funds to avoid such incidents in future, as shown in their annual reports. Not any new agreement regarding CSR has been signed by the Wal-Mart to ensure the workers safety. On the other hand the Primark has realized the importance of CSR and took steps to improve their legitimacy. Overall, there is an observed trend in the industrialists to start following and ensuring safety measures. The cooperation has also increased between the stake holders to protect the CSR, so that to enhance the legitimacy.

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