BACHELOR BUSINESS ADMINISTRATION HONS

SEMESTER 9 / 2023

BBCG3103
CORPORATE GOVERNANCE

MATRICULATION NO : 96011310543001

IDENTITY CARD NO. : 960113-10-5430

TELEPHONE NO. : 6019-3085349

E-MAIL : emilyzainudin@oum.edu.my

LEARNING CENTRE : BANGI LEARNING CENTER

1
Table of Content

No. Content Page

1.0 Introduction 2
2.0 Concept of Concept Social Responsibility (CSR) 2
3.0 Overview of Malaysian Corporate Social Responsibly 5
4.0 Corporate Social Responsibility and Islamic View 7
5.0 Stakeholder Theory 8
6.0 Stakeholders and the importance of CSER Disclosure in Malaysia 10
7.0 Institutional Theory 11
8.0 Summary 14
9.0 Reference 15
10.0 Part II OCP 16

1.0 Introduction

In the recent decade, corporate social responsibility (CSR) has become a global trend,
and it has established itself as a significant field in business literature. The growing number
of CSR research demonstrates this point. Companies are increasingly expected to consider
their social responsibility in their daily operations, rather than only enhancing their financial
success, as CSR has become an essential issue for commercial entities. The definition of CSR
has been a topic of debate among researchers and academics for the past 60 years.

Howard R. Bowen was the first scholar to publish a manuscript on the topic of
corporate dimension. Bowen is frequently referred to as the "Father of Corporate Social
Responsibility." A company's social responsibility entails accepting responsibility for its
decisions and actions in relation to society. Furthermore, CSR required firms to be concerned
with concerns that transcend beyond the firm's legal, technical, and economic needs.

2.0 Concept of Corporate Social Responsibility (CSR)

The proposed general recognised definition of CSR is depicted in a pyramid of four

CSR dimensions in which business social responsibility encompasses economic, legal,
ethical, and discretionary obligations. All of these responsibilities are expected of the
corporation by society after its establishment. The pyramid is designed in such a way that
each dimension must be completed sequentially before the higher dimension may be
completed. Figure 1 depicts the four elements of a CSR pyramid, which include economic
duties at the bottom, legal responsibilities, ethical responsibilities, and philanthropic

2
responsibilities at the top. The fundamental dimensions serve as the foundation for the
advanced dimensions.

The economic dimension is the foundation of social responsibility for businesses since it
focuses on the production of goods and services as well as the process of selling them for a
profit. Business has evolved into a basic societal economic unit by creating job opportunities,
even maximising shareholder income, and driving new product and service innovation.

The second dimension, the legal dimension, deals with fulfilling economic obligations in line
with the legal standards, laws, and rules established by the federal, state, and municipal
governments, such as the labour act, taxation act, and environmental standards. From this
vantage point, society expects businesses to carry out their economic missions within the
framework of legal requirements established by the societal legal system, which is governed
by the federal, state, and municipal governments. As a result, a good corporation must bear
the law and incorporate it into its operations and management. The next dimension is ethical
duties, which describe all acts and practises based on societal choice and ethical acceptance
even if it is not stated in the legislation. Companies have a responsibility to be good in ways

3
that go beyond legal compliance or acceptable behaviour. Companies, for example, should
not offer products that do not fulfil production specifications, as this could have a harmful
impact on the health of consumers. The ethical dimension is the most difficult for firms to
comply with of the four dimensions because different societies may have different standards
and sets of ethical rules. This indicates that in order to be regarded as good corporate citizens,
businesses must consider ethical aspects, legal compliance, and economic performance.

Philanthropic obligations are the highest dimension, encompassing voluntary corporate acts
to society that improve their overall quality of life. Companies, for example, make donations
to natural disaster victims, sponsor society's programmes, provide scholarships to outstanding
students from low-income families, launch awareness campaigns about the dangers of
consuming too much sugar in food and beverages, or establish community facilities such as a
general hall or a free cybercafé.

