Accounting Organizationsand Society,Vol. 12, No. 4, pp. 341-355, 1987. 0361-3682/87 $3.00+.

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Printed in Great Britain 1987 PergamonJournals Ltd.

ACCOUNTING AS A L E G I T I M A T I N G INSTITUTION*

ALAN J. RICHARDSON
Department of Accounting Faculty of Business, University of Alberta

Abstract

Recent attempts to reconceputalize the role of accounting in organizations and society have suggested that
accounting may be examined as a "legitimating institution". The concept of legitimation, however, has not
developed within a single theoretic tradition, rather it emerges from three sociological traditions, each
suggesting a distinct perspective on the phenomenaand openingnew areas for research. This paper reviews
perspectives on legitimation, locates existing research on accounting within them, and suggests some areas
for further research.

I n r e c e n t l i t e r a t u r e t h e r e have b e e n a t t e m p t s to W a t e r h o u s e ' s ( 1 9 8 3 ) n o t i o n that a c c o u n t i n g

r e c o n c e p t u a l i z e the role of a c c o u n t i n g . This has
b e e n o c c a s i o n e d b y the e m p i r i c a l failure of effi-
c i e n t m a r k e t t h e o r y a n d c o n t i n g e n c y t h e o r y to
p r o v i d e rationales for the d e v e l o p m e n t of ac-
c o u n t i n g t e c h n i q u e s a n d systems, as well as
explicit calls to c o n s i d e r a c c o u n t i n g in its or-
ganizational a n d social c o n t e x t . T h e result has
b e e n the d e v e l o p m e n t of a n u m b e r of interest-
ing a p p r o a c h e s to a c c o u n t i n g i n c l u d i n g the mar-
kets a n d h i e r a r c h y f r a m e w o r k (Johnson, 1983),
a c c o u n t i n g in o r g a n i z e d anarchies ( C o o p e r et
al., 1 9 8 1 ) a n d a political e c o n o m y a p p r o a c h
(Tinker, 1980).
O n e o f the m o r e f r e q u e n t suggestions, al-
t h o u g h the t e r m i n o l o g y used has n o t b e e n con-
sistent, is that a c c o u n t i n g m a y b e usefully
s t u d i e d as a l e g i t i m a t i n g institution. T h e s e
suggestions r a n g e from C o o p e r ' s ( 1 9 8 0 , p. 1 6 4 )
assertion that " a c c o u n t i n g m a y b e v i e w e d as a
m e a n s o f s u s t a i n i n g a n d legitimizing the c u r r e n t
social, e c o n o m i c a n d political a r r a n g e m e n t s "
a n d T i n k e r etal.'s (1982) c h a r a c t e r i z a t i o n of ac-
c o u n t i n g as "ideology", to Tiessen &
serves a "constitutional" role in organizations.
T h e c o m m o n focus of these papers is the ability
o f a c c o u n t i n g , as a set of beliefs a n d t e c h n i q u e s ,
to link actions a n d values, i.e. to make those ac=
tions legitimate.
Also implicit i n these articles is the suggestion
that a c c o u n t a n t s are the m e d i u m t h r o u g h w h i c h
the legitimating role of a c c o u n t i n g k n o w l e d g e is
enacted. Although o t h e r s m a y use a c c o u n t i n g in-
formation, this i n f o r m a t i o n gains its credibility,
a n d h e n c e its p o t e n t i a l for m o t i v a t i o n and con-
trol, in part t h r o u g h its association w i t h i n d e p e n -
d e n t professionals. This p e r s p e c t i v e is consis-
t e n t w i t h w o r k o n the sociology of the profes-
sions w h i c h regards the professions as occupa-
tional g r o u p s w h i c h have g a i n e d a social man-
date to define w h a t is right a n d w r o n g w i t h i n a
specific s p h e r e of activity. This f u n c t i o n r e q u i r e s
a c o m b i n a t i o n of t e c h n i c a l skill a n d authority,
a n d emphasises the political n a t u r e of all profes-
sional activity (Hughes, 1958; Freidson, 1976;
Richardson, 1985a). 1
T h e c o n c e p t of l e g i t i m a t i o n has a long a n d

* The author would like to acknowledge the comments ofJ. Waterhouse, P. Teissen,J. J. Williamsand the Accounting Or-
ganizations &Societyreviewers on an earlier draft of this article. A more general debt of gratitude is owed to J. B. Dowling
for many conversations on the ideas developed here.
t The role of accounting as a legitimating institution, i.e. having the capacity to convey legitimacyonto actions, presumes and
requires that accounting knowledge and the institutions through which that knowledge is enacted are themselves seen as
legitimate. The "legitimacy of legitimating institutions" (Dowling, 1983) is a complex problems precisely because it is the
role of these institt/tions to take on and resolve the problematic legitimacy of clients. These issues have been addressed with
respect to the standard-setting process (Waterhouse, 1982;Johnson & Solomons, 1984); management accounting (Bartlett,
1982). This level of analysis,however, is distinct from that adopted in this article.
341
342 ALANJ. RICHARDSON

rich history w i t h i n sociological a n d political relation b e t w e e n a c t i o n a n d values (Richardson,

