Accounting Theories and Practice

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Accounting Theories and Practice

Introduction

Corporate social responsibility is one of the core aspects in a business; however, it has multiple definitions with many businesses and firms framing dissimilar definitions based on their understanding. Basically, corporate social responsibility is about how a company manages the business processes to produce an overall positive impact on the society; furthermore, it is through this that organizations are able to establish the quality of their management (both in terms of people and processes), and the nature of, and their impact on their society in the various areas.

Today, most stakeholders and shareholders take an increasing interest in the activity of a company. Generally, the CSR field is all about profits, political performance, social demands and ethical values; additionally, it covers a wide scope of theories and approaches that are used to guide companies and organizations in enforcing or performing its social responsibility.

Part One: Shareholders and Stakeholders Theories

There a number of stakeholders and shareholders theories that relate to corporate social responsibility; mainly these theories affect the relationship between a company and its shareholders and stakeholders (Mahoney et. al, 2013, 352).

  1. Legitimacy theory – emphasizes that firms and organizations continually seek out to make sure that they operate within the bounds and norms of their respective societies which explains why they try to ensure that their activities are perceived by parties from outside hence maintaining legitimacy. However, the bounds and norms are known to change frequently hence requiring the organization to be responsive to the environment in which they partake their activities.

This theory relies on the aspect that there is a social contract between a particular organization and its society; concurrently, the contract is the concept used to represent the multitude of implicit and explicit expectation that the society has on how the organization should conduct its operations.

  1. Stakeholder normative theory – The ethical and normative perspective of this theory puts much attention on the notion that its every stakeholder’s right to be treated fairly and viewed equally by an organization, and that matters of stakeholder power are not directly pertinent.
  • Universal Rights- Over the years, human rights have been taken as a basis of corporate social responsibility especially in the international market and recently, a number of human rights based approaches have been brought forward on the same. Basically, this theory defends the existence of natural human rights; however, many people do not take them seriously but they have a theoretical grounding with some moral philosophy giving them support.
  1. Sustainable Development – This has become popular and necessarily because it is an approach that evolved at macro level and not the corporate level; typically it demands for corporate contribution requiring the integration of social, environmental and economic considerations to make balanced judgements and decisions for the long term.

Significantly, achieving corporate sustainability is a custom – made process/ task and each corporation should select personal ambitions and approaches to do the same; moreover, these approaches should meet its aims and be in line with the strategy for the sake of the organization’s operations.

  1. The Common Good Approach – This is a less combined approach if compared to the stakeholder approach though it hold the regular good of society as the referential value for corporate social responsibility with its stress of the business together with any other social group or individual should contribute to it. This theory can be enhanced by creating wealth, providing goods and services in an effectual manner and respecting the dignity and right of every individual; additionally, it campaigns for the social well being and a harmonic way of living together in just peaceful and friendly conditions today and there after.

Part Two: Positive Accounting Theories

The positive accounting theories include: instrumental theories, political theories and integrative theories.

Instrumental Theories

There are three main groups identified in the instrumental theories and these include:

Maximizing Shareholder Value – This approach takes the straightforward contribution to maximizing the shareholder value as the supreme criterion to evaluate specific corporate social activities where it is used in decision making. Today not many shareholders are interest in value maximization alone and it is through this concept that a firm sets the objective of long term value maximization or value-seeking (Elisabeth &Domenec, 2004, 53).

Strategies for Achieving Competitive Advantages

  1. Social investments in competitive context- This theory entails spending on humanitarian activities as the only way to develop the framework of competitive advantage of a corporation and mostly forms bigger social value than most individual sponsors or the government can.
  2. Natural resource based view of the firm and dynamic capabilities- Maintains an organizations ability to be ahead of its competitors; moreover, this is facilitated by other factors like the unique interaction of human, organization and physical resources over time.
  3. Strategies for the bottom of the economic pyramid- In the past, most business line of attacks concentrated on aiming products at upper and middle-class people in contrast to the biggest portion of the world’s population is poor or lower-middle class and it is from this that it has been decided that disruptive innovations can improve the social and economic conditions at the base of the pyramid (Brennan and Merkl-Davis, .

Cause Related Marketing

Basically, this is the procedure of formulating and implementing activities involving marketing, and these activities are characterized by an offer from an organization to offer a particular amount to selected cause when consumers are involved in revenue providing exchanges that meet the needs and aims of both the organization and individuals.

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