Overall, it can be argued that CSR goes beyond the profit motivation, requiring corporations
to consider other aspects such as environmental protection, employee care, being ethical in
daily business activities, and increasing the quality of life in society. Companies have
increased their involvement in CSR when they are confident that it will benefit them. For
example, improved performance, greater brand image and company reputation, increased
profit, increased ability to attract and retain existing staff, all of which lead to distinguishing
the companies from their competitors.

As a result, implementing CSR increases the acceptance, value, and sustainability of the
companies and grants them a "licence to operate." The products or services offered by the
companies will be purchased by society. However, if firms fail to ensure their social and
environmental duty, their reputation will suffer. Consumers will boycott their products,
disrupting their operations and, in the end, causing the companies to fail. This demonstrates
that they have lost their "licence to operate." As CSR has become a global trend, there is a
need to understand the evolution of CSR in Malaysia. As a result, this study is motivated to
provide a general summary of CSR studies in Malaysia.

4
3.0 Overview of Malaysian Corporate Social Responsibly

Malaysia has been a strong supporter of CSR. High-profile Malaysian events, such as the
collapse of the Highland Towers and the 1997 widespread smog, raised awareness of CSR in
Malaysia, instilling a higher level of expectation on Malaysians. Companies to be more
environmentally responsible (Smith, Yahya, & Amiruddin, 2007). The government's
endeavour began in 1974 with the passage of the Environmental Quality Act. This activity
involved legislating concerns about environmental safety and pollution. As a result, each
house construction or development, as well as any other project, must comply with the
Environmental Impact Assessment (EIA).

The Malaysian government is constantly promoting and emphasising the critical role of CSR
in contributing to the country's growth. The Malaysian government is also encouraging CSR
practises by including them in the Malaysia Plan, the Capital Market Master Plan, and the
national budget. As a result, the CSR agenda has been established as an integral part of
Malaysia's vision 2020 and the National Integrity Plan (NIP) (Malaysian 10th Plan;
Malaysian 9th Plan). Thus, the Malaysian Institute of Integrity (IIM) was established under
NIP with the main responsibility to promote the practise of ethical principles, good values,
and integrity among public and private companies (Goi & Yong, 2009).

The majority of CSR research in Malaysia concentrated on disclosure. Several issues of CSR
disclosure were investigated within the framework of disclosure. Among the concerns
investigated are the level of disclosure, the quantity of information released, the forms of
disclosure, and the characteristics of the companies. Among these topics, disclosure level is
the most commonly studied theme, with most research focusing on the level of disclosure and
motivating factors influencing disclosure level.

The researcher evaluated 100 publicly traded firms from various industries, including
plantations, mining, manufacturing, and services, using a personal interview questionnaire. It
centred on the notion of CSR, the type and scope of business involvement in socially
responsible activities, and corporate social reporting via four levels of social objective
hierarchy, namely, social awareness, social involvement, social reporting, and social audit.
The researcher discovered that top management beliefs influenced company knowledge of
social roles. Furthermore, the findings revealed that the practises of parent firms are the most
important determinant of foreign-owned companies. Furthermore, human resource

5
difficulties and product or service to consumers are the primary focus of firms' social activity.
It was also revealed that the majority of corporations that disclosed social characteristics were
large publicly traded companies with significant foreign ownership.

In terms of disclosure level, discovered that the disclosure level of 100 firms across all
sectors was poor, with less than 30% of the companies disclosing CSR every year. However,
[4, 16] demonstrated that the level of CSR reporting increased over time as a result of various
factors such as legislation enforcement, pressure groups' increased demand and ethical
investors, the establishment of awards for good CSR practise by companies, increased
economic activities, and societal awareness and politics. Conducted research on how Chief
Executive Officer (CEO) utterances communicate CSR success. Corporations use this
statement to report their compliance with the government and the stock exchange, as well as
their obligation to their stakeholders. Through social legitimacy, businesses contribute to
strengthen economic legitimacy. There are currently no accounting standards in Malaysia for
providing CSR information.