theory. It was not, h o w e v e r , d e v e l o p e d w i t h i n a
single theoretical tradition, rather, t h e r e are
three major perspectives - - structural-
functionalist, social constructionist, and
h e g e m o n i c - - o n the c o n c e p t of legitimation,
each offering different insights a n d suggesting
different research issues. T h e p u r p o s e of this
p a p e r is to briefly r e v i e w each of these perspect-
ives, locating existing w o r k o n a c c o u n t i n g
w i t h i n them, a n d to d r a w o u t the i m p l i c a t i o n s
for f u r t h e r r e s e a r c h o n the role of a c c o u n t i n g as
a legitimating institution. T h e s e t h r e e perspect-
ives are s u m m a r i z e d in Table 1.
THE NATURE OF LEGITIMATION
The p r o c e s s of legitimation, i n general terms,
m a y b e s e e n as an attempt to establish a s e m i o t i c
1985a; Richardson & Dowling, 1985). Semiotics
refers to c o m m u n i c a t i o n t h r o u g h the use of
codes. A c o d e consists of a set of expressions, a
set of c o n t e n t s , rules linking e x p r e s s i o n s a n d
c o n t e n t s , a n d a set of b e h a v i o u r s c o n t i n g e n t o n
the c o d e (Eco, 1976). Codes are arbitrary pair-
ings of reality ( c o n t e n t s ) to s y m b o l s (expres-
s i o n s ) w h i c h are a c c e p t e d as surrogates for, or
attributes of, that reality. Since the relationship
b e t w e e n values and actions is c o n v e n t i o n a l , i.e.
the m o r a l e v a l u a t i o n of a c t i o n is d e p e n d e n t o n
the historical and cultural c o n t e x t of that action,
semiotics p r o v i d e s a c o n v e n i e n t a n d analytically
p o w e r f u l m e a n s of c o n c e p t u a l i z i n g the relation-
ship. T h e p e r s p e c t i v e s o u t l i n e d b e l o w differ o n
o n e o r m o r e of t h r e e aspects of the n a t u r e of the
m a p p i n g b e t w e e n a c t i o n a n d values: the s o u r c e
of values; the d e f i n i t i o n of action a n d the range
of c o n c e i v a b l e alternatives; a n d the validity of

TABLE 1. Three perspectives on legitimation

Structural-functionalist Social constructionist Hegemonic

Key authors Parsons, Durkheim,MalinowskiSchutz, Weber, Berger & Marx, Gramsci

Luckmann

Perspective on Mechanismfor implementing Process of giving"meaning"to Processof mystifyingpower

legitimation social values "socialfacts"

Imputed function To ensure allocation of To ensure intersubjectivity to To maintain stable power

resources consistent with the allow social interaction and relations to advance the capital
"functionalimperatives"of cultural continuity accumulation process
society

Source of value Consensus driven by social Consensusdriven by social Elite ideology

functions interaction

Rangeof actions Definedby functions Definedby tradition Definedby elite self-interest

Nature of link between Presumed to be uniqueand Establisheddiscursively Falsebut believed by

Action and values objective subordinates

Examples in accounting Gambling( 1977), Tiessen & Boland& Pondy (1983) Tinker (1980), Cooper &
literature Waterhouse (1983), Berry Burchell e t al. (1985) Sherer (1984)
e t a L (1984).

Research issues Role of accounting systemsin Role of accounting systems in The role of accounting systems
minimizingconflicts and cultural continuityand in creating, distributing and
helping cope with uncertainty facilitatingintersubjectivity mystifyingpower
 ACCOUNTINGASA LEGITIMATINGINSTITUTION 343

the correspondence between values and action a given situation. The three dominant perspect-
(refer to Table 1 ). ives on the organization and c o n d u c t of this role
The structural-functionalist perspective pre- are reviewed below.
sumes that both values and actions are defined
by the functions which must be performed for a
social system to survive. The relationship be- THE STRUCTURAL-FUNCTIONALIST
tween values and actions is presumed to be un- PERSPECTIVE
ique and the evaluation of this link is a technical
function. The social constructionist perspective A theoretical o v e r v i e w
regards values as emerging from interaction The structural-functionalist perspective in
among members of a society. These values are s o c i o l o g y includes the work of Comte, Dur-
tied to emergent and institutionalized actions kheim, Pareto and many others (BurreU & Mor-
through a process of discourse directed by cer- gan, 1979; pp. 4 1 - 1 0 6 ) . In the late 1930s, Tal-
tain experts in legitimation (e.g. priests, elders, cott Parsons emerged as the great synthesizer of
professionals). The hegemonic perspective, fi- this tradition, and, for the last fifty years, his writ-
nally, regards values as an aspect of elite ing has directed work on this perspective. In
ideologies which are tied to actions which sus- exploring the concept of legitimation from the
tain and further the interests of these elites. The structural-functionalist perspective, I shall rely
link between values and actions in this case is primarily on Parsons' work.
"false" (with reference to some ideal state) but is Parsons regards society as a system which
accepted by those affected. must perform certain functions in order to main-
The process of legitimation concerns the tain homeostasis (equilibrium) and survive.
moral evaluation of action. The legitimation of Four "functional imperatives" were derived
action is necessary for that action to o c c u r from studies of small groups, economics and
where: an actor is seen to have a choice in the ac- psychotherapy (Effrat, 1968; p. 98) - - adapta-
tions he or she may take; the resource require- tion, pattern maintenance, goal attainment and
ments or consequences of action for others are integration - - and work in this area has focused,
non-trivial; other actors' participation cannot be empirically and analytically, on h o w these func-
coerced; and, their consent is necessary for the tions are accomplished in different cir-
actor to undertake his or her planned action or cumstances. The relationships among functions
avoid penalties for past actions (Richardson, define the major processes in society as shown
1985b). These conditions would seem to be met in Fig. 1.
in the relationship between managers and subor- Parsons (1977, p. 358) distinguishes sharply
dinates (Barnard, 1938) and between organiza- between legitimation and justification. Legitima-
tions and the institutional environment (Child, tion refers to processes which create and vali-
1972; Pfeffer & Salancik, 1978). The legitimation date the normative order of a society. It ties to-
of action requires the acceptance of an actor's gether the resource mobilization system and
claim that his or her action is congruent with the labour consumption market. In other words,
values of those with w h o m he or she must in- legitimation refers to processes which bring cul-
teract. tural values to bear on the distribution of re-
Accounting may be seen as a legimating in- sources in society. Justification, on the other
stitution to the extent that it mediates the map- hand, operates at a lower level of generality. It
ping between action and values. In particular, ac- ties together the political support system and re-
counting fills this role by structuring relations source mobilization system. Justification, thus,
among actors and acting as the medium through presumes the existence of relatively codified
which organizational control is exercised; serv- cultural values and operates to demonstrate and
ing as a sanctioning basis for action; and/or, de- ensure the congruence of particular allocative
fining or constraining the perception of action in decisions with those values. For Parsons, justifi-
 344 ALANJ. RICHARDSON

