ACTG 2010 Lecture Notes - Lecture 4: Takeover, Insider Trading, Good Governance

• School: York University
• Department: Accounting
• Course: ACTG 2010
• Professor: Douglas Kong

Document Summary

Legitimacy helps to explain the role of a corporation"s charter, shareholders, board of directors, management and employees all of which are part of the corporate governance system. Organizations are legitimate to the extent to which their goals and values are congruent with the social system within which they function. Legitimation is a dynamic process by which business seeks to perpetuate its existence. Legitimacy has to be considered at both the micro and macro level. At micro level- business achieving and maintaining legitimacy by conforming to societal expectations. At macro level- refers to the corporate system that is the totality of business enterprises. In comparing both the levels, it is clear that, although specific organizations try to perpetuate their own legitimacy, the corporate system as a whole rarely addresses the issue at all. This is bad because powerful issues regarding business conduct clearly indicate that such institutional introspection is necessary if business is to survive and prosper.