CHAPTER TWO
LITERATURE REVIEW
2.1 Preamble
Corporate Social Responsibility became a matter of utmost importance for diverse groups demanding change in the business. During the 1980‘s to 2000, corporations recognized and started accepting a responsibility towards society. Corporate social responsibility (CSR) focuses on the wealth creation for the optimal benefit of all stakeholders including shareholders, employees, customers, environment and society. The term stakeholder means all those on whom an organization's performance and activities have some impact either directly or indirectly. This term was used to describe corporate owners beyond shareholders as a result of a book titled Strategic management: a stakeholder approach by R. …show more content…
Nevertheless, as time goes on the increase start to bring in changes in composition and complexity to the practice of CSR (Deegan and Gordon, 2006). All theories in CSR are serving as point of reference for every set of CSR practice, but since there is no single accepted theory, perspective and definition to CSR, it means there should be a lot of variation in what constitute the theoretical and practical aspect of CSR (Choi, 2009).
The theories underpinning CSR studies express how CSR is observed or interpreted by different stakeholders from different perspectives. For example, classical theory deals with profit maximisation from a shareholders perspective or priority (Friedman, 2002). Agency theory emphasizes on getting the legal recognition to act on behalf of the principal from managers (agents) perspective (Salazar & Husted, …show more content…
Under legitimacy theory communicating CSR initiatives is a source of initiating and protecting organizational legitimacy.
Pattern (2002) observed that there is a positive relationship between disclosure of CSR initiatives and organizational legitimacy. (Deegan and Rankin 2007; Brown and Deegan 2008) all concur to this finding. Previously, financial performance is regarded as a yardstick for determining organizational legitimacy, but now it is the way that the organization serves the community that determines it legitimacy to survive. Campbell (2000) pointed out that disclosure of CSR initiatives bridges the legitimacy gap between how an organization is perceived and how it wants to be perceived.
Moir (2001) argued that legitimacy theory is a form of social contract that impliedly exists between stakeholders and the business organization, its fulfilment determines the survival of the
LITERATURE REVIEW
2.1 Preamble
Corporate Social Responsibility became a matter of utmost importance for diverse groups demanding change in the business. During the 1980‘s to 2000, corporations recognized and started accepting a responsibility towards society. Corporate social responsibility (CSR) focuses on the wealth creation for the optimal benefit of all stakeholders including shareholders, employees, customers, environment and society. The term stakeholder means all those on whom an organization's performance and activities have some impact either directly or indirectly. This term was used to describe corporate owners beyond shareholders as a result of a book titled Strategic management: a stakeholder approach by R. …show more content…
Nevertheless, as time goes on the increase start to bring in changes in composition and complexity to the practice of CSR (Deegan and Gordon, 2006). All theories in CSR are serving as point of reference for every set of CSR practice, but since there is no single accepted theory, perspective and definition to CSR, it means there should be a lot of variation in what constitute the theoretical and practical aspect of CSR (Choi, 2009).
The theories underpinning CSR studies express how CSR is observed or interpreted by different stakeholders from different perspectives. For example, classical theory deals with profit maximisation from a shareholders perspective or priority (Friedman, 2002). Agency theory emphasizes on getting the legal recognition to act on behalf of the principal from managers (agents) perspective (Salazar & Husted, …show more content…
Under legitimacy theory communicating CSR initiatives is a source of initiating and protecting organizational legitimacy.
Pattern (2002) observed that there is a positive relationship between disclosure of CSR initiatives and organizational legitimacy. (Deegan and Rankin 2007; Brown and Deegan 2008) all concur to this finding. Previously, financial performance is regarded as a yardstick for determining organizational legitimacy, but now it is the way that the organization serves the community that determines it legitimacy to survive. Campbell (2000) pointed out that disclosure of CSR initiatives bridges the legitimacy gap between how an organization is perceived and how it wants to be perceived.
Moir (2001) argued that legitimacy theory is a form of social contract that impliedly exists between stakeholders and the business organization, its fulfilment determines the survival of the