Resource
ADAPTATIVE. . . . . . . . . . . . . . Mobilization _GOAL-ATTAINMENT
SUBSYSTEM System SUBSYSTEM
(economy) i ~" "~ " TM (polity)
| s t " ~"~ AUocative I
| Legitimation Standard I
I
| ~*
System (Justification) I
I .- ~" System ~" .. |
Labour ~ ~, -~ ~ ~. Political
I
Consumption Support
Market System
System i
w I
I I
I I
!
| Loyalty l
PATYERN-MAINTENANCE Solidarity - - . INTEGRATIVESUBSYSTEM
(Culture) Commitment (Law and Custom)

Fig 1. Legitimationfrom a structural-functionalistperspective

(modified from Parsons, 1977, p. 366).

cation is a t e c h n i c a l p r o b l e m a d m i n i s t e r e d b y The actual m e c h a n i c s of c h a n g e have n o t b e e n

e x p e r t s in particular fields of e n d e a v o u r . The
professions are s e e n as o c c u p a t i o n a l g r o u p s par-
ticularly c o n c e r n e d w i t h this class of p r o b l e m s
(Parsons, 1954; pp. 3 4 - 4 9 ; Hargrove, 1972).
Legitimation, the c r e a t i o n a n d validation of a
n o r m a t i v e order, is c e n t r a l to Parsons' theoreti-
cal approach. H u m a n action, as o p p o s e d to re-
flex a n d m e c h a n i c a l m o v e m e n t , c a n o n l y o c c u r
w h e r e t h e r e is s o m e s n o r m a t i v e order:
Action must always be thought of as involving a state of
tension between two different orders of elements, the
normative and the conditional. As process, action is, in
fact, the process of alteration of the conditional elements
in the direction of conformity with norms (Parsons,
1937, p. 732).
G i v e n the c e n t r a l i t y of legitimation, it is
paradoxical that it receives such little a t t e n t i o n
in Parsons' w o r k ( n o t w i t h s t a n d i n g his transla-
tions of W e b e r ) . This arises b e c a u s e Parsons re-
gards the n o r m a t i v e o r d e r of society as a p r i o r /
to the e x i s t e n c e of society. A n o r m a t i v e o r d e r is
p r e s u m e d , for example, in b o t h his d e f i n i t i o n of
a c t i o n and power. T h e c r e a t i o n of this n o r m a t i v e
o r d e r is based o n a p r e s u m e d c o n s e n s u s arising
o u t of shared r e c o g n i t i o n of the f u n c t i o n s w h i c h
society m u s t perform. This is n o t to i m p l y that
cultural values are i m m u t a b l e , they will change
as the e n v i r o n m e n t facing the society changes.
g i v e n great a t t e n t i o n b y Parsons or s u b s e q u e n t
w r i t e r s in this tradition b u t Parsons ( 1 9 6 8 , p.
14 5) does refer briefly to the c o n c e p t of a "moral
elite" w h i c h acts to i n t r o d u c e a n d modify social
values. This l a c u n a in Parsons work, h o w e v e r ,
was a c e n t r a l t h e m e i n the writings of Durkheim.
D u r k h e i m ( 1959, p. 150), following Saint Simon,
suggests that the scientific d e t e r m i n a t i o n of
m o r a l values was possible and desirable. It fol-
l o w e d that the "moral elite" w o u l d b e those
groups in society w i t h s u p e r i o r scientific train-
ing a n d knowledge. I n particular, the professions
a n d o c c u p a t i o n a l guilds w e r e suggested as the
a p p r o p r i a t e foci o f the m o r a l r e g u l a t i o n of soci-
ety ( D u r k h e i m , 1957). T h e professions, there-
fore, are s e e n as codifying a n d e n a c t i n g the
m o r a l o r d e r of society.
T h e process of l e g i t i m a t i o n w i t h i n the struc-
tural-functionalist tradition is p e r c e i v e d as the
use of s y m b o l s w h i c h i m p l y an obligation, o n the
part of the actor using these symbols, to p e r f o r m
c e r t a i n socially valued acts. A key p r o b l e m in
Parsons' s c h e m e is the degree to w h i c h values
( " v a l u e - c o m m i t m e n t s " ) are institutionalized in
society such that these s y m b o l s a n d the obliga-
tions i m p l i e d b y t h e m are r e c o g n i z e d and, con-
sequently, the e x t e n t to w h i c h they m a y b e u s e d
as s a n c t i o n a b l e bases for the organization of so-
 ACCOUNTING AS A LEGITIMATING INSTITUTION
cial interaction. A second problem is the "infla-
tion and deflation of commitments" (Parsons,
1968; p. 153) which may o c c u r where legimat-
ing symbols are used beyond the capacity of the
actor to fulfil the implied obligations. The rela-
tionship between the use of symbols and the
ability to fulfil these obligations is not generally
assumed to be a problem a p r i o r i (i.e. "moral
hazard" is discounted as a general social prob-
lem).
R e l e v a n t a c c o u n t i n g research
Accounting research implicitly using the
structural-functionalist conception of legitima-
tion treats accounting systems as technical de-
vices which capture and implement the func-
tional values of a given social system. In particu-
lar, the accounting system becomes a means by
which uncertainties and conflicts are trans-
formed into the routine allowing individuals to
carry on with the necessary functions of that so-
cial system.
Gambling (1977), for example, drawing on
anthropological versions of functionalism,
suggests that accounting serves a "confidence-
building and conflict avoidance" role in organi-
zations. He argues that accounting systems allow
blame to be shifted from individuals to external
factors thereby letting the individual "save face",
maintain morale, and continue to be a produc-
tive m e m b e r of the organization. Covaleski &
Dirsmith ( 1 9 8 3 ) found that budgets in hospitals,
relating to nursing costs, were used for two pur-
poses: to advocate the cause of particular nurs-
ing groups (organizational subunits) and to con-
trol costs in that group. On examination, they
found that the advocacy role of budgets domi-
nated and was decoupled from the control func-
tion. This state of affairs was reified by Covaleski
& Dirsmith as functionally necessary and they
conclude with suggestions for further in-
stitutionalizing the procedures (e.g. "nursing
representatives should accept the fact that part
of their role involves being a hypocrite").
Tiessen & Waterhouse (1983), attempting to
integrate contingency theory with agency
theory and the markets and hierarchy frame-
work, reason that accounting systems in uncer-
345
tain environments may serve a "constitutional"
role. The accounting system is seen as a set of
rules for constructing performance histories and
settling disputes which provide a potentially ar-
