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Received April 2002 Revised May 2002

The legitimising effect of social and environmental disclosures a theoretical foundation

School of Accounting and Law, RMIT University, Melbourne, Australia
Keywords Social accounting, Environmental audit, Motivation Abstract This paper serves as an introduction to this special issue of Accounting, Auditing & Accountability Journal; an issue which embraces themes associated with social and environmental reporting (SAR) and its role in maintaining or creating organisational legitimacy. In an effort to place this research in context the paper begins by making reference to contemporary trends occurring in social and environmental accounting research generally, and this is then followed by an overview of some of the many research questions which are currently being addressed in the area. Understanding motivations for disclosure is shown to be one of the issues attracting considerable research attention, and the desire to legitimise an organisation's operations is in turn shown to be one of the many possible motivations. The role of legitimacy theory in explaining managers' decisions is then discussed and it is emphasised that legitimacy theory, as it is currently used, must still be considered to be a relatively under-developed theory of managerial behaviour. Nevertheless, it is argued that the theory provides useful insights. Finally, the paper indicates how the other papers in this issue of AAAJ contribute to the ongoing development of legitimacy theory in SAR research.

Introduction
Craig Deegan

1. Introduction This article has been written to provide an overview of a particular theoretical perspective that has been used to explain why managers might elect to publicly disclose information about particular aspects of their social or environmental performance[1]. This article also provides an introduction to the other articles in this special issue of Accounting, Auditing & Accountability Journal, and it does this by indicating where the authors' research ``resides'' within the broader body of literature which has typically been labelled as social and environmental accounting research (SEAR). It will be shown that the four other papers in this special issue of AAAJ embrace a sub-set of the total research effort, this ``sub-set'' being research which explores the motivations behind corporate social and environmental reporting. As will be indicated, there is a deal of research that provides evidence that corporate social and environmental reporting is motivated by a desire, by management, to legitimise various aspects of their respective organisations. This might be a valued strategy for an organisation when particular events occur that are perceived by management as being detrimental to the organisation's reputation, and
Accounting, Auditing & Accountability Journal, Vol. 15 No. 3, 2002, pp. 282-311. # MCB UP Limited, 0951-3574 DOI 10.1108/09513570210435852

The author gratefully acknowledges the support provided by James Guthrie and Lee Parker in relation to compiling this special issue of AAAJ, and for their comments on this particular paper. The helpful comments provided by Reg Mathews are also acknowledged.

perhaps, ongoing survival. Indeed, three of the following four papers provide evidence consistent with the view that public disclosure of social and environmental information, in media such as the annual report, is undertaken for legitimising purposes. Such a motivation for reporting (to legitimise the organisation's operations) would be in contrast to a reporting approach which reflects an acceptance by managers of an accountability, or a responsibility, to disclose information to those who have a right-to-know[2]. Whether legitimising disclosures, broadly speaking, are to the benefit of the broader community is also something that we will briefly consider. This article also seeks to provide a brief overview of research trends and opportunities in the area of social and environmental accounting research. Because the area is so broad, we obviously cannot be ``all-inclusive'' in such a review. Interested readers should also review other ``trends and opportunities'' papers, such as the excellent review provided by Mathews (1997), and more recently, the review provided by Gray (2002). The balance of this paper is organised as follows. The next section, section 2, describes the broad area of social and environmental accounting research and identifies some particular areas of research that are attracting increased attention. Section 3 then discusses various research questions that might be the focus of social and environmental accounting researchers. As is demonstrated, there is a vast array of research questions which can be and have been addressed, including issues associated with explaining managers' motivations for publicly disclosing social and environmental information something directly relevant to the other papers in this special issue of AAAJ. Section 4, considers the issue of motivation further, and provides an overview of various motivations that could be attributed to the decision to disclose social and environmental information. The desire to legitimise an organisation's operations is shown to be one of the many motivations considered to drive disclosure-related decisions. Section 5 investigates the legitimisation motive in more depth with particular consideration being given to legitimacy theory. Section 6 discusses the potential contribution of the other four papers in this edition of Accounting, Auditing & Accountability Journal to the development of legitimacy theory, and section 7 provides concluding comments. 2. The growth in social and environmental accounting research Research in the area which we broadly refer to as SEAR has ebbed and flowed for a number of decades. However, in recent times, there has been substantial growth in the research attention being devoted to social and environmental accounting issues. This increase in attention can be demonstrated by the number of academic researchers entering the area, and by the increased focus being applied by governments, professional accounting bodies, industry bodies, and corporations to various related issues. Arguably, it is over the last decade, and particularly since the mid-1990s, that there has been major growth in related research. What has created this growth is, in itself, an interesting issue for investigation. What must be emphasised, however, is that such

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research is not new, but the degree of attention is unlike anything in the past. Various academic research journals are now publishing numerous articles on social and environmental accounting and accountability issues. Most notably amongst these would be Accounting, Auditing & Accountability Journal, Accounting Forum, Accounting, Organizations and Society, Advances in Public Interest Accounting, Critical Perspectives on Accounting, British Accounting Review, Accounting and Business Research, Business Strategy and the Environment, Asia Pacific Journal of Accounting and Interdisciplinary Environmental Review. Journals such as Accounting, Auditing & Accountability Journal (Vol. 10 No. 4, 1997, as well as this issue), Accounting Forum (Vol. 19 Nos 2/3, 1995 and Vol. 24 No. 1, 2000 ), European Accounting Review (Vol. 9 No. 1, 2000) and Asia Pacific Journal of Accounting (Vol. 4 No. 2, 1997) have dedicated entire editions to social and environmental accounting issues. This volume of research is in contrast to what was occurring until the early 1990s, when much less research was being published in the area (and when it was being published it was typically emanating from a small number of people who had gone against the ``trend'' and embraced issues associated with social and environmental accountability). It is also worthy of note that many of the so-called ``leading schools'' in the area of accounting (and this is an interesting ``tag'' given that so many did not lead efforts in this growing field of research that was arguably of relevance and importance to the broader society, rather than simply to those parties operating within ``the market-place'') did not embrace research in areas associated with social and environmental accountabilities (and some still resist). More often than not, doctoral students were counselled to do research in conventional areas typically based on neo-classical economics and related notions of market efficiencies (a great deal of which was emanating from ``leading'' US business schools) areas of research which perceivably would not ``stifle'' academic promotion-prospects. This had implications for the inflow of ``new talent''. The few early advocates of social and environmental research (and early researchers within the 1970s and 1980s typically included ``environment'' within the broader term of ``social'') were arguably seen by many as quite radical at the time something which critical theorists of today (perhaps informed by Marxian, feminist or deep-green philosophies) could find quite amusing. As Mathews (1997, p. 488) states:
Those who researched non-traditional disclosures or wrote in support of socially-related disclosures were regarded as both radical and critical, because they were explicitly or implicitly criticizing the current structure of the discipline: historical financial accounting reports for shareholders and creditors. It was later that some of these writers were themselves criticized for being prepared to modify rather than replace the system within which accounting was situated.

