2.3.3 Theory of Maximized Profits for Shareholders
According to Wiedmann (2008), the conventional theory of CSR believes that companies, as a business setup, should take optimal profit making for shareholders as their most fundamental objective. The realization of the benefits of any other concerned interest parties who are under the influence of the company‘s behaviors should not be deemed as the corporate objective. And the management body of the company shall have the right to resort to any means to achieve the goal when making any decisions or taking any actions on behalf of the company.
2.3.4 Stakeholders Theory
According to Griffin and Mahon (1997), stakeholders‘ theory maintains that maximizing the interests of the shareholders of the company is the most important objective that a business organization should achieve. However, it should not be considered as the sole objective. As a business organization, a company is vitally interrelated with the overall social environment. When in business activities, a company should not only consider on the influence that the activities may have on shareholders, but also on the influence that they will have on the interests of the parties other than the shareholders, including employees, suppliers, customers, creditors and on the benefits of the government. When a company makes any decision, it has to take into account the benefits of these people. Otherwise, it should take liabilities against any harm or damages thus incurred to these people.
2.3.5 Good Corporate Citizens Theory
According to Caroll (1991), this theory maintains that companies, as business organizations, should take profit making as the corporate objectives. However, companies are also liable to offering help, i.e. companies shall have the obligation to help solve certain social problems. For instance, companies shall have the obligation of making donations to education or charity organizations.
2.3.6 Minimum Requirement of Morality Theory
The minimum requirement of morality theory according to Ojo (2010) believes that companies have the obligation to satisfying shareholders‘ interests rather than causing damages to other parties. By this theory, as long as companies have avoided causing or corrected the social harm caused due to their behavior during the process of business activities, the companies are deemed to have fulfilled their social responsibilities. The CSR theory of minimum requirement of morality is regarded by some scholars as conservative idealism, or in other words as the voluntary compliance with the law.
2.3.7 Theories of Corporate Social Disclosure
If theories of conventional accounting disclosures revolve around the need of decision makers for information on which to base their choices, then they seem unlikely to explain this, largely voluntary, activity (Gray, Owen & Maunders, 1987). Although Toms (2002) does suggest that environmental disclosure might serve as a conduit for signaling facts about environmental management and this might explain why a some companies might adopt such a strategy, theories which explain the increase in social disclosures, which include more than just environmental management issues, and the interest in social reporting generally, are likely to rest elsewhere. In their 1987 paper, Gray, Owen and Maunders review theories that might explain the phenomena, and argue that it is more likely that social and political theory studies will shed light on the practice. They go on to discuss in detail three sets of theories: theories of the stakeholder, theories of legitimacy, and theories of political economy.
2.3.8 Social Accounting and General Systems Theory
Social reporting, at a theoretical level, is concerned with how commercial activity links into other social systems, and presents an alternative ontological approach to how one views the role of corporations. Indeed, understanding systems thinking is important in understanding the meta- theoretical assumptions of social and environmental accounting. In short, as explained by Gray, Owen & Maunders (1987), it is an approach designed to reverse the tendency in scientific thought towards reductionist reasoning. Systems theory has its origins in the natural sciences and is explained in the following terms: an attempt to study a part without understanding the whole from which the part comes (reductionism) was bound to lead to misunderstandings. The part can only be understood in its context; understanding tends to be directed by and limited to one‘s own discipline. Natural phenomena are complex and cannot be successfully studied by artificially bounded modes of thought (Gray, Owen & Maunders, 1987).The essence of systems thinking therefore demands that we think about all our commercial (and leisure) activities in the context of how they affect other life systems.
2.3.9 Legitimacy Theory
Other reasons for companies choosing to disclose information relate to issues of legitimacy. In the same way that it was suggested that companies require the support of stakeholders to survive, legitimacy theory in the words of Ojo (2010) implies that a corporation‘s activities must be legitimate in the eyes of society to allow it to continue; in the doomsday scenario, if the company loses its legitimacy, then it will cease to exist. This notion may well have seemed somewhat theoretical, in itself, prior to the Enron scandal, but applied to Arthur Andersen, it can be seen to have some basis. It is not difficult to argue that, as the accounting irregularities became apparent, so the business world turned its back on Andersen, and its legitimacy was compromised to such an extent that it could not continue, and folded in a spectacularly short time.
This theory suggests that company disclosures may be a reaction to the perception that companies have of how they are viewed by different stakeholder groups within society. The theory itself is based on the notion that companies have an implicit approval from society to allow them to operate, in return for performing actions beneficial to society. The position this theory takes in relation to company disclosures is outlined by Lindblom (1993), who suggests that companies might adopt one of four strategies in an effort to keep society informed and sympathetic to the companies aims. She outlines these approaches in what might be seen as strategies of escalating manipulative persuasion, i.e. that company activity might not alter, but that the message it wishes to convey is designed to fulfill one or more of these strategies. She suggests that, while the information disclosed may be the same, the purpose behind the disclosure may have four distinctly different purposes.