bitrary measure of certainty which facilitates in-
dividual innovation and adaptation to produc-
tion uncertainties.
These predictions appear to be supported by
Berry e t al.'s ( 1 9 8 5 ) work with the National
Coal Board (NCB). Accounting measures were
used in this setting to buffer coal production
from an uncertain and hostile environment.
Berry e t al. describe the accounting system as
being a central aspect of the "coping" strategies
used by production personnel to continue de-
velopment work in spite of economic and politi-
cal setbacks. Accounting thus captured the do-
minant values of this system (p. 22) and pro-
vided a justification for ongoing activities neces-
sary for the system's survival. The authors de-
scribe this work as reflecting the "ideology of the
status quo" and it must be noted that, retrospec-
tively, the authors have rejected the empirical
adequacy of this approach and have substituted
a hegemonic framework (see Hopper et al.,
1985, reviewed below).
The work of Mattessich ( 1 9 7 8 ) and Thornton
( 1 9 7 9 ) on the institutional aspects of account-
ing information is also consistent with the struc-
tural-functionalist approach to legitimation.
Their work regards institutions as objectifica-
tions of social values within which individuals
interact. In agreement with Parsons' distinction
between legitimation and justification, the value
judgments or standards which are relevant are
regarded as external to the practice of account-
ing such that accounting operates to justify rela-
tions within a set of institutionalized value con-
straints.
In each of these studies, the values which ac-
countants implement are taken for granted. The
accountant and accounting system play a techni-
cal role in ensuring that values are enacted. Note
that this does not imply that accounting is used
mechanically, rather it suggests that the use of
accounting adapts to reflect the dominant, func-
tional values of the organization. The accoun-
tants' role is to identify these values and enact
346 ALAN J. RICHARDSON
them in their reports and control activities. It
may be noted that this perspective on the role of
accounting dominates both academic research
and practitioners' own perception of their role
(Hopwood, 1984b).
Implications for future research
In work drawing on the structural-
functionalist perspective, the emphasis has been
on identifying the contribution that an account-
ing system makes to the survival of the social sys-
tem in which it is embedded. The work so far,
however, has not detailed the link between ac-
counting systems and organizational effective-
ness (cf. Otley, 1980). The functionalist litera-
ture on legitimation has suggested, for example,
that the definition of legitimacy in a society
arises through reinforcement (Merelman, 1966)
and utility maximizing (Cook, 1980) mech-
anisms operating at an individual level of analy-
sis. These approaches, however, may not aid
analysis at an organizational level. For example,
within this perspective, the values, and, there-
fore, the definition of effectiveness which are
being enacted are regarded as external to the ac-
counting system, but precisely where do they
originate? Alternative sources may include vari-
ous stakeholders in the organization as well as
more diffuse cultural sources. The source and
substance of the value premises of accounting
techniques have not been subject to empirical
examination (Williams, 1985).
A second problem, noted by Leslie (1975), is
that the process of legitimation may be
piecemeal. The values which are relevant may
vary depending on the level within the organiza-
tion at which action occurs, the specific issue,
and even the aspect of a given issue that is of con-
cern. This suggests the need to undertake finer
grain studies of accounting systems in action
than are currently available. The NCB studies are
an admirable step in this direction.
A third concern with the relationship be-
tween accounting as a legitimating institution
and organizational effectiveness is the time
frame within which effectiveness is measured.
The work so far has been limited to the short-
term contributions of accounting and an import-
ant issue which has not been addressed is the re-
sponse of accountants and others to, as Parsons
refers to it, the "inflation and deflation of com-
mitments". The use of accounting measures to
ensure legitimacy implies, within this perspect-
ive, an obligation to produce certain outputs. If
these outputs are not forthcoming the account-
ing system and the role of accountants as a
legitimating institution will be called into ques-
tion.
Finally, while some research has addressed
the social and psychological consequences ofac-
counting's role as a legitimating institution, the
relative effect of alternative legitimations has not
been addressed. The accounting role allows the
profession considerable latitude in conduct but
the literature has focused exclusively on the
conduct which actually occurred without due
regard to the range of alternatives foregone in
undertaking that course of action (Willmott,
1983). The focus of the structuralist-func
tionalist perspective on accounting's contribu-
tion to effectiveness demands that these alterna-
tives also be assessed.
THE SOCIAL CONSTRUCTIONIST
PERSPECTIVE
A theoretical overview
The social constructionist perspective de-
veloped from German idealism and complemen-
tary work in symbolic analysis based on ordinary
language philosophy and sociolinguistics. This
perspective focuses on symbols as reflective and
constitutive attributes of social reality. The ap-
proach is based on the epistemological assertion
that we can only know reality as a complex set of
mental images or symbols. The source of these
images is the society to which we are socialized
and in which we interact. The work undertaken
from this perspective has attempted to explore
situations from the perspective of participants'
subjective experience of it and to examine the
processes through which intersubjectivity is
achieved and action is accomplished (Silverman,
1975, provides a concise introduction to this
area).
 ACCOUNTINGASA LEGITIMATINGINSTITUTION
The concept of legitimation from this per-
spective emerges as a central problem in the or-
ganization of knowledge of social reality includ-
ing problems of cultural continuity and access to
knowledge in society. Given that reality is per-
ceived through socially constructed images, and