However, CSR development reached a critical milestone in 2006. According to former Prime
Minister (PM) Tun Abdullah Badawi's address in the Malaysian Government Budget of
2007/2008, Public Listed Companies (PLCs) were required to report on CSR activities in
their annual reports. Bursa Malaysia then issued the CSR framework for Malaysian PLCs, as
well as a directive to the PLCs to embrace CSR reporting (Bursa Malaysia CSR Framework,
2006). The Corporate Social Responsibility Disclosure (CSRD) is mentioned in this report.
This CSRD in Malaysia is entirely voluntary. Table 1 depicts the CSR framework's four
dimensions: environment, community, marketplace, and workplace. This framework assists
PLCs in implementing CSR. However, the organisation has admitted that it neither delivers
the entire narrative regarding CSR nor the solution This approach has been described as "a
one-size-fits-all" one. Not all PLCs will fit within the parameters specified. A company may
choose to finish all dimensions or only the one pertinent to its field of endeavour in order to
get a competitive edge.

6
 Dimension Activity
Enviroment Climate Change, Energy (Renewable Energy, Energy Efficiency, Biofuel),
Waste Management, Biodiversity, and Endangered Wildlife.
Community Employee Volunteerism, Education (Schools Adoption Scheme), Youth
Development, Underprivileged, Graduate Employment and Children.
Marketplace Green Products, Stakeholder Engagement, Ethical Procurement, Supplier
Management, Vendor Development, Social Branding and Corporate
Governance.
Workplace Employee Involvement, Workplace Diversity, Gender Issues, Human
Capital Development, Quality of Life, Labour Rights, Human Rights, and
Health & Safety.
Table 1 Summary of CSR dimensions (Bursa Malaysia CSR Framework, 2006)

In the same year, 2006, Khazanah Nasional Berhad2 was established as a Government-
Linked Company (GLC)3. The Silver Book, which covers CSR recommendations for the
GLCs, was produced by Transformation Plan. This is a set of principles and rules that GLCs
must follow in order to actively contribute to society while also creating value for their
shareholders. The silver book also provides guidance to GLCs on how to clarify and handle
any social commitments. These activities are timely as we use the CSR platform to position
Malaysian companies in the global market.

4.0 Corporate Social Responsibility and Islamic View

Since the Quran became a guide in human life, CSR has been deeply rooted in Islamic
roots. Indeed, the values and ideals contained in Islam serve as a foundation for CSR, and it is
unquestionably the same concept proposed by Western (Dusuki, 2008). Islamic teaching
includes all aspects of life, including politics, economics, and social issues. Islam emphasised
the importance of social welfare in ensuring the Ummah's long-term development. Man is
God's vicegerent (khalifah) on this earth who has been given the mind, and they are the best
economic agents if they follow all of God's instructions. The concept of faith and dedication
will encourage people to do good rather than only for themselves. Individuals or businesses
that do not necessarily guarantee the supply of welfare benefits in this world and the next.
These considerations encouraged believers to keep doing well through the concept of social
welfare. Obedience to God will motivate businesses and individuals to continue practising

7
social responsibility. Shariah-compliant enterprises must operate within the framework of
social responsibility based on the factors proposed by (Carroll, 1991, 1999).

Justice is a key component of Islamic economic systems, and to ensure that it is applied,
Islam has highlighted three basic strategies to be adopted by humans: eliminating convergent
ownership, proper reward factor, and infaq to a non-factor. To ensure that wealth does not
accumulate to a specific group, Islam outlaws the assumption of ownership. The concept of
justice in Islamic beliefs is unmistakably opposed by capitalism economic systems.Workers
or anybody else participating in the production process should be appropriately rewarded for
the energy they contribute. JuWages, rent, and profit could all be forms of giving.