The work of the critical theorists (as displayed in such journals as AAAJ and Critical Perspectives on Accounting), provided much needed critique and commentary on various social reporting prescriptions. They were often critical of the proponents of social and environmental accounting because the

approaches being proposed were perceived as doing little, or nothing, to alter the way business conducted its operations (Tinker et al., 1991). In this regard, the published exchanges between Parker and Puxty in the first volume of Advances in Public Interest Accounting (1986) makes interesting reading[3]. Throughout the 1990s, research directions were changing in many research schools and ``the environment'' was becoming the major focus of researchers who were embracing the area arguably at the expense of the ``social'' (Owen et al., 1997; Mathews, 1997). However, perhaps heeding the concerns of authors such as Owen and Mathews, the ``social side'' of research and practice has gained more prominence in recent years both at the corporate level, and with researchers. Consistent with the increased research focus, there has also been a marked increase in the number of research students studying various social and environmental accounting issues, as reflected, obviously somewhat imperfectly, by the increasing number of PhD students researching the area, and the number of people attending social and environmental accounting research doctoral colloquiums, such as those held at the Centre for Social and Environmental Accounting Research (University of Glasgow) and the recent International Congress on Social and Environmental Accounting held in Melbourne in April 2002. A number of universities (albeit still in the minority) have put in place subjects dedicated to social and environmental accounting practice and research. In the mid 1990s financial accounting theory texts also, for the first time, dedicated chapters to social and environmental accounting with one of the early examples being Mathews and Perera (1996). This practice has now been adopted within other leading accounting theory texts (for example, Deegan, 2000). Other ``theory'' books, while not strictly dedicated to accounting theory, provided much needed input into the growing debate (for example, see the important contribution made by Gray et al. (1996)). Governments, industry bodies and accounting professions have also shown a marked increase in the amount of attention being devoted to social and environmental accounting issues, particularly in the area of external reporting. Professional accounting bodies showed an early interest in social accounting, the best example of which was The Corporate Report (issued in 1975 by the Accounting Standards Steering Committee of the Institute of Chartered Accountants in England and Wales). This innovative release, which discussed and emphasised ``rights'' to information, did not, however, lead to a lot of other effort or change by accounting professions and the issue seemed to disappear from the agenda of professional accounting bodies until it was to re-emerge in the 1990s. A number of organisations, such as the Global Reporting Initiative, The Institute for Social and Ethical Accountability, World Business Council for Sustainable Development, and the Council on Economic Priorities, have recently released guidance documents that are being embraced internationally[4]. The work of these bodies perhaps indicates a trend towards taking the development of the area away from the accounting profession. In some respects, this is surprising given the expertise that accounting professionals could usefully bring to the area (Gray, 2002). Also given the

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extent of interest in various social and environmental accounting and accountability issues it would appear unlikely that the topics are likely to retreat from research agendas. Although, as Gray (2002) warns, social accounting was a ``hot-topic'' in the 1970s and early 1980s with various organisations and governments embracing this issue, yet it seemed to almost vanish from the radar for over a decade. As was the case back then, social and environmental reporting is predominantly a voluntary practice so conceivably, in the absence of regulation, it could vanish again but with the mass of effort dedicated to the area this time, this would appear unlikely. Because the development of social and environmental accounting and accountability practices is still in its infancy (for example, compared to the long historical practice of financial reporting), there is still much debate on various issues. For example, in relation to the external reporting side, there is a lack of consensus on key issues such as the objectives of reporting; the qualitative characteristics the information should possess; the audience of the reports; the ``best'' presentation formats, and so forth. However, this lack of consensus leads to much experimentation which in turn adds to the excitement of this rapidly developing area an area that is full of rewarding research opportunities for those that care to be involved! 3. An overview of some of the research questions that can be pursued Within the broad area of research known as social and environmental accounting research there are many areas or issues that can be researched. In the brief discussion below we will outline a number of issues an outline that is anything but comprehensive. However, it does help to place the other papers in this edition of Accounting, Auditing & Accountability Journal in context. Some of the various research questions that have been researched or are currently being researched include:
.

What are companies reporting? A great deal of the early research in the area, such as the studies by Ernst & Ernst throughout the 1970s, provided information about what various organisations were disclosing. Such work is still being undertaken today, with some of it focusing on international comparisons. See Teoh and Thong (1984); Andrews et al. (1989); Guthrie and Parker (1990); Harte and Owen (1991); Lynn (1992); Adams et al. (1995); Gibson and Guthrie (1995); Niskala and Pretes (1995); Deegan and Gordon (1996); Gamble et al. (1996); Choi (1999); Bell and Lehman (1999); Newson and Deegan (2002). Can social and environmental disclosure practices be linked to other attributes of performance, such as economic performance, or to factors such as industry membership, country of origin (and culture), or size? See Ingram and Frazier (1980); Trotman and Bradley (1981); Ullman (1985); Cowen et al. (1987); Fayers (1998); Newson and Deegan (2002).

How do particular stakeholders react to social and environmental disclosures? See Ingram (1978); Buzby and Falk (1978, 1979); Anderson and Frankle (1980); Jaggi and Freedman (1982); Shane and Spicer (1983); Freedman and Jaggi (1986, 1988a, b); Epstein and Freedman (1994); Blacconiere and Patten (1994) for research about investor reaction to social and environmental disclosures. For the reactions of other stakeholder groups see Tilt (1994); Deegan and Rankin (1997). What are accountants' attitudes to social and environmental accounting? See Bebbington et al. (1994); Deegan et al. (1996). What is the correspondence between corporate social and environmental disclosures and actual corporate performance? See Wiseman (1982); Rockness (1985). What are the roles of taxation instruments in relation to environmental protection? See Baumol (1975); Lockhart (1997); O'Riordan (1997). How is accounting education embracing the area, and what are some of the impediments to including social and environmental issues with the accounting education programs of universities and professional accounting bodies? See Blundell and Booth (1988); Gray et al. (1994); Gibson (1997); Gordon (1998); Gray and Collison (2001). How should organisations account for their social and environmental performance? Should externalities be attributed a ``cost'' for financial accounting purposes? See C.C. Abt Associates (1972); Milne (1991); USEPA (1996); Bebbington and Gray (1997); Mathews (2000). What theories best explain how we do report, or perhaps, how we should report social and environmental information? See Ramanathan (1976); Cooper and Sherer (1984); Benston (1982, 1984); Belkaoui and Karpik (1989); Mathews (1993, 2000); Gray et al. (1996); Lehman (1999); Deegan (2000). How should (and perhaps, why should) management accounting systems embrace social and environmental issues? See Stone (1995); Bennett and James (1997, 1998); Ditz et al. (1998); Parker (2000a, b). What motivates managers to make particular social and environmental disclosures? See Guthrie and Parker (1989); Patten (1992); Roberts (1992); Deegan and Gordon (1996); Deegan and Rankin (1997); Adams et al. (1998). What is the role, or scope, of social and environmental verifications, attestations, or audits (and these can all take on various forms)? See Bauer and Fenn (1973); Grojer and Stark (1977); Brooks (1980); Geddes (1991); Gray and Collison (1991); Gray et al. (1991); Zadek (1993); Gallhofer and Haslam (1995): Power (1997); Owen and Swift (1999); Ball et al. (2000); Owen et al. (2000); Gray (2002).