given that these images are not unique, h o w
does society maintain a world view which allows
continuity of action in the face of a constant in-
flux of new actors, and attempts by existing ac-
tors to redefine their own situation? At a theoret-
ical level, answers to these questions are
suggested in the complementary works of
Berger & Luckmann ( 1 9 6 6 ) and Holzner
(1968).
Berger & Luckmann (1966, pp. 7 6 - 7 9 )
suggest that social reality is constructed through
a dialectical process involving three moments:
externalization, objectification and internaliza-
tion. First, our conceptions of social reality are
given tangible form, externalized, in our per-
formances, rituals, symbols and artifacts. These
conceptions of reality are then given an object-
ive status in our life, we begin to accept things
that we have constructed as immutable parts of
our reality. Finally, the objectivated construc-
tions of past action are internalized through
socialization processes (e.g. education) and be-
c o m e further divorced from the processes
which created them.
The concept of legitimation arises as a "sec-
ond-order objectification of meaning" (Berger &
Luckmann, 1966, p. 110) which ties together in-
dependently evolving institutions in order to
make them plausible and acceptable. In other
words, legitimation is a process of creating
rationales which give order to a chaotic array of
actions arising out of the pragmatic problems
facing society (cf. Hopwood, 1987). It is import-
ant to note that this perspective does not pre-
sume that the internalization of particular social
constructions will ever be complete. Multiple
definitions of reality may exist and compete for
the loyalty of members of a social system. Simi-
larly, the legitimations proposed to tie together
various features of the social world may not be
fully accepted.
Analytically, Berger & Luckmann distinguish
347
four levels of legitimation. The first level is lin-
guistic. Our vocabulary allows us to name and
hence "know" certain things. By having a word
for something we must grant its claim to exist
(for example: consider the feminist movement's
attempt to introduce n e w words into our voc-
abulary and to eradicate others). The second
level consists of "theoretical propositions in
rudimentary form" (Berger & Luckmann, 1966,
p. 112). This category includes myths, stories
and other forms of anecdotal evidence which are
used to justify certain social events or relations.
The third level consists of explicit theories
linked to particular institutional contexts, for ex-
ample, marginalist economic theories in the
economic sphere. Finally, the highest level of
legitimation consists of symbolic universes
which are able to tie together different institu-
tional environments and "explain" their interre-
lation. This level of legitimation typically pro-
vides the means by which social and individual
biographies may be "rationalized" and given
meaning. Rites of passage from from one stage of
life to another are specified within symbolic uni-
verses.
Bcrger & Luckmann rccognize that thc
maintenance of the legitimating apparatus of
socicty typically becomes the domain of particu-
lar occupational groups w h o not only maintain
and cxpand the lcgitimating symbols of society,
but also may cngage in "therapy" to cnsure that
individuals conform to thc official version of re-
ality. Holzncr (1968, p. 152) identifies these
groups as societics' intcllcctuals. Following Man-
nhcim, Holzner secs intellectuals as a "free-float-
ing" strata of society which is capable of de-
vcloping lcgitimating symbols which may sup-
port or underminc an existing authority struc-
turc (construction of rcality ) in society. Intellcc-
tuals rcprescnt occupational groups socialized
to certain "orientations" towards reality. They
are given authority in ccrtain "situations", i.e. so-
cially dcfined circumstances, to enact these
orientations as the definition of reality.
Thc bulk of cmpirical work in this tradition
has attempted to invcstigatc the mcans by which
pcople participating in any situation make sense
of and sustain the situation through their actions.
348 ALANJ. RICHARDSON
Typically this involves making use of "objec-
tiffed" knowledge which is not inherent in the
situation itself to search for "typical features" of
the situation which aUows us to give a rational
account of the situation and our behaviour in it.
This process is regarded as being driven by
"practical interests", i.e. a desire by people in-
volved in a situation to "get by", and, thus, the ra-
tionality used in everyday situations is a practical
rather than formal rationality (e.g. Garfinkle,
1967).
Relevant accounting research
There are several bodies of literature related
to this perspective, although typically, particu-
larly at an individual level of analysis, the link has
not been explicitly recognized. The emphasis of
this literature is on the way in which accounting
is used to constitute reality and the effect on in-
dividuals of the legitimation of a particular ver-
sion of reality.
For example, Belkaoui's (1978, 1984) work
on the linguistic relativity of accounting argues
that the way in which accounting represents re-
ality can affect the perception and behaviour of
users of accounting information. In a field study,
Belkaoui ( 1 9 8 4 ) demonstrates that accounting
students trained in different languages develop
distinct perceptions of the "same" accounting
concept. Also of relevance is the functional fixa-
tion literature. Building on Ijiri et al.'s ( 1 9 6 6 )
comments and Ashton's ( 1 9 7 6 ) experimental
methodology (see Wilner & Birnberg, 1986, for
a critical review), this literature has de-
monstrated that subjects socialized to a particu-
lar meaning of data inadequately adjust their de-
cision processes in response to changes in the
definition of data. In these studies, the way in
which accounting defines reality can be seen to
affect the perception and behaviour of individu-
als.
BurcheU et al.'s ( 1 9 8 5 ) study of the use of
value added accounting in the U.IC is perhaps
the best example of a social constructionist
analysis of accounting. This study begins by de-
monstrating that value added accounting has
been used as a linguistic category without em-
pirical referent allowing it to be used as part of
diverse political programs. The authors attempt
to identify the manner in which value added
