Tag Archives: social contract theory

Theoretical Perceptions of Corporate Social Responsibility: A Critical Review (Published)

This study examined the different accounting theories and how they applied to corporate social responsibility (CRS).  The accounting theories are stakeholder theory, social contract theory, legitimacy theory and signalling theory. These theories were explained and discussed from a corporate social responsibility point of view, this was done by identifying the conditions that best suits these theories. From the review done on these theories, the stakeholders theory applied to corporate social responsibility by explaining that a company is not just responsible to shareholders but to other groups of people who are affected or are been affected by the activities of the company and at that they should be responsible to them as well. The social contract theory pointed out that there is an invisible contract between the business enterprise and society and the contract contains some indirect obligations to be performed by the business organisation to the society and these obligations can be show cased through the corporate social responsibility report. This means that whether the company likes it or not the wellbeing of the society is part of their responsibility. The legitimacy theory expects that organisations should be legit in their business operations. They should always provide corporate social responsibilities activities to the society in which they operate, as it is through that means they will be obtaining approval to continue operations in that society and finally the signalling theory explains that there is a reward for reporting corporate social responsibility information voluntarily to the capital market, because the reported information could motivate investors and potential investors to invest in the company.

Keywords: Corporate Social Responsibility, Legitimacy theory, shareholder theory, social contract theory