Infaq, or donate to non-factor, is a notion that is closely related to CSR in that there is a need
to share the output return to people in need. People with disabilities, orphans, the elderly, and
the impoverished are among the groups identified by Islam as deserving of assistance. To
ensure the development of the Ummah, the group must be guaranteed to benefit equitably
from a country's economic activity. Zakah (obligatory for the poor) and Sadaqah are two
types of donating.From an Islamic perspective, the major goal of income distribution is to
ensure that those who need help are able to survive and, later, are among those who
contribute.

5.0 Stakeholder Theory

Stakeholder theory is a theory that is concerned with the relationship between an

organisation and its stakeholders. Its stakeholders. Despite the fact that Ansoff (1965) was
thought to be the first to use the term "stakeholder theory" (Roberts 1992), evidence reveals
that the term "stakeholder", the fulcrum of the stakeholder theory was first utilised in 1947
(Johnson 1947). However, it gained popularity after the mid-1980s. Most of the key issues in
stakeholder theory were addressed by Freeman (1984; Freeman 1994; 2005) and other
researchers (for example, Clarkson 1994; Clarkson 1995; Donaldson & Preston 1995;
Harrison & Freeman 1999; Branco & Rodrigues 2007; Carroll & Buchholtz 2009).
According to Freeman (1984), a stakeholder is "any group or individual who can affect or is
affected by the achievement of the firm's objectives" (Freeman 1984, p. 49). While using
Freeman's concept of a stakeholder as a foundation, several scholars attempted to be more
particular by categorising stakeholders in various ways. Strategic and moral stakeholders, for
example (Goodpaster 1991); external and internal stakeholders (Pearce 1982; Carroll 1989);
latent, expectant, and definitive stakeholders (Mitchell et al/. 1997); subgroups of

8
stakeholders such as shareholders, employees, and customers (Preston & Sapienza 1990);
single issue and multiple issue stakeholders (Wood 1994); supportive, marginal,
nonsupportive, mixed blessing stakeholders (Savage eta/. 1991); voluntary and involuntary.
The major point of these classifications is to stress the fact that there are many stakeholder
groups with varying and occasionally competing expectations.

Instead of just meeting the expectations of shareholders, as is the case with traditional
shareholder theories, an organisation must meet the multiple expectations of its various
stakeholder groups, according to the stakeholder perspective, because "stakeholder theory
emphasises organisational accountability beyond simple economic or financial performance"
(Guthrie et al.) According to stakeholder theory, an organization's management is expected to
fulfil its obligation to its stakeholders through engaging in activities deemed vital by its
stakeholders and providing information. As a result, the term "accountability" is widely used
in relation to this theory, and the research examines how one focused organisation delivers
accountability to its multiple stakeholders (Smith 2008).

Stakeholder theory has given rise to some assumptions. They exist in a variety of stakeholder
literatures, including strategic management, CSR, business and society, and business ethics
(Freeman 1984; Freeman 1994; Donaldson & Preston 1995; Harrison & Freeman 1999;
Freeman 2005; Belal 2008; Smith 2008). These assumptions, which can be described as
follows, illustrate their breadth and provide comprehensive understanding for this theory.

1. Stakeholders are identified from the perspective of a single focus organisation.

2. In order to fulfil its objectives, a company must successfully manage its stakeholders.

3. There are various types of stakeholders, and these types frequently have competing
interests.

4. An organisation must be able to balance the competing interests of stakeholders in its

external environment and those in its internal environment.

5. Stakeholders put pressure on an organisation because they expect or have a vested interest
in something.

6. The ability of stakeholders to exert pressure on an organisation is determined by the

organisational characteristics of stakeholders.