arose as a focus of interest. Value added is pre-
sented as emerging out of an institutionally em-
bedded debate combining a concern for indust-
rial democracy and industrial productivity. It
represented existing knowledge which could be
used to make sense of an ongoing problem. The
authors also recognize that the existence of
value added accounting created, or gave form to,
the issues of concern. From this perspective,
therefore, accounting forms part of the implicit
background knowledge with which actors con-
struct their social reality and also serves as sym-
bolic resources through which actors manipu-
late and create accounts of that reality.
In a similar manner, H o p w o o d (1984a)
suggests that accounting is being used in the
public sector to symbolize the new emphasis on
efficiency by the state and, simultaneously, to
provide a rhetoric which will bring about a
change in operating procedures. Accounting
provides selective visibility to particular issues,
and perspectives on issues, which results in the
"creation of the significant" within the bureauc-
racy. By providing a vocabulary of motives for
action and a system of evaluative criteria, ac-
counting is used to change the set of legitimate
actions within the public sector. H o p w o o d cau-
tions, however, that the intended purposes of
these changes may b e c o m e uncoupled from the
process of accounting. In both H o p w o o d and
Burchell et al., accounting is introduced to tie
together independently evolving processes in
order to provide some coherence to that aspect
of reality. The introduction of these symbolic
constructions, however, was not tied to particip-
ants' subjective experiences of the situation and,
consequently, the effect of these legitimations
on behaviour becomes moot.
Meyer ( 1 9 8 6 ) has provided a general frame-
work for the analysis of accounting's social role
from a social constructionist perspective. He
suggests that accounting is part of the legitimat-
ing apparati of society. The amount of account-
ing which organizations actually undertake will
depend upon the demand for rationalized ac-
counts in society. Simultaneously, however, ac-
 ACCOUNTINGASA LEGITIMATINGINSTITUTION
counting contributes to the construction of soc-
iety as a set of rational interactions. Accounting
thus fulfils two roles. It is a means by which or-
ganizations may signal their rationality and meet
the expectations of society, and it is implicated
in the process by which these values come to be
clarified and codified as social expectations. The
dialectic which Meyer describes, while analyti-
cally attractive, poses difficult methodological
issues (Dirsmith, 1986).
A number of recent papers have called for an
extension of work in this perspective to provide
insights into the role of accounting and accoun-
tants (Boland & Pondy, 1983; Cooper, 1983;
Hayes, 1983; Hopwood, 1983; Tomkins &
Groves, 1983; Meyer, 1986). In spite of this en-
couragement there has yet to appear a signifi-
cant body of research from this perspective.
Implications for future research
The social constructionist perspective is the
most frequently cited alternative to the struc-
tural-functionalist perspective which has domi-
nated accounting research. Some very basic
questions from this perspective need to be
asked. For example, to what extent does the real-
ity defined by accounting dominate in organiza-
tions and with what other systems of meaning
does it c o m p e t e for influence? If accounting is
fulfilling its role as a legitimating institution,
then, from this perspective, we would expect to
see accounting crucially involved in the process
of problem definition ( Schon, 1979) and agenda
setting (Blumer, 1971). We may also see ac-
countants acting as "therapists" (Holzner, 1968;
Edelman, 1977), actively seeking out those in
the organization with "distorted" views of reality
and helping them to think and behave "cor-
rectly". The accounting system, in order to fulfil
these roles, is likely to be the focus and source of
"myths", or, more generally, culture, within or-
ganizations (Boje et al., 1982). It may be noted
that the accountant's actions in this regard are
not motivated by self-interest - - at least in the
narrow sense of that term. The concern of ac-
countants is to protect a system of meaning
which has an established tradition and which is
considered by them to be normatively superior
349
to alternative systems of meaning within the or-
ganization.
We may ask what are the mechanisms by
which systems of accounting thought enter or-
ganizations, and h o w are these systems of mean-
ing altered and maintained? Although the ac-
counting system may be considered, at one level
o f analysis, an independent system of meaning
loosely coupled to the external environment
(Weick, 1976; Meyer & Rowan, 1977), the social
constructionist perspective insists that it will ar-
ticulate with other institutions (Berger &
Luckmann's, 1966, symbolic universes). These
ties have not been demonstrated although their
existence is recognized in Argyris' ( 1 9 7 6 ) use of
double-loop learning to critique the loose coupl-
ing notion, and in Covaleski etaL's (1985) advo-
cacy of this method for the analysis of account-
ing systems. These questions direct attention to
the ecology of meaning systems in organizations
and, therefore, to those sources of variation,
selection and retention of these systems.
A frequent failing of studies from this per-
spective is to ignore the interests which are af-
fected by and seek to affect accounting. The so-
cial constructionist view recognizes the exis-
tence of diverse interests in society and seeks to
explore the means by which those interests
negotiate the reality within which individuals in-
teract, and, at that level of analysis, h o w these de-
finitions of reality are sustained or undermined.
Although the relative priority of interests in soc-
iety is not prejudged in this perspective, the role
of interests must be central to any social con-
structionist analysis.
THE HEGEMONIC PERSPECTIVE
A theoretical overview
The hegemonic perspective is derived from
Marx' reversal of the German idealic position
that reality is constructed according to mental
conceptions. It holds that the relations among
men are structured by modes of material pro-
duction and consciousness is formed as a conse-
quence of those modes of production. The