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Are current or proposed social and environmental reporting practices really of benefit to the broader community, or do they simply act to legitimise existing social structures which benefit some groups at the expense of others? See Puxty (1991).

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As can be seen from the above list, some of the research is quite descriptive (describing what is), some is normative (describing what should be), whilst other is positive in nature (explaining what is). Some of the research is theorybuilding. When describing what is being disclosed, there has been much debate about how to measure and classify social and environmental disclosures. Ernst & Ernst (1976), and subsequently, recent papers such as Milne and Adler (1999) and Gray et al. (1995a) provide useful direction. When explaining why particular disclosures are being made, or in describing how organisations should make particular disclosures, reference is often made to a particular theoretical perspective (such as legitimacy theory, which is one of many theories that might be applied, and which is the focus of this edition of AAAJ). However, reflecting the fact that we do not have an ``accepted'' theory for social and environmental accounting, there is much variation in the theoretical perspectives being adopted. Where efforts have been made to explain social and environmental disclosure practices, recent research has tended to rely upon legitimacy theory, and to a lesser extent, stakeholder theory (with both theories having antecedents in political economy theory). At the same time, much of the critical review of social and environmental reporting practice and prescription (and indeed, critiques of the work of many researchers in the area) is informed by other theoretical perspectives, such as by the works of Marx or by the deepgreen or feminist literatures. Whether we can ever reach consensus on one theory for social and environmental accounting, or indeed whether we want to, is not something that we will pursue further in this article. In relation to recent research efforts, amongst the many areas, there appears to be a particular increasing focus being given to a type of community engagement practice, often labelled as social auditing. There has also been an increased focus towards triple bottom line reporting (Elkington, 1997) and the related notion of sustainability reporting and related verifications. This trend is reflective of Gray et al.'s (1998) view that consideration to social reporting and related accountability issues has re-emerged after a period of stagnation. The reasons for this renewal of interest could be varied. According to Gray et al. (1998, p. 303):
The increasing concern with stakeholders, growing anxiety about business ethics and corporate social responsibilities and the increasing importance of ethical investment have all raised the need for new accounting and accounting methods through which organisations and their participants can address such matters. But probably the most important of all the influences has been the dawning realisation that environmental issues especially when examined within the framework of sustainability cannot be separated from social issues and the accompanying questions of justice, distribution, poverty, and so forth. Social accounting, in all its guises, is designed to deal exactly with these issues.

Social audits, which can take on various forms (be they produced by management, or by independent bodies), were not an unknown occurrence with exciting experiments being conducted in the 1970s by such UK organisations as Social Audit Ltd (see Medawar, 1976). But the audits were voluntary and their incidence decreased until a resurgence in the latter half of the 1990s. At a broad level, a social audit can be defined as a process that enables an organisation to assess its performance in relation to society's requirements and expectations (Elkington, 1997). Research into social audits is interesting, not least because of the variety of guises and motivations involved. Their use can be explained as a managerial device aimed to take various social pressures away from an organisation. For example, the international sportswear company Nike was criticised internationally for the labour practices imposed on its workforces in certain parts of Asia (in particular). As part of the response, a social audit was implemented with the assistance of the Global Alliance for Workers and Communities. If community suspicion or concern had not been demonstrated, would such a practice have been implemented? The results of the social audit are provided on Nike's Web site. Similar arguments could be made in relation to social audits conducted by Shell, or the British lottery company, Camelot. Such social audits are linked to issues such as risk assessment and monitoring; managing key or powerful stakeholders; creating market opportunities; increasing positive brand-recognition; and resurrecting legitimacy. By contrast, social audits might also be undertaken for accountability purposes and to try to explain the various social impacts an organisation might be creating both good and bad. They might also be issue specific, such as the implications that might follow from opening or closing a particular plant. There is much disagreement on methodologies and given the managerial benefits, there is much discussion about management capture of the social audit process (see Owen et al., 2000). What is being emphasised here is that this is an example of one area in the social and environmental accounting field where there are many unresolved issues awaiting further research. As noted above, recent times have also seen an increase in ``sustainability reporting'' which seems to have closely followed the surge in interest in triple bottom line reporting (Elkington, 1997). There is much critical discussion about whether sustainability reports are what they claim to be. Indeed, what would a ``true'' sustainability report look like? Do the reports using the ``sustainability'' label (and discussing such things as greenhouse emissions and support for indigenous communities) really report about sustainability, or have they really not progressed beyond issues of eco-efficiency? Further thought needs to go into this area. 4. Understanding managerial motivations Although we have provided a brief overview of some of the recent research directions being pursued in social and environmental accounting, it is now time to return to the theme of this issue of AAAJ. While the incidence of social audits

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and attention to triple bottom-line reporting and sustainability reporting (however defined) is increasing, the practices are still overwhelmingly voluntary. The voluntary nature of the activity leads researchers to question why it occurs. As can be seen from the many bullet-points provided earlier, researching motivations for particular voluntary actions, such as reporting social and environmental information, is only one of many areas of research in the area of social and environmental accounting. It is this issue of motivation to which this special edition of AAAJ relates and it is this issue which will now be the focus of the remainder of this paper. Of course, there could be a variety of motivations for managers to voluntarily undertake certain activities, such as deciding to report social and environmental information. Some reasons might include: . The desire to comply with legal requirements. This would not be a major motivation in a great deal of countries given the lack of requirements in relation to social and environmental disclosures and associated verifications (Deegan, 2000). . ``Economic rationality'' considerations that is, there might be business advantages in appearing to do ``the right thing'' and this might be the key motivation rather than any acceptance of any social responsibilities of business (Friedman, 1962). . A belief in an accountability or responsibility to report that is, there could be a view held by managers that people have a inalienable right to information that should be satisfied (Hasnas, 1998; Donaldson and Preston, 1995; Freeman and Reed, 1983) regardless of the associated costs. Unfortunately, it is unlikely that this view would be the dominant view in most business organisations operating within the capitalist system. . A desire to comply with borrowing requirements. Increasingly lending institutions are requiring, as part of their own risk management policies, borrowers to periodically provide various items of information about their social and environmental policies and performance. . To comply with community expectations, perhaps reflective of a view that compliance with the ``community licence to operate'' (or ``social contract'') is dependent upon providing certain accounts of social and environmental performance (Deegan, 2002). . As a result of certain threats to the organisation's legitimacy. For example, reporting might be a response to negative media attention, particular environmental or social incidents, or perhaps as a result of poor rating being given by particular ratings agencies (see Deegan et al., 2000, 2002; Patten, 1992). . To manage particular (perhaps powerful) stakeholder groups (see Ullman, 1985; Roberts, 1992; Evan and Freeman, 1988; Neu et al., 1998).