7. An organisation owes its stakeholders financial, social, and environmental duties.

9
Different interpretations and classifications of stakeholder theory are visible in the literature
based on the preceding assumptions. Donaldson and Preston (1995), for example, proposed a
stakeholder theory taxonomy: normative, instrumental, and instrumental-instrumental.
Another example was provided by Berman (1999), who put forth the intrinsic stakeholder
commitment paradigm and the strategic stakeholder management model.. Although there are
many other interpretations and classifications of stakeholder theory, two major branches
stand out in the literature: the ethical (moral or normative) branch and the managerial
(positive) branch (Grey et al. 1996; Guthrie et al. 2006; Belal & Owen 2007; Bela! 2008;
Deegan 2009; Grey et al. 2010; An et al. 2011).

6.0 Stakeholders and the importance of CSER Disclosure in Malaysia

Industries must be held accountable for their operations, especially CSER practises.
Currently, multiple government agencies and regulatory authorities are not working together.

‘there is no coordination amongst different agencies involved for organizational

environmental issues. The public sector's decision-making process was frequently hampered
by "red tape". As a result, the government and regulatory bodies must provide corporations
with clear standards for improving CSER disclosure. Only publicly traded corporations in
Malaysia are required to report their CSER. However, revealing the specifics of items to be
disclosed is still up to the companies and is entirely voluntary. As a result, the Department of
Environment (DOE) has issued a written guideline for businesses to follow in order to meet
societal expectations while also protecting the environment.

The DOE guideline outlines Malaysia's environmental policy objectives. The guideline also
covers the environmental standards in Malaysia under the Environmental Quality Act of 1974
for pollution prevention, abatement, and control, as well as environmental enhancement.
Environmental impact assessment (EIA) is needed in Malaysia for operations included in the
Environmental Quality (Prescribed operations) (EIA) Order 1987. Malaysia has also
implemented two EIA procedures: preliminary EIA and detailed EIA. EIA reports should be
prepared in compliance with the requirements outlined in the DOE Handbook of EIA
requirements. All interviewees emphasised the need of coordination among government
agencies and regulatory entities. When pollution or environmental issues or incidents are
published or featured in the media, no proper investigations are usually done. They further
stated that blaming other agencies is always used to avoid responsibility. This lack of
coordination may skew law enforcement, impacting and limiting organisations' CSER

10
initiatives (Acutt & Medina-Ross 2004). Thus, collaboration across governments and
regulatory bodies has the potential to reduce social and environmental costs. Such
coordination can also ethically improve the operation of organisations in meeting the
demands of society and environmental issues (Hamann & Acutt 2003; Naeem & Welford
2009).

7.0 Institutional Theory

Institutional theory investigates organisational structures and explains why organisations with
similar traits or forms exist in the same "organisational field." An organisational field is
defined by DiMaggio and Powell (1983) as "those organisations that, collectively, constitute
a recognised area of institutional life: key suppliers, resource and product consumers,
regulatory agencies, and other organisations that produce similar services or products."
“According to Carpenter and Feroz (2001), "institutional theory views organisations as
operating within a social framework of norms, values, and assumed assumptions about what
constitutes appropriate or acceptable economic behaviour". Organisations conform within an
organisational field, maybe due to institutional demand for change, because "they are
rewarded for doing so through increased legitimacy, resources, and survival capabilities"
(Scott 1987). According to Powell (1983), once an organisational field is constructed,
numerous powerful forces within society arise, causing organisations within the field to grow
more similar to one another.

There are two aspects in institutional theory: isomorphism and decoupling. Isomorphism,
according to DiMaggio and Powell (1983), best explains the process of homogenisation.
DiMaggio and Powell (1983) define isomorphism as "a constraining process that forces one
unit in a population to resemble other units that face the same set of environmental
conditions." Isomorphism is classified into two types by Moll, Burns, and Major (2006):
competitive isomorphism and institutional isomorphism. Competitive isomorphism is defined
by Mollet et al. (2006) as "how competitive forces drive organisations towards adopting
least-cost, efficient structures and practises’. Institutional isomorphism can be divided into
three processes: coercive isomorphism, mimetic isomorphism, and normative isomorphism
(DiMaggio & Powell1983).

