Legitimacy Theory
Financial Dictionary — Accounting Theory
Definition
Legitimacy theory posits that corporations are bound by a social contract in which corporations agree to perform various socially desirable actions in exchange for approval of their goals and other rewards, ultimately ensuring their continued existence.
Detailed Explanation
Legitimacy theory explains how organizations seek societal approval by aligning their activities with social norms and expectations.
Common Uses
- Used to explain the concept in accounting and business contexts.
- Used when training staff or documenting procedures and policies.
- Used when training staff or documenting procedures and policies.
Practical Example
- Example: Teams reference **Legitimacy Theory** when defining terms in manuals, policies, or training materials.
Why This Term Matters
- Why it matters: Improves clarity and consistency across documentation and decision-making.