Legitimacy Theory

A frequent paradigm used to explain social and environmental disclosure is legitimacy theory. The social contract between a company and the community is discussed in the legitimacy theory. The central claim of legitimacy theory is that if an organisation operates within the bounds of societal norms, it may exist. The company voluntarily exposes its social and environmental facts to uphold its credibility in society and foster a positive view of its commitment to social responsibility. Some research explains social and environmental disclosure using the legitimacy paradigm.

If there is a disconnect between the firm and society, the firm's legitimacy will be in jeopardy. A move is taken by an organisation to close the "hole" in the value gap between the enterprise and society. For the company to be well-regarded, society must be a part of it. The tension between the company and society should hopefully be lessened by strong legitimacy. Threats to legitimacy can be handled in four different ways. The company starts by providing the stakeholders with pertinent information regarding the shift in organisational performance. Second, the company modifies how stakeholders see the organisational performance. Third, the company modifies perception by diverting stakeholders' attention from the current problem. Fourth, the company makes an effort to alter external perceptions of its performance. These four tactics are crucial for maintaining credibility. Information about the social and environmental context might be willingly disclosed to create favourable perceptions and expectations. Less transparency might be interpreted as a corporation bearing less accountability.

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STEWARDSHIP THEORY

Donaldson and Davis established the stewardship theory in 1989 and offered it as a normative substitute for the agency theory. Stewardship theory offers a non-economic foundation for describing the connection, unlike agency theory, which prioritises control and conflict (Sundaramuthy and Lewis 2003). According to the stewardship hypothesis, managers will take good care of the resources they are in charge of. It also asserts a direct link between employee happiness and an organization's ability to succeed. "Stewardship is the prudent practice of Allocation, management, and supervision of capital to produce long-term value for customers and beneficiaries, resulting in long-term gains for the economy, the environment, and society. Therefore, it is clear that stewardship must be seen from a long-term perspective in order to produce sustainable advantages for the stakeholders. According to the stewardship hypothesis, ownership just holds a firm trust rather than really owning it. A...

Resource Based Theory (RBT)

RBT, or resource-based theory, is a well-known method for strategic management. In order for a company to maintain a competitive edge, it has been frequently used as a managerial framework to identify essential resources. The theory offers a crucial framework for deriving explanations for and projections of the basic drivers of a firm's performance and competitive advantage. Penrose (2009) introduced Resource-Based Theory (RBT) for the first time by putting up a model for the efficient management of organisations' resources, diversification tactics, and business possibilities. The idea of seeing a corporation as a coordinated collection of resources to address and tackle how it might achieve its goals and strategic behaviour was first put out in Penrose's book. RBT offers a framework to identify and foresee the core elements of business performance and competitive advantage. In response to prior managerial interest in the industry structure, a more macro viewpoint, RBT tu...

Green Washing

You've probably heard of whitewashing at least once in the corporate world. Whitewashing is when an organization hides or conceals scandalous information by presenting a biased account of the facts. However, greenwashing is less well-known. Many stakeholders are more conscious of environmental considerations due to rising environmental problems and, subsequently, rising general knowledge. Stakeholders like investors, buyers, governments, and corporate clients have increased their pressure on businesses over the past ten years to share information about their environmental performance and to produce environmentally responsible goods. Environmentalist Jay Westerveld coined "greenwashing" in a critical essay in 1986. This was inspired by the irony of the "save towels" movement in hotels, which had little impact other than saving on hotel laundry costs. The idea arose at a time when most consumers got their news primarily from television, radio and print media. ...

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