evolution of western society is seen as being dri-
ven by the demands of capital accumulation by a
350 ALANJ. RICHARDSON
small group who control the productive assets of
society. This group is also seen as controlling,
through the intellectual strata of society, the
consciousness of society in order to mystify the
power relation between them and "property-
less" workers.
The role of ideology in society was given a li-
mited and deterministic role in Marx' original
formulation. Its current status within radical
sociological theory is largely due to the exten-
sions of Marx by Antonio Gramsci. Gramsci ar-
gued that the class basis of society could only be
maintained through "moral leadership" or
hegemony (the potential for physical coercion is
always in the background) which structured the
way in which people perceived social reality.
The essence of politics and culture, he argued,
was the struggle between different "hegemonic
forces" or political consciousness.
Gramsci differs from Marx on the role of ideol-
ogy and hegemony in class confliCt in three fun-
damental ways (cf. Mouffe, 1981 ). First, Gramsci
rejects the definition of class based on the indi-
vidual's position in the productive process. He
substitutes the concept of a "historical bloc"
which represents a coalition of individuals of
like mind although not necessarily of the same
class in a Marxian sense. Second, hegemony was
regarded as a material aspect of society and not
a "superstructure" to be derived from economic
relations. The nature of hegemony in a society
could shape events independently of relations of
production. Third, Gramsci asserted that
hegemony was a strategy used by all ruling clas-
ses including the proletariat. He, thus, called on
the proletariat to undermine the hegemony of
capitalist interests and establish a working class
hegemony rather than focusing on control of the
labour process.
Gramsci identifies the intellectuals as the
group through which hegemony is mediated. He
differentiates, however, between organic and
traditional intellectuals. Traditional intellectuals
are "functionaries" with close allegiance to their
own tradition and craft. They consider them-
selves to be independent of all social interests
and practice under a rhetoric of autonomy. Or-
ganic intellectuals, on the other hand, develop
from within a particular social group and retain
primary allegiance to that group.
The traditional intellectuals are the most im-
portant legitimating institution in maintaining
hegemony. If they can be "captured" by a par-
ticular group, their rhetoric of independence
serves to legitimate the world view supported
by that group. Organic intellectuals who interact
with traditional intellectuals on their own
ground are seen as the most effective means of
"capturing" the traditional intellectuals.
R e l e v a n t a c c o u n t i n g research
This perspective has generated a number of
articles critical of existing accounting practices
and theories. Cherns (1978), for example, ar-
gues that accounting, as a form of measurement
which objectifies humans and human values,
serves to alienate man from his labour. Tinker
( 1 9 8 0 ) uses a hegemonic perspective to suggest
that accounting numbers must be interpreted,
not as a measure of economic efficiency, but as
an outcome and reflection of conflicts and
negotiations among various social interests.
Tinker et al. ( 1 9 8 2 ) extend this argument to
suggest that accounting has been "captured" by
capitalist interests due to accountants' reliance
on marginalist economics, and that accounting
has come to serve as a legitimating institution for
those interests. Lehman & Tinker ( 1 9 8 5 ) con-
tinue this theme by examining the response of
accountants, as represented by accounting liter-
ature, to changes in the "official" ideology of the
state surrounding the election of right-wing
governments in the U.K~ and U.S.A. They con-
tend that this literature mirrors the changes in
social ideology therefore contributing to the
state's ability to maintain control.
Loft ( 1 9 8 6 ) provides a further illustration of
research from the hegemonic perspective. She
analyses the rise of cost accounting techniques
and associations in the U.I~ surrounding the First
World War. The data suggest that cost account-
ing arose primarily as a compromise between
the need to establish a "command" e c o n o m y to
meet the needs of war while allowing capitalist
interests to continue "business as usual". It con-
tinued to develop after the war to mediate con-
 ACCOUNTINGASA LEGITIMATINGINSTITUTION
flicts between the populace and capitalist in-
terests. The reconstruction period was marked
by high inflation and charges of profiteering.
Cost accountants were able to apply their tech-
niques and commit their integrity to a statement
of product costs and, therefore, to whether or
not exorbitant prices were being charged. Fi-
nally, Loft links these roles to the cost accoun-
tants' personal ambitions for upward mobility
and professional status, demonstrating the pro-
fession's dependence on these social conflicts
for success.
The studies cited in the last few paragraphs
focus on the position of accounting within a
framework of social tensions and conflict. These
studies use society as the unit of analysis but ad-
ditional insights have been gained by tracing the
effect of these social tensions within the organi-
zational arena (Hopwood, 1987). Hopper et al.
(1985), for example, argue that accounting is
used in the NCB to assure the compliance of
labour with management's wishes. Through the
manipulation of transfer prices among
nationalized companies, the state is able to
realize surplus value in different areas of the
economy. The profit or loss of a given company
or segment thus becomes an arbitrary measure
but one which is accepted, by and large, by
workers as sufficient justification for plant clo-
sures and layoffs. Financial controls within the
firm thus b e c o m e the arena for conflicts be-
tween labour and the state.
Management fills a difficult role in this system.
Although they were required to maintain an
elaborate flow of financial information (e.g.
budgets and investment proposals) to state au-
thorities, in day-to-day activities management
shunned financial information in favour of phys-
ical measures and data. Management, thus,
mediated the contradiction between the de-
mands of the state and labour process prevent-
