Which theory explains CSR as a response to external social expectations to maintain society's approval and license to operate?

Which theory explains CSR as a response to external social expectations to maintain society's approval and license to operate?

• A. Stakeholder theory
• B. Legitimacy theory
• C. Agency theory
• D. Shareholder primacy

Answer: (B)

Legitimacy theory explains CSR as a way firms respond to society’s external expectations in order to preserve legitimacy and the license to operate. When communities, media, regulators, and other actors expect responsible behavior, organizations engage in CSR to show they align with social norms, reducing legitimacy risks and ensuring continued social approval and access to resources. The other theories describe different dynamics—stakeholder theory focuses on balancing various interests, agency theory on internal manager–owner conflicts, and shareholder primacy on prioritizing shareholder value—none of which centers on maintaining external social approval as the mechanism for ongoing operation.

Legitimacy theory explains CSR as a way firms respond to society’s external expectations in order to preserve legitimacy and the license to operate. When communities, media, regulators, and other actors expect responsible behavior, organizations engage in CSR to show they align with social norms, reducing legitimacy risks and ensuring continued social approval and access to resources. The other theories describe different dynamics—stakeholder theory focuses on balancing various interests, agency theory on internal manager–owner conflicts, and shareholder primacy on prioritizing shareholder value—none of which centers on maintaining external social approval as the mechanism for ongoing operation.