To attract investment funds. Internationally, ``ethical investment funds'' are becoming an increasing part of the capital market; for example, the Dow Jones Sustainability Group Index. People responsible for rating particular organisations for the purpose of inclusion or non-inclusion within the funds' investment portfolio utilise information from a number of sources, including information being released by the organisations themselves. To comply with industry requirements, or particular codes of conduct. For example, within Australia the Australian Minerals Industry has a Code for Environmental Management (as do other industries, such as the Australian Electricity Industry). There are certain pressures to sign to such codes. Such codes can then have associated reporting requirements (see Deegan and Blomquist, 2001). To forestall efforts to introduce more onerous disclosure regulations. Linked to the above bullet-point, evidence shows that one of the reasons that the Australian Minerals Industry introduced its code of environmental conduct, which requires external environmental reporting, was a fear that government might take the matter further and instigate the development of regulation (Deegan and Blomquist, 2001). To win particular reporting awards. There are a number of environmental, social, and sustainability reporting awards being offered within numerous countries throughout the world, with possibly the most well-known ones being those offered by the Association of Chartered Certified Accountants. Many organisations put a great deal of effort into winning these awards, and receiving the associated positive publicity such awards generate. Winning an award might in turn have positive implications for the reputation of the company (Deegan and Carrol, 1993).

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Of course, there could be several motivations simultaneously driving organisations to report social and environmental information and expecting that one motivation might dominate all others would be unrealistic. Indeed, many of the above motivations are interrelated. There could be many other motivations, other than those listed above, which would also drive the reporting decision. As indicated above, one factor that has in recent times been embraced by many researchers as motivation behind corporate social and environmental disclosures is the desire to legitimise an organisation's operations. This view is embraced within legitimacy theory. Because the balance of the papers in this special issue of AAAJ embrace legitimacy theory as the theoretical basis of their arguments it is useful to provide an introduction and overview of legitimacy theory[5]. We will then consider how the other papers in this edition of AAAJ contribute to the research being undertaken within the area.

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5. An overview of legitimacy theory Legitimacy theory, like a number of other theories such as political economy theory and stakeholder theory, is considered to be a systems-oriented theory. According to Gray et al. (1996, p. 45):
. . . a systems-oriented view of the organisation and society . . . permits us to focus on the role of information and disclosure in the relationship(s) between organisations, the State, individuals and groups.

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Within a systems-oriented perspective, the entity is assumed to be influenced by, and in turn to have influence upon, the society in which it operates[6]. Corporate disclosure policies are considered to represent one important means by which management can influence external perceptions about their organisation. The insights provided by legitimacy theory (and stakeholder theory) build on those that emanate from another theory, known as political economy theory (see Benson, 1975). The ``political economy'' itself has been defined by Gray et al. (1996, p. 47) as ``the social, political and economic framework within which human life takes place''. Political economy theory explicitly recognises the power conflicts that exist within society and the various struggles that occur between various groups within society. The perspective embraced in political economy theory, and also legitimacy theory, is that society, politics and economics are inseparable and economic issues cannot meaningfully be investigated in the absence of considerations about the political, social and institutional framework in which the economic activity takes place. It is argued that by considering the political economy a researcher is better able to consider broader (societal) issues which impact how an organisation operates, and what information it elects to disclose. According to Guthrie and Parker (1990, p. 166):
The political economy perspective perceives accounting reports as social, political, and economic documents. They serve as a tool for constructing, sustaining, and legitimising economic and political arrangements, institutions, and ideological themes which contribute to the corporation's private interests. Disclosures have the capacity to transmit social, political, and economic meanings for a pluralistic set of report recipients.

Consistent with the view that organisations are part of a broader social system, the perspectives provided by legitimacy theory (which, as stated, build on foundations provided by political economy theory) indicate that organisations are not considered to have any inherent right to resources, or in fact, to exist. Organisations exist to the extent that the particular society considers that they are legitimate, and if this is the case, the society ``confers'' upon the organisation the ``state'' of legitimacy. This is consistent with Mathews (1993, p. 26), who states:
The social contract would exist between corporations (usually limited companies) and individual members of society. Society (as a collection of individuals) provides corporations with their legal standing and attributes and the authority to own and use natural resources and to hire employees. Organisations draw on community resources and output both goods and services and waste products to the general environment. The organisation has no

inherent rights to these benefits, and in order to allow their existence, society would expect the benefits to exceed the costs to society.

Introduction

The idea of ``legitimacy'' can be directly related to the concept of a ``social contract'', as referred to above by Mathews. Legitimacy theory itself directly relies upon this concept[7]. Specifically, it is considered that an organisation's survival will be threatened if society perceives that the organisation has breached its social contract. Where society is not satisfied that the organisation is operating in an acceptable, or legitimate, manner, then society will effectively revoke the organisation's ``contract'' to continue its operations. This might be evidenced through, for example, consumers reducing or eliminating the demand for the products of the business, factor suppliers eliminating the supply of labour and financial capital to the business, or constituents lobbying government for increased taxes, fines or laws to prohibit those actions which do not conform with the expectations of the community. As a theoretical construct, the terms (or ``clauses'') of the social contract cannot be known with any precision, and different managers will have different perceptions about the various ``terms'' of the contract. Offering some assistance, Gray et al. (1996) suggest that legal requirements provide the explicit terms of the contract, while other non-legislated societal expectations embody the implicit terms of the contract. It is in relation to the composition of the implicit terms of the ``contract'' that we can expect managers' perceptions to vary greatly[8]. Legitimacy itself has been defined by Lindblom (1994, p. 2) as:
. . . a condition or status which exists when an entity's value system is congruent with the value system of the larger social system of which the entity is a part. When a disparity, actual or potential, exists between the two value systems, there is a threat to the entity's legitimacy.