Coercive isomorphism, the first of these processes, is related to external forces like as
shareholder influence, employee influence, and government legislation. As a result, this
process emerges as a result of pressure from powerful or essential stakeholders (on whom an

11
organisation is dependent) to change institutional practises such as CSR reporting (Deegan
2009). The process of coercive isomorphism is clearly tied to the managerial perspective of
stakeholder theory, which focuses on powerful stakeholders. When discussing how coercive
isomorphism creates some degree of homogeneity within organisations, Deegan (2009)
claims that "a company could be coerced into adopting its existing voluntary corporate
reporting practises... to bring them into line with the expectations and demands of its
powerful stakeholders (while possibly ignoring the expectations of less powerful
stakeholders)". Because these powerful stakeholders may have comparable expectations of
other firms, there will tend to be conformity in the practises that diverse organisations employ
- institutional practises will move towards some sort of uniformity".

The second step, mimetic isomorphism, includes organisations attempting to replicate or

copy the practises of other groups, primarily to gain a competitive edge in terms of
legitimacy. One of the powerful influences that drives copying is uncertainty (DiMaggio &
Powell 1983). Unerman and Bennett (2004) state, "any organisation that failed (at a
minimum) to follow innovative practises and procedures adopted by other organisations in
[the] same sector would risk losing legitimacy in relation to the rest of the sector". CSR
reporting is one of these new practises that might help to maintain and improve business
legitimacy.

The third and last isomorphic process, according to DiMaggio and Powell, is normative
isomorphism. It refers to the pressures that emerge from shared beliefs to adopt specific
institutional practises. According to Deegan (2009), in relating normative isomorphism to
corporate reporting, including voluntary reporting, (the professional expectation that
accountants will comply with accounting standards acts as a form of normative isomorphism
for the organisations for whom accountants work to produce accounting reports (an
institutional practise) that are shaped by accounting standards. In terms of voluntary reporting
practises, normative isomorphic pressures could originate from a variety of both formal and
informal groups to which managers belong, such as the culture and working practises formed
inside their workplace". All three isomorphic processes stated above lead firms to adopt
identical structures and managerial practises in their areas, regardless of their actual utility or
organisational efficiency (DiMaggio & Powell1983;

Feroz and Carpenter 2001). Carpenter and Feroz (200lL) state that "institutional theory is
based on the premise that organisations respond to pressures from their institutional

12
environments by adopting structures and or procedures that are socially accepted as the
appropriate organisational choice". The other dimension of institutional theory, in addition to
isomorphism, is decoupling. This dimension refers to the gap between an organization's
external image and its actual structures, procedures, or practises. The real practises of an
organisation do not have to conform to external expectations. This separation, which could be
purposeful or unintended on the part of the organisation, is known as decoupling (Moll eta/.
2006). "Decoupling refers to the situation in which the formal organisational structure or
practise is separate and distinct from actual organisational practise," write Dillard, Rigsby,
and Goodman (2004). According to Deegan (2009), "this decoupling can be linked to some
of the insights from legitimacy theory, whereby social and environmental disclosures can be
used to construct an organisational image that may be very different from the actual
organisational social and environmental performance." Thus, the organisational image built
through corporate reporting may be one of social and environmental responsibility while the
true managerial imperative is profit maximisation or shareholder value maximisation".
Institutional theory, according to Deegan (2009), connects organisational practises, including
CSR and other accounting practises, to the values and conventions of the society in which a
business operates. This relationship eventually leads an organisation to the need to retain,
earn, and restore legitimacy. Legitimate structures and or practises spread to organisations in
an area via coercion, imitation, and normative pressures. Organisations establish institutional
I practises through isomorphic processes (Dillard eta. 2004). Voluntary CSR disclosure and
voluntary participation in CSR efforts by an organisation are regarded as institutional practise
(Deegan 2009). In management accounting, political science, social and organisational
development, accounting controls, and financial reporting, institutional theory is a well-
established theoretical perspective (Grey eta. 2010).

