Question

1.Why Accounting Theory is one of the reasons to motivate Corporate social responsibility?

2.What are the motivations behind disclosure of environmental and social responsibility?

3.Use one of the System Oriented Theory to explain why company will voluntarily disclose?

4.What are the three system of Oriented theory?

Answer 1

Q.1)

This is the theory of maintaining, controlling, and reporting accounts. This is the bunch of principle and methods. Profit-making should not be the only motive in business; social aspect also to be considered. As per the accounting theory, corporate reporting should be done by the top-management which must be included with corporate social responsibility fulfilled. A business can’t ignore such section, since there are so many stakeholders (like government, customers, society, etc). Therefore, accounting theory motivates for CSR.

Q.2)

Motivations of such disclosure are as below:

Point a) It increases goodwill of the firm. Business gets value in the market. Suppose a firm maintains a nearby park and tries to increase environmental awareness of people.

Point b) It reduces the acts of prosecution. Suppose people are happy with firm’s conducts and they don’t have grievance to prosecute against the firm.

Point c) It helps to get government sanction very easily for further expansion, because the government is happy and wants to get more and more environmental awareness through such expansion.

Q.3)

Legitimacy theory is one of SOT. It indicates social bonding of a firm; therefore, highlights on social contract. All actions of a firm must not be based on self-interest (like maximizing profit); the firm is within the society; therefore, can’t ignore that thing. Moreover, it increases social value and brand reputation which ultimately increase demand of product – the indirect way of maximizing profit. This is the reason why firm discloses.

Q.4)

There are three theories as below:

Legitimacy theory: This is the way of social upliftment which benefits the firm as a whole.

Stakeholders theory: There are so many stakeholders of a firm like shareholders, customers, suppliers, lenders, government, etc. If the firm is responsible enough to each of these stakeholders, all would be happy and it benefits the firm as a whole. Suppose lenders are getting payments timely – it improves credit rating and there would be no hassles of getting further loan.

Institutional theory: A particular form is followed (like divisional organization or functional organization) for improving capacity and efficiency of the firm.