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Legitimacy is considered to be a resource on which an organisation is dependent for survival (Dowling and Pfeffer, 1975). However, it is a ``resource'' that the organisation also can impact or manipulate (Woodward et al., 2001). Consistent with resource dependence theory (see Pfeffer and Salancik, 1978), legitimacy theory would suggest that whenever managers consider that the supply of the particular resource is vital to organisational survival, then they will pursue strategies to ensure the continued supply of the resource[9]. In relation to legitimacy, such strategies may include targeted disclosures, or perhaps controlling or collaborating with other parties who in themselves are considered to be legitimate (Oliver, 1990; Fiedler and Deegan, 2002)[10]. Reflecting the overlapping nature of many theories, the notion of legitimacy is also central to institutional theory (see DiMaggio and Powell, 1983). Under this theory, organisations will change their structure or operations to conform with external expectations about what forms or structures are acceptable (legitimate). For example, because the majority of other organisations in an industry might have particular governance structures there might be ``institutional'' pressure on an organisation to also have such structures in place. That is, there is expected to be some form of movement towards conformance

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with other ``established'' organisations. Failure to undertake this process leading to congruence, which is referred to as ``isomorphism'' (DiMaggio and Powell, 1983, p. 149), has direct implications for an entity's survival. However, in contrast to legitimacy theory, wherein there is perceived to be an ability of managers to alter perceptions of legitimacy (perhaps through disclosures), under institutional theory managers are expected to conform with ``norms'' that are largely imposed upon them. Another theory, stakeholder theory, can also provide insights which are similar to those provided by legitimacy theory (reflective of the fact that both derive from political economy theory). As Gray et al. (1995b, p. 52) state, to treat legitimacy theory and stakeholder theory as two totally distinct theories would be incorrect:
It seems to us that the essential problem in the literature arises from treating each as competing theories of reporting behaviour, when ``stakeholder theory'' and ``legitimacy theory'' are better seen as two (overlapping) perspectives on the issue which are set within a framework of assumptions about ``political economy''.

Because there is a deal of overlap between a number of theories, and because the theories can provide slightly different and useful insights, there has been a move by some researchers to use more than one theory to provide an explanation for particular managerial actions (see Fiedler and Deegan, 2002) although such a strategy would not be supported by some academics (``purists''?) who believe that a researcher must embrace just one ``view'' of the world[11]. Briefly, in relation to stakeholder theory it should be appreciated that there are actually a number of theories that have been given the broad label of stakeholder theory. This in itself creates some confusion. As Deegan (2000) explains, there is both an ethical (or normative) branch of stakeholder theory, and a managerial (or positive) branch. The ethical branch provides prescriptions in terms of how organisations should treat their stakeholders (with a variety of definitions being given to ``stakeholders''). This theoretical view emphasises the responsibilities of organisations (see Hasnas, 1998; Donaldson and Preston, 1995; Freeman and Reed, 1983). As a theory that provides prescription, it therefore does not have a direct role in predicting managerial behaviour. By contrast, the managerial branch of stakeholder theory emphasises the need to ``manage'' particular stakeholder groups particularly those that are deemed to be ``powerful'' because of their ability to control resources that are necessary to the organisation's operations (Ullman, 1985). As Gray et al. (1996, p. 45) state in relation to stakeholder theory (from the managerial branch):
Here (under this perspective), the stakeholders are identified by the organisation of concern, by reference to the extent to which the organisation believes the interplay with each group needs to be managed in order to further the interests of the organisation. (The interests of the organisation need not be restricted to conventional profit-seeking assumptions). The more important the stakeholder to the organisation, the more effort will be exerted in managing the relationship. Information is a major element that can be employed by the organisation to

manage (or manipulate) the stakeholder in order to gain their support and approval, or to distract their opposition and disapproval.

Introduction

That is, information is disclosed for strategic reasons, rather than on the basis of any perceived responsibilities. Managers have an incentive to disclose information about their various programs and initiatives to particular (powerful) stakeholder groups to indicate that they are conforming to the stakeholders' expectations. In this regard, Neu et al. (1998) found support for the view that particular stakeholder groups can be more effective than others in demanding social responsibility disclosures. They found that particular companies were more responsive to the demands or concerns of financial stakeholders and government regulators (stakeholders deemed to be powerful) rather than to the concerns of environmentalists. Similar results were reported by Roberts (1992). Again, it is emphasised that there is much overlap between a number of theories, such as stakeholder theory and legitimacy theory. Proponents of legitimacy theory often talk about ``society'', and compliance with the expectations of society (as embodied within the social contract). However, this provides poor resolution given that society is clearly made up of various groups having unequal power or ability to influence the activities of other groups. Stakeholder theory explicitly accepts that different groups have different views about how organisations should conduct their operations, and have different abilities to affect an organisation. When researchers such as Lindblom (1994), who embrace legitimacy theory, discuss the concerns of ``relevant publics'' they are changing the focus from ``society'' towards particular groups therein, and indeed are borrowing insights from stakeholder theory (even though this might not be explicitly acknowledged). The insights provided by stakeholder theory help in identifying what groups might be relevant to particular management decisions, and perhaps, which expectations the organisation has to pay more attention to conforming with (arguably, organisations are subject to a number of social contracts). Whilst the balance of this paper, as well as the papers that follow in this special issue of AAAJ (Deegan et al., 2002; O'Donovan, 2002; Milne and Patten, 2002; O'Dwyer, 2002), will consider legitimacy theory, it seems important to remember the links legitimacy has with other theories, such as stakeholder theory, and the benefits that can accrue from trying to see a particular occurrence through more than one view (theory) of the world. Returning to the idea of a ``social contract'', which is central to the notion of organisational legitimacy, it is worth noting that the theoretical construct of the social contract is not new, having been discussed by philosophers such as Thomas Hobbes (1588-1679); John Locke (1632-1704); Jean-Jacques Rousseau (1712-1778). However, it is only recently that this concept, which was used in philosophy and politics literatures, has been embraced within accounting research. Shocker and Sethi (1973, p. 67) provide a good (and often cited) overview of the concept of a social contract:
Any social institution and business is no exception operates in society via a social contract, expressed or implied, whereby its survival and growth are based on:

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(1) the delivery of some socially desirable ends to society in general, and (2) the distribution of economic, social, or political benefits to groups from which it derives its power. In a dynamic society, neither the sources of institutional power nor the needs for its services are permanent. Therefore, an institution must constantly meet the twin tests of legitimacy and relevance by demonstrating that society requires its services and that the groups benefiting from its rewards have society's approval.