13
8.0 Summary

Malaysia is on track to become a developed nation by 2020. Malaysia is supposed to

encourage high accountability, integrity, transparency, and long-term economic growth in
order to become a developed country. As a result, CSR, regarded as a booster, could assist
and change Malaysia in achieving its aim. Most CSR studies in Malaysia focused on
disclosure and factors that influence CSRD, with only a few studies focusing on awareness
and perception. The CSRD has been rising over the years, and it would assist businesses
indirectly in terms of financial performance and company sustainability. Previous study in
Malaysia across industries, sectors, and responses suggests that CSR has the potential to
create more accountability, transparency, and sustainability. Previous study in Malaysia
across industries, sectors, and responses suggests that CSR has the potential to create more
accountability, transparency, and sustainability. Thus, incorporating CSR as part of the
company can surely assist organisations in the long run when it comes to sustainability.
Because few studies have looked into awareness and perception variables, there is plenty of
room for future study that can fill gaps in the CSR literature, particularly for Malaysian
studies. Furthermore, the regulatory authority must reform and strengthen the framework to
assist enterprises in reporting disclosure, as this will undoubtedly provide more relevant and
reliable information to various stakeholders. The establishment of new CSR policies in
Malaysia is critical for long-term social development, notably in obtaining developed nation
status by 2020.

All of these theories are derived from political economy theory, which provides "by far the
more interesting and insightful theoretical perspectives" (Grey et al. 1995a, p. 52). While
these three ideas are commonly used in CSR research, they are generally used separately. We
feel that using a single theory as a theoretical framework to describe organisational actions in
CSR practise is insufficient. In this study, an attempt is made to integrate three important
theories in order to acquire a broader understanding of and deep insights into the CSR
conduct of enterprises, an outcome that may not be reached by a single theory alone.
Accountability is usually associated with stakeholder theory, which states that an
organization's management is expected to be accountable to its many stakeholders and to
engage in activities deemed relevant by them. Stakeholder theory expands legitimacy theory's
"society expectations" by taking into account the organization's society with enhanced
resolution, recognising a variety of stakeholders with competing interests. Legitimacy theory
extends stakeholder theory by addressing more than merely societal expectations of

14
accountability. It also engages in a by itself. The legitimisation process, in other words,
guarantees that the organization's action is viewed to be compliant with social norms and
expectations from the perspective of various stakeholder clusters in society. Institutional
theory is concerned with generally accepted social norms and/or institutional practises that
are influenced indirectly by the organization's stakeholders. According to institutional
theory, organisations in the same area tend to become homogeneous by adopting common
institutional practises and conforming to widely accepted social norms and beliefs.
Organisations gain legitimacy from society as a whole or from multiple stakeholder groups
by adopting and adhering to common institutional practises, as well as social conventions and
values.

9.0 References

1. Ahmad, N.N.N., Sulaiman, M. & Siswantoro, D. 2003. Corporate social responsibility

disclosure in Malaysia: An analysis of annual reports of KLSE listed companies.
IIUM Journal of Economics and Management 11(1): 1-37.
2. Ahmad, N.N.Z. & Sulaiman, M. 2004. Environmental disclosures in Malaysia annual
reports: A legitimacy theory perspective. International Journal Commerce and
Management 14(1): 44-58.
3. Braendle, U. C., & Kostyuk, A. N. (2007). Developments in Corporate Governance.
Corporate Governance, 1–11.
4. Ewan, D. (2022, February 21). Difference Between Legitimacy Theory and
Stakeholder Theory. Difference Between Similar Terms and Objects.
5. Freeman, R. E., Harrison, J. S., Wicks, A. C., Parmar, B., & Colle, S. de. (1984).
Stakeholder Theory. Cambridge University Press. 978-0-511- 67692-5
6. Freeman, R. E., Wicks, A. C., & Parmar, B. (2004). Stakeholder theory and the
corporate objective revisited. Organization Science, 15(3)

15
Part II OCP

16
17