3.2.3 Legitimacy Theory in Accounting
In accounting, there are two major classes of Legitimacy Theory. The first one is on an “Institutional Level” while the other one is the “Organizational Level.” What is important is that we remember that Legitimacy Theory is all about conforming to the Social Contract of the society, or in this case, of the nation in which the organization is functioning (Tilling, 2014). Institutional Level
This refers to how an organization gained acceptance from the society as a whole at large. Legitimacy and Institutionalization become the same as for an organization to become a recognized institution, its values, principles, purpose and goals must have been long before established as socially accepted (Tilling, …show more content…
First one is the Government. The organization must gain approval from its government in terms of compliance to its regulations, policies, and laws. This can be achieved through transparent disclosures and responsible accounting (Tilling, 2014). Second one is the Church. More often than not, there is a prevailing religion in the land and the organization must comply with the moral and ethics standards set and imposed by the Church. Securing approval from the Church means securing approval from its followers (Tilling, 2014). Society will be the third factor. The society at large have common expectations and standards. The challenge is, it changes depending on the prevailing philosophy or concept at any given point in time. Most organizations would use branding and storytelling to gain public approval (Tilling, 2014). Lastly, is Capitalism. This one refers to the sustainable and responsible profitability of an organization. The main responsibility of an organization is to ensure profit for all of its employees and stakeholders (Tilling, 2014).
Organizational …show more content…
By not complying with the requirements and policies of the State, the organization creates the threat of scrutiny and forced closure (Tilling, 2014). The Public - The public essentially comprises the general consumers. Without a market and direct consumers, the organization will definitely collapse. Also, the Public provides the labor required to operate the organization. In addition, the Public opinion and interest guides the action of the all the other stakeholders (Tilling, 2014). The Financial Community - For an organization to continue to grow and prosper, it requires a continuous inflow of investments from other organizations who share complimenting goals and interests. The organization must be able to adapt to the expectations of the financial community in order to gain their support in the form of investments (Tilling, 2014). The Media - Deemed as the fourth state, the Media plays a huge role in the portrayal of the public image of an organization. The Media uses the Public opinion and interest to paint the public image of an organization. Brand management plays a key role for an organization to gain the trust of the Media Community (Tilling,
In accounting, there are two major classes of Legitimacy Theory. The first one is on an “Institutional Level” while the other one is the “Organizational Level.” What is important is that we remember that Legitimacy Theory is all about conforming to the Social Contract of the society, or in this case, of the nation in which the organization is functioning (Tilling, 2014). Institutional Level
This refers to how an organization gained acceptance from the society as a whole at large. Legitimacy and Institutionalization become the same as for an organization to become a recognized institution, its values, principles, purpose and goals must have been long before established as socially accepted (Tilling, …show more content…
First one is the Government. The organization must gain approval from its government in terms of compliance to its regulations, policies, and laws. This can be achieved through transparent disclosures and responsible accounting (Tilling, 2014). Second one is the Church. More often than not, there is a prevailing religion in the land and the organization must comply with the moral and ethics standards set and imposed by the Church. Securing approval from the Church means securing approval from its followers (Tilling, 2014). Society will be the third factor. The society at large have common expectations and standards. The challenge is, it changes depending on the prevailing philosophy or concept at any given point in time. Most organizations would use branding and storytelling to gain public approval (Tilling, 2014). Lastly, is Capitalism. This one refers to the sustainable and responsible profitability of an organization. The main responsibility of an organization is to ensure profit for all of its employees and stakeholders (Tilling, 2014).
Organizational …show more content…
By not complying with the requirements and policies of the State, the organization creates the threat of scrutiny and forced closure (Tilling, 2014). The Public - The public essentially comprises the general consumers. Without a market and direct consumers, the organization will definitely collapse. Also, the Public provides the labor required to operate the organization. In addition, the Public opinion and interest guides the action of the all the other stakeholders (Tilling, 2014). The Financial Community - For an organization to continue to grow and prosper, it requires a continuous inflow of investments from other organizations who share complimenting goals and interests. The organization must be able to adapt to the expectations of the financial community in order to gain their support in the form of investments (Tilling, 2014). The Media - Deemed as the fourth state, the Media plays a huge role in the portrayal of the public image of an organization. The Media uses the Public opinion and interest to paint the public image of an organization. Brand management plays a key role for an organization to gain the trust of the Media Community (Tilling,