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An organisation might not be perceived as legitimate for several reasons. Perhaps community expectations have changed with the implication that what was once acceptable corporate behaviour is no longer deemed acceptable. That is, legitimacy itself is a dynamic concept (Lindblom, 1994). Or, perhaps particular events have occurred which have detrimentally impacted the reputation or legitimacy of the organisation, or the industry to which it relates (Patten, 1992) such as major adverse social or environmental events that are linked to the operations of the organisation. Again, it must be emphasised that how or whether management reacts to perceived legitimacy gaps (perhaps through corporate disclosures) is based on their perceptions of how society views the organisation in terms of whether what is being done is acceptable that is whether there is perceived to be a legitimacy gap in the first place. Confronted with the same facts, not all managers might perceive a legitimacy gap and related threat[12]. Where managers perceive that the organisation's operations are not commensurate with the ``social contract'' then, pursuant to legitimacy theory, remedial strategies are predicted. Because the theory is based on perceptions, any remedial strategies implemented by the manager, to have any effect on external parties, must be accompanied by disclosure. That is, information is necessary to change perceptions. Remedial action which is not publicised will not be effective in changing perceptions (Cormier and Gordon, 2001). This perspective, as provided by legitimacy theory, highlights the strategic importance (and power) of corporate disclosures, such as those made within annual reports and other publicly released documents. In considering organisational strategies for maintaining or creating congruence between the social values implied by an organisation's operations, and the values embraced by society, two particular papers have been regularly quoted within the literature, these being Dowling and Pfeffer (1975) and Lindblom (1994). Dowling and Pfeffer (1975, p. 127) outline the means by which an organisation, when faced with legitimacy threats, may legitimate its activities:
.

the organisation can adapt its output, goals and methods of operation to conform to prevailing definitions of legitimacy; the organisation can attempt, through communication, to alter the definition of social legitimacy so that it conforms to the organisation's present practices, output and values; and

the organisation can attempt through communication to become identified with symbols, values or institutions which have a strong base of legitimacy.

Introduction

Consistent with Dowling and Pfeffer's strategy of ``communication'', Lindblom (1994) proposes that if an organisation perceives that its legitimacy is in question it can also adopt a number of strategies all of which will rely on the use of external disclosures. Lindblom (1994) identifies four courses of action (there is some overlap with Dowling and Pfeffer) that an organisation can take to obtain, or maintain legitimacy. The organisation can seek to: (1) educate and inform its ``relevant publics'' about (actual) changes in the organisation's performance and activities; (2) change the perceptions of the ``relevant publics'' but not change its actual behaviour; (3) manipulate perception by deflecting attention from the issue of concern to other related issues through an appeal to, for example, emotive symbols; or (4) change external expectations of its performance[13]. According to Lindblom and Dowling and Pfeffer, the public disclosure of information in such places as annual reports can be employed by an organisation to implement each of the above strategies. For example, a firm may provide information to counter or offset negative news which may be publicly available through the news media, or it may simply provide information to inform the interested parties about attributes of the organisation that were previously unknown. In addition, organisations may draw attention to strengths, for instance environmental awards won, or safety initiatives that have been implemented, while sometimes neglecting, or down-playing, information concerning negative implications of their activities, such as pollution or workplace accidents. There have been a number of studies in the SEA area which have embraced legitimacy theory. One early and very influential paper was Guthrie and Parker (1989). Guthrie and Parker sought to match the disclosure practices of BHP Ltd (BHP Ltd is a large Australian company and has subsequently become BHP Billiton) across the period 1885-1985 with a historical account of major events relating to BHP Ltd. The argument was that if corporate disclosure policies are reactive to major social and environmental events, then there should be correspondence between peaks of disclosure, and events which are significant in BHP Ltd's history. Whilst this paper did not provide evidence supportive of legitimacy theory (perhaps due to data limitations, as Deegan et al. (2002) explain) a large number of subsequent research studies have used and refined their arguments. The result has been that, more often than not, corporate social and environmental disclosure strategies have been linked to legitimising intentions. This subsequent research includes Patten (1992, 1995), Gray et al. (1995a), Deegan and Rankin (1996), Deegan and Gordon (1996), Walden and

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Shwartz (1997), Brown and Deegan (1998), O'Donovan (1999), Deegan et al. (2000) and Deegan et al. (2002). Although there is mounting evidence that managers adopt legitimising strategies, we can perhaps reflect upon whether this is actually a ``useful'' insight? Such results provide a view that information might only be released by an organisation when suspicions or concerns are aroused. This is not consistent with a view (or perhaps a hope?) that managers disclose information for accountability reasons because people have a right-to-know about aspects of the organisation's operations. The implication of such findings is that if disclosures are successful in allaying community fears, as seems to be the intent of managers, then these legitimising strategies may enable organisations, that negatively contribute to various groups within society, to continue operations. Social progress could be hindered by such legitimising strategies (Puxty, 1991). The view that managers will only provide disclosures when people have concerns which threaten legitimacy also has implications for regulation. Arguably, disclosure decisions should not be responsive to perceived legitimacy threats but should be based on beliefs about what managers are considered to be accountable for, and what people need to know about (which of course are difficult issues in themselves). What the weight of the literature on disclosure motivations should do, is provide sufficient evidence to regulators that leaving it to managers to disclose information cannot be expected to lead to the provision of unbiased information. As a theory that is based on managers' perceptions of social contracts (and these perceptions will differ between managers), and potential breaches thereof, legitimacy theory does suffer resultant problems in relation to precision of prediction. Further, even if managers were to agree on whether there was a legitimacy threat, conceivably different managers will adopt different legitimising strategies from the array of possibilities that would be available and again, any prediction would be problematic. However, whether the inability to provide precise predictions of managerial behaviour should render a theory deficient is far from clear. Whatever the case, legitimacy theory does arguably provide useful insights into the managerial decision-making processes. While legitimacy theory might provide useful insights, it can still be considered to be an under-developed theory. There are many ``gaps'' in the literature which embraces legitimacy theory. For example, do legitimising activities actually work, and if so, which forms of disclosure media are more successful in changing community views about an organisation (see the following paper by Milne and Patten, 2002)? Further, there is still a general lack of knowledge about whether particular groups in society are relatively more influenced by legitimising disclosures than others, or indeed, whether managers think particular groups are more readily influenced than others. Also, how do managers most effectively become aware of community concerns and therefore, the terms of the ``social contract''? How do managers determine which segments of society (perhaps referred to as ``conferring publics''