ing a confrontation of the distinct values opera-
tive in each domain.
Implications for future research
The hegemonic perspective has developed a
sound theoretical framework which suggests al-
ternative interpretations of accounting informa-
351
tion and links between the dominant systems of
production and accounting theory. The per-
spective has not been applied extensively at a
lower level of analysis, for example, to the in-
teraction between accountants and other mem-
bers of organizations (although see Armstrong,
1985) or to the development of the accounting
profession itself. The analytic p o w e r of this per-
spective, I believe, lies at this level of analysis
and such work will appear in the near future.
Within the hegemonic perspective, account-
ing serves two roles. First, it is part of the "claims-
making" activity in which all participants engage
to affect the distribution of resources in organi-
zations (Rosenberg, 1985). In this regard, ac-
counting may come to serve many masters and
the question of h o w this is accomplished is cen-
tral to any hegemonic analysis. Once hegemony
is established, the role of accounting shifts. It be-
comes as means of "amplifying" p o w e r in the
sense that it allows the dominant group to imple-
ment its preferences without recourse to the
tangible bases of its p o w e r (Peckham, 1979;
Edelman, 1964, 1977). The researcher's role is
to demystify this use of accounting, exploring
the means by which it achieves its effect and,
thereby, emancipating those affected (Willmott,
1983; Scheibe, 1978).
The accounting profession receives particular
attention within this perspective. The relation
between the profession and social elites is traced
to identify the source of the profession's social
position and the interests on which it is depen-
dent. The profession's knowledge generation
and standard setting activities are subject to crit-
ical scrutiny (Watts & Zimmerman, 1986). Two
areas which have not received attention, but
which have been identified as crucial in
hegemonic studies in other fields, are recruit-
ment to the profession and training. Apple
(1979), for example, has argued that these pro-
cesses are designed to ensure that the hegemony
of dominant groups is reproduced from genera-
tion to generation (see also Bourdieu & Passe-
ron, 1977). This also leads to questions about
the internal structure of the profession, for ex-
ample, whether or not there are "radical groups"
(Perrucci, 1973) in the profession which can be-
352 ALANJ. RICHARDSON
come the nucleus of change, and h o w internal
decision-making is handled (Halliday & Cappell,
1979; Richardson, 1987).
DISCUSSION
A fundamental distinction between natural
and social phenomena is that an understanding
of social phenomena requires an appreciation of
the meanings attributed to those phenomena by
individuals affected by them in addition to an un-
derstanding of the observeable outcroppings of
those phenomena. The values connoted by so-
cial actions are a crucial aspect of the meaning of
those actions and, therefore, individuals' be-
havioural and affective response to actions. The
three perspectives outlined above are attempts
to conceptualize the means by which values or
interests b e c o m e embedded in knowledge and
enacted in day-to-day social practices. Each of
these perspectives posits the existence of occu-
pational groups in society which mediate the re-
lationships between values and action. They dif-
fer, however, on the source of values, the range
of conceivable actions to which values can be
linked, and the nature of the mapping between
values and action.
Each of these perspectives has been used to
examine the role of accounting as a legitimating
institution, i.e. providing a means by which so-
cial values are linked to economic actions. In at-
tempting to examine the value premises of ac-
counting, this literature has set for itself a for-
midable empirical task. The methodologies of
the natural sciences may not be appropriate for
questions of meaning and values. In many cases,
furthermore, the values which accounting em-
braces and enacts are implicit in action and,
therefore, invisible to conventional method-
ologies. One way around this problem may be to
focus on "critical situations" (Giddens, 1979; p.
124) where social routines are disrupted and the
implicit becomes problematic. Legitimation
crises in accounting (e.g. audit failures) may pro-
vide cases where the value premises of account-
ing b e c o m e observeable.
It is more likely, however, that the exploration
of accounting as a legitimating institution will
rely on interpretative analyses. The values which
accounting maps into social actions, and the
means by which this is accomplished, will be
identified by gaining deep contextual know-
ledge of accounting in use through various non-
traditional methods. In this case it is crucial that
the concepts brought to the analysis be expli-
cated. The use of interpretative methods places
the onus on the researcher to demonstrate the
clarity and rigor of his theorizing. This can,
perhaps, be most easily accomplished by locat-
ing the analysis within a particular theoretical
tradition.
It is hoped that this review may serve two pur-
poses. First, it provides a set of ideal types which
may be used to locate the perspective adopted
by authors examining accounting as a legitimat-
ing institution and hence to trace the logical im-
plications of their approach. This exercise was
undertaken in this article as a means of identify-
ing areas for further research within each of the
theoretical perspectives identified. It is perhaps
most important where authors are using hybrid
or multiple perspectives in order to identify as-
pects of studies where multiple interpretations
of data are possible and conceptual ambiguity is
most likely. Second, it identifies three rich
theoretical literatures which may be used to
guide future research in this field. Although ac-
counting has, at least implicitly, drawn on each
of these perspectives, in no case have their in-
sights been systematically exploited. The de-
velopment of a sociology of accounting within
each of these traditions would contribute sig-
nificantly to our understanding of accounting as
a social and organizational process.
 ACCOUNTING AS A LEGITIMATING INSTITUTION 353

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