(O'Donovan, 2002, or ``relevant publics'' (Lindblom 1994)) are conferring the much-needed legitimacy? While such limitations, as mentioned above, are inherent within the literature it is hoped that new research, such as that which is detailed in the papers that follow, will contribute to the ongoing understanding of managers' reporting decisions. 6. The contribution of the other papers in this edition of Accounting, Auditing & Accountability Journal The four papers to follow embrace legitimacy theory as the basis of their examination of the motivations for corporate managers to make social and environmental disclosures. Arguably, each of the papers provides valuable contributions to the development of theory. The first paper by Deegan et al. (2002) relates to a study of the disclosure practices of BHP Ltd. This is a fairly conventional style of paper as it relies on the use of publicly available (secondary) data. The results of the study by Deegan et al. support legitimacy theory. Whereas the paper by Deegan et al. relies on publicly available data, and infers motivations therefrom, the other three papers directly rely on insights provided by either corporate managers, or recipients of corporate disclosures. These three papers are important in that they signal a more sophisticated approach to testing corporate motivations, and an acceptance that ``conversations'' with managers and report users can provide very important insights into their behaviour. The direct questioning of managers for the purposes of testing legitimacy theory had previously only been undertaken by a limited number of researchers (for example, Buhr, 1998; O'Donovan, 1999). The second and third papers by O'Donovan (2002), Milne and Patten (2002) generate findings that are generally supportive of legitimacy theory in explaining annual report disclosure practices. The final paper by O'Dwyer (2002) provides results which tend to question the explanatory ability of legitimacy theory. We will now consider each of the papers in slightly more depth to identify some specific contributions to the literature. Deegan et al. (2002) investigate the social and environmental disclosure policies of BHP for the years 1983-1997. This paper represents an extension of Guthrie and Parker (1989) a paper which, as previously stated, was a very valuable contribution to the accounting literature, but one which failed to provide general support for legitimacy theory (perhaps due to some limitations in the data used, as Deegan et al. suggest). Deegan et al. (2000) investigate whether the extent of community concern pertaining to particular issues associated with BHP Ltd's operations in turn elicits particular disclosure reactions from the company. The measure of ``community concern'' used by Deegan et al. is based on the extent of media attention devoted to particular issues. In doing so, they rely upon the insights provided by Media Agenda Setting Theory, a theory that was first brought into the accounting literature by Brown and Deegan (1998), and which has been cited in a number of subsequent accounting studies[14].

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The Deegan et al. (2002) contribution represents a refinement of the methods applied in Brown and Deegan (1998) as they specifically investigate the extent of media attention directed to specific social and environmental issues relating to BHP and how BHP's annual report disclosures, pertaining to these particular events, appear to respond. Specifically, the underlying proposition (which is consistent with legitimacy theory) is that changes in society concerns, reflected by changes in the themes of print media articles, will be mirrored by changes in the social and environmental themes disclosed, and by the extent of the disclosure being made. Supportive of legitimacy theory, the findings show that those issues that attracted the largest amount of media attention were also those issues which were associated with the greatest amount of annual report disclosures. These results lend support to legitimation motives for a company's social disclosures and also support O'Donovan's (1999) conclusions that managers make annual report disclosures in response to media coverage. Deegan et al. (2000) therefore highlight the potential power of the media in influencing corporate disclosure policies, and they again reinforce the dilemma that unless community concerns are somehow aroused (perhaps as a result of the media embracing a particular agenda) then managers may elect not to provide information about particular aspects of their organisation's social and environmental performance. The next paper by O'Donovan (2002) explicitly recognises that managers' legitimising strategies will conceivably differ depending upon whether they are trying to gain, maintain, or repair the legitimacy of their organisation. This can be contrasted to the many studies that simply investigate management responses to perceived legitimacy threats. Given the lack of research into corporate strategies for gaining and maintaining legitimacy, O'Donovan (2002) represents a very important contribution to the literature. O'Donovan argues that maintaining legitimacy is likely to be easier than gaining or repairing it. Further, it is recognised that different organisations will have different ``levels'' of legitimacy to maintain, with the implication that the more an organisation relies upon its legitimacy for commercial purposes (for example, some cosmetic firms relative to armament manufacturers), the more vigilant the organisation needs to be to potential legitimacy threats. In undertaking the research O'Donovan uses six vignettes which are given to six managers from large Australian companies. The vignettes involved hypothetical environmental issues and events pertaining to fictitious companies, and provided different scenarios that could be associated with either gaining, maintaining, and repairing legitimacy. The significance of the environmental issues and events were made to differ between the vignettes. Managers were asked how their disclosure response would differ between the different scenarios. Supportive of legitimacy theory, O'Donovan shows that the significance of the event impacts whether managers will make a disclosure-related reaction. Where there is perceived to be a minimal threat, then no disclosures would be deemed necessary. Disclosure reactions were also found to differ depending upon

whether the action was necessary to gain, maintain, or repair legitimacy this, arguably, is an important insight. Whilst some existing research (including O'Donovan, 2002) concentrates on managers' reactions to particular events, there is still very little information about whether legitimising strategies actually change attitudes about an organisation. The paper by Milne and Patten provides some much-needed insights. As with O'Donovan (2002), Milne and Patten (2002) generate their own data, rather than relying on secondary data sources. Specifically, Milne and Patten report the results of an experiment in which they use 76 US practising accountants as surrogates for investors. They ask the accountants to indicate how they would allocate a fixed amount of investment funds across two fictitious chemical companies. The subjects were required to consider both a long-term and short-term investment time horizon and they were provided with ``mocked-up'' financial statements and Management Discussion and Analysis Reports for each company. The environment section of the Management Discussion and Analysis Report was the variable being manipulated. One company (the ``poorer performer'') was shown to have greater exposure to US Super-fund related requirements. All respondents received the reports of both companies; however, half of the respondents received extra ``positive'' information from management about the poorer performer's current and future environmental performance. The results indicated that those subjects that received the ``legitimising disclosures'' tended, when adopting a long-term investment horizon, to invest more in the poorly performing company than those that did not receive the legitimising disclosures. Interestingly, the same results did not hold when the subjects were requested to adopt a short-run strategy. For the short-term scenario, they saw the higher risk associated with being a poor environmental performer as being associated with potentially higher returns, and with a short-term horizon they tended to invest relatively more in the poorly performing company (the higher risk was associated with a higher potential return). However, this propensity to invest more in the poorly performing company was reduced for those subjects that received the legitimising disclosures. These are very interesting results which, prima facie, do suggest that legitimising disclosures can make a difference, but this difference depends upon whether the investors adopt a long-term or short-term decision horizon. Of course, whether these results generalise to other stakeholders, or accountants outside of the USA (or indeed, outside of the sample), is not something we can be sure about. The final paper is by O'Dwyer. Following the theme of the previous two papers, O'Dwyer (2002) also uses primary data to investigate issues associated with legitimising disclosures. He directly seeks the perception of managers about the motivations for corporate social disclosures within annual reports, and whether they believe social disclosures can be successful as a legitimation strategy. Specifically, in-depth interviews are held with 29 senior executives from 27 Irish companies operating across six industries. He also explicitly investigates reasons for absences of disclosure. The interviewees provide a

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view that Irish companies are the subject of ``major'' social pressures with pressures particularly coming from local communities, environmental pressure groups, and the print media. The managers also indicated that as a result of many recent Irish corporate misdemeanours, society was generally sceptical of managerial actions. There was a general acceptance that social pressures generated a need for the companies to be responsive, with managers in environmentally sensitive sectors indicating that their annual report disclosures did tend to be reactive and tied to a desire to repair legitimacy. Further investigation, however, indicated that many of these companies provided minimal disclosures. A general perception is provided that in Ireland, legitimising disclosures are unlikely to succeed and could be counterproductive. There is a view that Irish people tended not to emphasise positive achievements or actions (it was not ``the done thing''), and that such disclosures could heighten suspicions about a company, and increase demands about their performance. Managers also expressed a view that reacting to particular social and environmental concerns, through corporate disclosures, could act to make the concerns legitimate. Avoiding reporting could actually assist in making issues ``go away''. O'Dwyer therefore does not challenge that companies see the need for legitimising their organisation at different times, but his results suggest that, at least in the Irish context, the use of corporate social disclosures within the annual report would not be used as part of a portfolio of legitimising strategies. Indeed some organisations that did use the annual report for such purposes have ceased to use it because of its perceived futility in acting as a ``legitimation vehicle''. Whether these results are Irelandspecific are not clear. Certainly they seem to differ from the insights provided by O'Donovan (2002) and Milne and Patten (2002). This raises the point that legitimisation strategies, if employed, may vary between countries and broad comments made about how managers react to particular events may need to explicitly consider national, historical and cultural contexts. 7. Concluding comments As this paper demonstrates, there is a growing interest in researching various social and environmental accounting issues. Such interest has particularly grown since the latter half of the 1990s. One particular issue that has attracted a deal of research attention is the social and environmental reporting practices of corporate entities. As long as such disclosures remain predominantly of a voluntary nature then accounting academics will undoubtedly continue efforts to understand the motivations for reporting. As was indicated in this paper, there can be many motivations driving managers to externally report information about an organisation's social and environmental performance. One such motivation might be the desire to legitimise certain aspects of an organisation's operations. Legitimacy theory, the theoretical basis of the four following papers, provides a foundation for understanding how and why managers might use externally-focused reports to benefit an organisation. While legitimacy theory,

as it is currently applied, might still be considered to be in need of further refinement, papers such as those that follow will hopefully help other researchers to further develop theory to explain corporate social and environmental reporting practices.
Notes 1. In writing this article there was no intention to evaluate the various reporting practices being adopted by particular organisations or industries, although this is obviously a worthy and needed area for research and commentary. Nevertheless, it should be noted that current practices often attract criticism from various scholars within the academic community. 2. For one view about the role of accounting in providing social and environmental information to demonstrate accountability see the ``accountability model'' discussed by Gray et al. (1996). 3. There have also been critical appraisals of the works of the ``critical theorists'', typically because of the perception that their work generally lacks any prescriptive content (Mathews, 1997). 4. See the organisations' Web sites for details of the guidance documents being released. The Web sites, respectively, are: www.globalreporting.org; www.accountability.org.uk; www.wbcsd.ch and www.cepaa.org. 5. Some of the following discussion about legitimacy theory is based on material provided in Deegan (2000). 6. A systems-based perspective can be contrasted with other theoretical perspectives which tend to be more ``closed'' in orientation. For example, Positive Accounting Theory (Watts and Zimmerman, 1986) typically considers the relationships between only three groups, managers (agents), owners (principals), and debt holders, and generally ignores other stakeholder groups. 7. The notion of a social contract which comprises various societal norms and expectations also is of direct relevance to other theoretical perspectives, such as institutional theory, political economy theory, and stakeholder theory. See Mathews (1993), Gray et al. (1996), and Deegan (2000) for an overview of these theories. There is much overlap between these theories. 8. As such, legitimacy is not necessarily defined or inferred by legality. The legal institutionalisation of corporations proscribes only narrow accountabilities and limited responsibilities (Warren, 1999). While the law reinforces changes in social values it does not necessarily create them. 9. As the discussion demonstrates, and as previously noted, there is much overlap between a number of theories used to explain corporate strategies and to treat any of the theories as discrete would be rather na ve. 10. In research which considers motivations for collaborations between environmental groups and Australian building and construction companies, Fiedler and Deegan (2002) found that one key motivating factor, from the perspective of managers from the construction companies, was the benefits from being associated with an environmental group. This was because of the perceived legitimacy of such groups. 11. At this point it is worth noting that, with the exception of a very limited number of papers such as Ness and Mirza (1991), advocates of Positive Accounting Theory (see Watts and Zimmerman, 1986) have typically not chosen to study issues associated with the manager's choice to disclose social and environmental information. Consistent with this, it is interesting to consider why researchers that explore social and environmental accounting disclosure decisions a ``positive issue'', overwhelmingly reject Positive Accounting

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Theory as the basis of their arguments. Perhaps it is because early leaders in the area of social and environmental accounting rejected Positive Accounting Theory as ``morally bankrupt'' (Gray et al., 1996 p. 75) and this influenced subsequent researchers. Positive Accounting Theory also tends to be a much more ``closed-systems'' approach, with its focus on a limited subset of stakeholders, such as managers, owners and debt-holders. Hence it would not resonate well with researchers who envisage an organisation as being part of a broader social system. Alternatively, perhaps it is because Positive Accounting Theory, with its reliance on economics-based assumptions such as ``self-interest drives all action'' (which encourages current consumption relative to future consumption), does not provide very much hope for any quest towards true accountability or sustainability. 12. The ``legitimacy gap'' refers to the difference between the ``relevant publics'' expectations relating to how an organisation should act, and the perceptions of how they do act. 13. Whilst a somewhat tangential issue, it is interesting to note that Lindblom (1994) is one of the papers that is most highly cited by researchers who are working in the paradigm related to legitimacy theory. Yet, there is no evidence of this conference paper ultimately being published in an academic journal. This is quite unusual for such a highly cited paper. 14. Media agenda setting theory has been a dominant theory in the mass-communication literature since the 1970s.

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Jaggi, B. and Zhao, R. (1996), ``Environmental performance and reporting perceptions of managers and accounting professionals in Hong Kong'', International Journal of Accounting, Vol. 31 No. 3, pp. 333-46. Lewis, L., Humphrey, C. and Owen, D. (1992), ``Accounting and the social: a pedagogic perspective'', British Accounting Review, Vol. 24 No. 3, pp. 219-33. Medawar, C. (1978), The Social Audit Consumer Handbook, Macmillan Press, London. Owen, D.L. and Gray, R.H. (1994), ``Environmental reporting awards: profession fails to rise to the challenge'', Certified Accountant, April, pp. 44-8. Social Audit Ltd (1973-1976), Social Audit Quarterly. Spicer, B.H. (1978), ``Investors, corporate social performance and information disclosure'', The Accounting Review, Vol. 53 No. 1, pp. 94-111. (About the Guest Editor: Craig Deegan is based in the School of Accounting and Law at RMIT University, Melbourne, Australia, where he is Professor of Financial Accounting. His consulting, research and teaching areas include financial accounting, financial accounting theory, research methods, and social and environmental accounting and accountability. He consults regularly with corporations, government and industry on various social and environmental accountability issues and is Chairperson of the Institute of Chartered Accountants in Australia Triple Bottom Line Issues Group).

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